Covid-19 developments – labour and employment laws

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Faisal Mahmood Ghani
Faisal, Mahmood Ghani & Co, Karachi
faisalmghani@magco.com.pk

Covid-19 developments – labour and employment laws

In the Province of Sindh, the commercial hub of Pakistan, an Order dated 23 March 2020 by the Home Department of the Government of Sindh focused on preventing layoffs and implementing paid leave for the duration of lockdown, leaving employers questioning this move at a time when factories were closed and little to no revenue was being generated by most. From a legal perspective, the vires and constitutionality of the Order is questionable since labour and employment laws grant employers the right to affect layoffs and retrenchments where economic circumstances so require.

Order No SO(Jud-I)HD/8-1(04)/2020-Corona is stated to have been issued under Section 3(1) of the Sindh Epidemic Diseases Act 2014 (the ‘Epidemic Act’) and directs that: (1) no worker shall be laid off; (2) all kinds of workers shall be paid salaries, remunerations or wages in full by their respective employers and the said period of closure would be counted as paid leave; (3) any person disobeying any direction or order by the government under this Order shall be deemed to have committed an offence under Section 8 of the Penal Code as provided in Section 4 of the Epidemic Act; and (4) that the director and joint directors of the Labour and Human Resources Department of the Government of Sindh.

However, the right to retrenchment has been provided in terms of Standing Order 11(3) of Industrial and Commercial Employment (Standing Orders) Ordinance 1968 and in para materia Section 14 of Sindh Terms of Employment (Standing Orders) Act 2015, which provides:

14. (1) The employer may, at any time, in the event of fire, catastrophe, break-down of machinery or stoppage of power supply, epidemics, civil commotion or other cause beyond his control, stop any section or sections of the establishment, wholly or partially for any period or periods without notice.' [emphasis added]

Pursuant to the Standing Orders, during the period of layoff, the employer is obligated to pay an amount of half of daily wages during the first 14 days as compensation. There is no provision permitting continuation of layoff beyond 14 days. The Order, therefore, is contrary to law, as a statutory provision(s) cannot be undone through a notification/ Statutory Regulatory Order (SRO) and can only be amended via legislative amendment.

Further, Section 3(1) of the Epidemic Act does not empower the government to take measures such as those to prevent layoffs and imposing paid leave during the duration of the lockdown. Section 3(1) provides that the government may take such measures ‘as it shall deem necessary to prevent the outbreak of such disease or the spread thereof, and may determine in what manner and by whom any expenses incurred (including compensation, if any) shall be defrayed.' [emphasis added] This provision does not permit the government to take any measures for the protection of workers, but only to prevent the spread of the virus. For this reason, the said notification is ultra vires the Epidemic Act as well.

The Province of Sindh promulgated the Sindh Covid-19 Emergency Relief Ordinance on 18 May 2020, which provides inter alia that ‘no employee or worker shall be laid off, terminated or removed’ and further provides a list of permissible deductions from salaries of employees earning PKR 50,000 and above. While the Ordinance sidesteps the legal difficulties faced by the Order, prohibiting layoffs indefinitely without providing monetary support to companies to shoulder payroll costs is likely to bring several companies to the brink of bankruptcy.