The IBA’s response to the war in Ukraine  

Effects of Covid-19 on employment law

Monday 4 May 2020

Back to Asia Pacific Regional Forum publications

Yousaf Amanat
Yousaf Amanat, Islamabad


Along with loss of life, another victim of Covid-19 has been the economy.All businesses from aviation to hospitality have tested positive for Covid-19. The first thing all businesses start doing when faced with such losses is cut spending and limit themselves to the bare essentials of conducting business. Unfortunately, the first victims for any such budget cuts are usually employees. It starts with more junior employees and, if the situation persists without any improvement it ends with management being cut. Covid-19 has already caused companies to start thinking about cutting their losses with lay-offs and wage cuts. If not done properly by companies, these budget cuts could end up becoming regulatory and operational nightmares.

Employment law in Pakistan

In Pakistan the Labour Law in the main is only applicable to workers. Workers are categorised as employees who are engaged in menial tasks such as being receptionists, drivers and so on. The litmus test for determining as to who is a work person is further provided by the courts wherein the courts have through their judgements clarified that ‘workmen’ are people who are not in a supervisory or managerial capacity.

After the passage of the 18th Amendment of the Constitution of Pakistan, all the provinces in Pakistan have their own laws for various matters including employment matters. There are consequently numerous employment laws and, with provinces having their own laws the amount of employment-related legislation has risen exponentially. The main employment law applicable to workers is the Industrial and Commercial Employment (Standing Orders) Ordinance 1968 at the federal level and its equivalent law at provincial levels. The Standing Orders provide that employers cannot close an establishment or lay off more than 50 per cent of employees without government permission except in the event of a fire, catastrophe, power supply stoppage, civil commotion or an epidemic. The Standing Orders also speak of stoppage of sections of work, reduced wage payments and the eventual laying off of workers in cases of fire, catastrophe, power supply stoppage, civil commotion or an epidemic.

Rights guaranteed to employers under the law normally cannot and will not object to layoffs and shutting down of organisations since the same are commercial decisions and companies cannot realistically stay open in the face of losses or function properly unless they cut such losses.

In matters of employment, Pakistan’s courts are inclined to side with employees as far as facts go, however the sympathies with the employees do not extend to circumventing the law.

The law and dealing with Covid-19

In cases of epidemic and catastrophes, the employers can partially or completely close their operations or cut employees’ wages without government permission.

Covid-19 however poses a unique issue. This is not an epidemic which threatens a particular establishment. In fact it is pandemic which threatens the life of a person if they simply set foot outside of their home. Work stoppage has not been carried out by individual organisations, but has been ordered by the government.

In the Pakistan province of Sindh, its government has issued a notification banning laying off workers or cutting employees’ wages. The notification, however, does not provide that work cannot be stopped or establishments closed because nobody is able to ban that. Although no other province in Pakistan has yet issued any such notification, the notification by the Government of Sindh reflects government intention to protect workers.

As yet we do not know if Covid-19 will mutate and die down of its own accord, if warmer weather will not let it survive or if an early cure can be found and so the situation remains fluid. Employers would do well to view the changing scenario carefully and not jump the gun.