Analysis of the ‘No Work No Pay’ Rule in India

Author- Yashashvini Singh Jodha

‘Wages’ or, ‘Salary’, the most fundamental aspect of labour law is the basis of an economy. Exchange was ushered in with the death of the barter system to become the catapult of modern-day trade, making wages the life source of employer-employee relationships, negotiations, and disagreements. The damage of these equations lead to what we know as strikes and boycotts. While these mechanisms are a necessary and effective tool for the maintenance of labour welfare, especially in a welfare state, it is also necessary to remember that wages are often the solution to labour disputes. The pain point is more complex than simply a low wage or an employer paying inadequately. Wage distribution, within a microeconomy such as the informal sector, is a balancing act of employer’s capacity, worker’s demand and employee availability. The underlying effect of a mismatch between employer-employee demands is the development of a power structure that allows the employer to bully their way through. The principle of ‘No Work No Pay’ is one method of doing so.

The development of the No Work No Pay Principle is a judicial one. While not specified in any labour code in these exact words, it is mirrored in section 20(1) of the Wages Act, 2019 [1]and Section 9(1) of the Payment of Wages Act, 2019. It essentially states that a deduction in the salary of a worker can be made on account of an employee’s absenteeism for a period or, the whole of the duration he is supposed to work. This is essentially the NWNP principle; if an employee is not working, he will not be paid for that amount of lag in his duty. However, this code, as was The Payment of Wages Act, often does not dictate the power to make deductions, and the courts trace the origin of this power from state enactments that the employer falls under the purview of.

Therefore, the NWNP principle enjoys a consistent string of judicial innovation and adjustment, understandably considering the wide interpretation of ‘absence’ and the scope of the time period within which such absence can justify the application of the principle i.e ‘whole or part of the period’ of work. With the increasing requirements of a newly industrialised, heavy, diverse and developing Indian market along with the pressure of growing industries competing against one another, demands for jobs, a growing middle class and lower employability, it becomes necessary for employers to have smooth sailing relationships with their existing employees. This is possible through smooth labour law interpretation and implementation.

The judicial development of the NWNP Principle

The first case to acknowledge the concept of NWNP was a Calcutta high court judgement, ‘Algemene Bank Nederland vs Central Government Labour Court’[2]. The respondent, Mr.Shyamapada Das was an employee at the petitioner’s bank operating in Calcutta. The respondent, along with other employees of the bank, on the 10^thSeptember 1975, chose to leave their work stations and hold a demonstrative meeting within the bank premises during work hours. This ‘illegal demonstration’ lasted till 5:45 pm and involved squatting, sloganeering with no work. Post this event, the Bank issued a statement stating that the workers would “not be entitled to any salary for their period of absence from their duty on the basis of “No work No pay.” The bank then paid salaries as per this statement and discounted the amount for the period of absence. The respondent thereupon filed an application under Section 33C(2) IDA, 1947 for the recovery of a sum of Rs.11.41 before the central government of Calcutta.

The judgement analyses the bipartite agreement between the employees and the employer and the jurisdiction of the Labour Court over the application of Section 33 in a scenario where the dispute is not over settlement amounts but over the right to demand such amount. It reached the conclusion that a contract of employment involves reciprocal promises based on the period of performance and pro-rata wage deduction upon failure to meet such consideration is permissible under law without amounting to penalty. Justice Mukherjee gives the following verdict in favour of the petitioner’s right to deduct wages-

“The fact that the petitioner could have proceeded against the respondent No. 2 as a punishment does not, in my opinion, detract from the petitioner’s right not to pay the wages if the petitioner is entitled to deduct it. The fact that the unauthorised absence is a minor misconduct does not prevent the petitioner from not paying the salary if under the terms of the contract the respondent No. 2 has not earned the salary for not doing the work. In such a case, no question of giving any opportunity to the respondent No. 2 arises and therefore, there is no question of violation of principles of natural justice.”

This judgement was the beginning of judicial acceptance of the NWNP principle with a sense of natural justice. However, it only acknowledged the principle in spirit and not letter.

Next, in the case of Ramchandran v. Indian Bank[3] the petitioner was working as a clerk in the respondent’s bank at Madurai. His total salary was Rs.1380 per mensem. The bank put up a notice stating that some members of the staff had ceased work and resorted to mass agitation, deputation by being absent from their work-stations during the month of July 1976. In response, the bank would proportionately be deducting a sum of the wages as a disciplinary action. In the subsequent case, the respondents argue in light of Section 7 and Section 9 of The Payment of Wages Act, 1936 which are the underlying provisions for the NNWP principle. However, the court, although upholding the reasoning in the Algemene case, did not allow the bank to make deductions in this case because it did not have the right to do so under the governing Shops and Establishments Act, West Bengal owing to the absence of a provision such as Section 9 of the Payment of Wages Act. In doing so the Court further elaborated the legal context necessary for the NWNP rule to apply i.e the right of the employer must arise from a contractual (indivisible payment) or a statutory power or else such a deduction may be deemed excess power in the hands of the employer and illegal. The court also pointed out that absence would mean absence from the place of work and not the premises of the workplace.

This became the basic principle reiterated in a number of other cases resulting in further contextual nuances being attached to the interpretation of the principle. It can also be noted that in most cases, duty and service are used interchangeably where the benchmark is usually drawn from the employer-employee terms of employment.

In the case of Apart (P) Ltd. V. Samant[4], the extent of ‘no work’ was touched upon. The workers, in this case, had allegedly been working slow and unproductively and thereby the employer was within its right to deduct wages. The Court deemed it wholly impermissible as there existed no inquiry making the decision unilateral, illegal and opposed to natural justice. Similarly, in the case of K.R Sengamlam v. Indian Bank[5], the court pointed out the difference in total abstention from work and mere disobedience. The employee by refusing to attend the clearing house at the bank had only not performed this particular part of his duty making a deduction in wages unjust. However, this application must also be applied on a case to case basis and not as a thumb rule. [6] This is true in practice as well. For example, in the case of Dharam Singh v. Bank of India, Bomaby[7], the Punjab High Court held that if an employer is absent in his duty for part of the day, wage deduction for the entire day is permissible. This is in contrast with the ruling in K.R Sengamalam, proving that the NWNP is best applied delicately and carefully. The Supreme Court too has followed the case to case basis diction. In the case of The Commissioner, Karnataka Housing Board v. C. Muddiah[8], the Court acknowledged that “in the absence of statutory provision, the normal rule is no work no pay” however, it also upheld the notions of justice, equity and good conscience in dealing with the understanding of facts and circumstance, taking a compassionate stand towards the employee.

The NWNP has been applied in favour of the employer in most of the above-mentioned cases. Even in cases of a strike leading to a lockout, the court was strict in its ruling that wages will be paid if a strike is legal and justified and not otherwise. In the case of Hal Employees Union v. P.O[9], an illegal strike was followed by a legal lockout by the respondent. The court followed the NWNP principle and the workmen were not entitled to their wages.

The cases where this principle has not been applied follow the foremost rule dictating that where the employee is willing to work but is not given the opportunity to do so due to circumstances not personal to him, the NWNP would not apply.[10] The Allahabad High court went further ahead in saying that while wrongfully dismissing an employee, the employer was withholding permission to work which does not allow the principle of NWNP because the employee was willing to work. [11] Similarly, if the employee is in the wrong and causes the employer to become unable to work, he cannot take advantage of such wrong and bring in NWNP.[12]

In addition to these more passive and straightforward scenarios, there are also cases where the application of the principle is based upon burden of proof. In the case of Gujarat Housing Board v. Naval Kishore Revashankar Pandya[13], the employers were compelled to pay wages even for holidays when the employee had worked after failure to prove when the workman had been restricted from working during holidays. In the case of N. Atomic Power Employees’ Union v. Nuclear Power Corporation[14], the Court shifted the burden of proving the workman’s refusal to work despite their absence owing to lack of transport or a bandh, as alleged by the respondents. Once again, the court took in the circumstances of the case and gave a judgement in view of prevention of exploitation of Indian workers.

Finally, this principle has stood the test of time in its application in a recent judgement; the case of Chief Regional Manager, United India Insurance Company Limited v. Siraj Uddin Khan[15], wherein the Supreme Court reiterated that no individual can claim wages for the period that he/she remained absent without leave or justification.

ANALYSIS

The NWNP principle is a well-explored rule wherein the judiciary has expounded upon the law written down in Section 20 of the Wages Act, 2019 incorporated from Section 9 of the Payment of Wages Act, 1936. The case of Dharam Singh Rajput v. Bank of India[16] the Court succinctly captures the essence of the judgements mentioned above as well as the jurisprudence behind it:

“An employee is supposed to carry out his duties during the working hours and in case he, for any reason refuses to work or absents himself during the working periods, without the permission of the authorities competent to permit, his leave of absence is liable for deduction of wages for the period he is absent.

This is clear by the explanation attached to S.9 of the Payment of Wages Act. A perusal of this explanation makes the intention of the Legislature clear that even if the employee stays on his desk and refuses to work in pursuance of stay-in-strike or any other cause, which is not reasonable, he shall be deemed to be absent and make himself liable for deduction of wages. Where a wage period is monthly, a part of this period can be reasonably split up into a number of days during the month. But it will be unreasonable to further split up each day into hours and minutes and seconds. In the matter of interpretation of this provision, the interest of both the employees and the employers have to be reasonably and justly balanced”.

The key point made by the court is that the interpretational freedom of the section must be justly and reasonably balanced. The NWNP is one such rule that can work both in favour of the employer as well as in disfavour of the employee owing to the occasional oppressive nature of employment. It then becomes up to the courts to decipher which case falls where and therefore uphold the standards of natural justice and harmony within the labour force. Despite the NWNP not being a strictly statutory provision, it has its origins within the Constitution of India itself. In Chapter VI of the Constitution, borrowed from the French (where this principle is even codified), Article 39 gives of the Constitution the principle of ‘Equal Work Equal Pay’ as a directive for State rules. In line with the Fundamental Rights, it implies that there shall be no discrimination in the payment of wages for the same amount of work. If equal pay is the end of the stick supporting the employee, then the NWNP is the end supporting the employer, thereby bringing in the aforementioned balance. It has become a popular rule now also being implemented for teachers in Bhubaneshwar. More importantly, during times of a pandemic such as COVID-19, it becomes extremely necessary to know where these rules stand so that they are not left open to misuse. COVID-19 being an emergency does not deem the application of this principle as leave for workers would be justified and like the Atomic Powers case, the workers in this situation are not refusing to work, they simply cannot. To conclude, in allowing the principle to stand in situations where workers had legitimately left their place of work or place of duty empty, the court protects the employer and in checking the circumstances in which that employee left his/her seat in the first place, the court employs understanding and fairness for the employee.

[1] 20. (1) Deductions may be made under clause (b) of sub-section (2) of section 18 only on account of the absence of an employee from the place or places whereby the terms of his employment, he is required to work, such absence being for the whole or any part of the period during which he is so required to work. (2) The amount of such deduction shall in no case bear to the wages payable to the employed person in respect of the wage-period for which the deduction is made in a larger proportion than the period for which he was absent bears to the total period within such wage-period during which by the terms of his employment he was required to work: Provided that, subject to any rules made in this behalf by the appropriate Government, if ten or more employed persons acting in concert absent themselves without due notice (that is to say without giving the notice which is required under the terms of their contracts Fines. Deductions for absence from duty of employment) and without reasonable cause, such deduction from any such person may include such amount not exceeding his wages for eight days as may by any such terms be due to the employer in lieu of due notice. Explanation.––For the purposes of this section, an employee shall be deemed to be absent from the place where he is required to work if, although present in such place, he refuses, in pursuance of a stay-in strike or for any other cause which is not reasonable in the circumstances, to carry out his work.