Karnataka High Court Order upholding Minimum Wages Notification - Steep Hike

KARNATAKA MINIMUM WAGES REVISED NOTIFICATION DEC 2017 - EFFECTIVE 1ST JANUARY 2020 - CHALLENGE IN HIGH COURT AND FINAL UPDATE/ADVISORY 

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Several Industries and Associations filed Writ Petitions before the Karnataka High Court, against thesteep increase in the Minimum Wages Notified effective 1^st January, 2017.were filed on behalf of thefollowing scheduled employments / industries: Some of the Industries are:-

·         Shops and Commercial Establishments

·         Engineering Industry

·         Petrol & Diesel Oil Pump Industry

·         Bakeries

·         Chemical Industry

·         Brass, Copper, Aluminium and Steel Utensils Manufacturing Industry

·         Metal Rolling & Rerolling (Ferrous) Industry

·         Rubber Industry

·         Tiles Industry

  ·     Biscuit Industry

The Trade Unions had filed Writ Petitions against withdrawal of Minimum Wage Notification for the following Industries:

a)      Cloth Dyeing and Printing

b)      Spinning Mills Industry

c)       Textile Silk Industry

d)      Tailoring Industry (Draft Notification).

The Hon’ble High Court passed a common order on all the above Writ Petitions which is published in the link above. While drawing reference to the historical events leading to enactment of the Minimum Wages Act, 1948 deliberated various aspects of the law.  The Writ Petitions by the Industry challenged the impugned notifications, inter alia, the below grounds:

·         The Advisory Board being wrongly constituted is no Board at all in the eye of law

·         Interests of the cross section of the industry was not fairly represented

·         Some members representing labour were put up to represent the industry

·         No worthwhile consultation took place in the Advisory Board meeting

·       There  was no recommendation by the Advisory Board thereby abdicating its responsibility

·         No meaningful discussion took place nor was there voting

·         In determining the components of the minimum wages, guidelines of Reptakos Judgment [(1992) 1 SCC 290] were not followed

Factors outside the domain of Minimum Wages Act were contempltated

                   VDA in addition to compliance with minimum wages paid are above the values prescribed

                                 i.            equal remuneration

                               ii.            Inclusion of service weightage / experience allowance

                              iii.            Providing Rest Rooms, Drinking Water etc.

                             iv.            HRA to Government Servants to be the basis for fixing the rental component of the Minimum Wage

•     Arbitrary Inclusion of supervisors and managers under the Minimum Wage Notification 
•       Prescribing  Minimum Wages to non-scheduled employments       
•    Rates fixed by the Government are closer to Fair Wages and no opportunity provided for the employers to question the methodology adopted for calculating the minimum wages.
• .       Data collected by the Government in revising the minimum wages does not inspire confidence as Arbitrary increase of minimum wages to the extent of 200 to 325% may strike death-knell to the industry.
•        Appellate mechanism provided in the notification amounts to re-enacting the provisions of the Act
•       Minimum Wages have been calculated on the basis of one earning member per family whereas it is now common that even the woman of the family also is invariably employed thereby augmenting the total income per family.
  
  
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w    What the High Court Observed

• Judicial review under Art. 226/227 focusses on the decision making process and not the decision as such. 
• c)       Power of policy making lies almost exclusively with the Legislature and the Executive.
• d)      Government is the ultimate authority in fixing / revising the minimum wages as both the Advisory Board and the Court lack expertise in the matter.
• e)      The contention that the Advisory Board was not properly constituted is not tenable as this issue was not raised by the petitioners at any time either after constitution of the board or during the deliberations of the Advisory Board.
• f)       The employers’ representatives such as KEA, KASSIA, FKCCI etc. represent more than 90% of the Scheduled Employments and hence the interests of the employers were adequately represented.
• g)      Unequal representation of the employers. Employees and independent persons has not been substantiated
• h)      Opinions / views of the Advisory Board are only recommendatory in character and the ultimate decision making power rests with the Appropriate Government.
• i)        The contents of the Board proceedings and recommendations prima facie show that there was transaction of business and members of either side discussed the subject although the quality and quantum of the deliberation could have been much higher.
• j)        That there was no voting in the Advisory Board meeting does not amount to non-adherence as the rule regarding voting is merely directory in nature.
• k)      Even though the Advisory Board did not make any specific recommendation to the Government, it may not be a sufficient ground for invalidating the notification. Ideally the Board could have made some recommendations but the absence is too feeble a ground for invalidating the notification.
• l)        There is no reason to doubt that the Government that it did consider the Board’s recommendation. The involvement of high Government functionaries in the decision making process itself strengthens the presumption that the Government has considered the same.
• m)    Under the scheme of the Act, it is within the exclusive domain of the appropriate government to revise the minimum wages and therefore, whatever procedural lacuna that lie in the Board proceedings pales into insignificance.
• n)      The argument that the Advisory Board after accomplishing its proceedings is bound to give advice which the Government has to consider is not substantiated.
• o)      When the Advisory Board has not given a counter proposal with respect to the proposed revision of rates in the draft notification, there is a strong presumption that the Board accepted the draft proposal of the Government. There was some amount of consultation between the Government and the Advisory Board. The infraction of the procedure even if is assumed, petitioners cannot draw much milk therefrom.
• p)      The Advisory Board can fix its own procedure and it may use Government data or data brought by its members from their own sources. The Board need not undertake investigation or a roving enquiry.
• q)      The proceedings of the Advisory Board prima facie show that it has done some work although much more could have been done; “there is scope for improvement even in the heaven” said Oscar Wilde.
• r)       The complaint that the rates of minimum wages revised are exorbitantly high and exploitative of the industry cannot be accepted in the absence of any counter formula. The complaint that the impugned wage values transcend minimum wages cannot be mechanically chanted like a Vedic mantra. In a populous society like ours, sometimes, blood appears cheaper than bread. No material is produced to show that the impugned wages values are far in excess of minimum wages.
• s)       The contention that the rates of revised minimum wages is too high cannot be addressed by the Writ Court since the same falls within the domain of Executive wisdom and power.
• t)       The Writ Court cannot be called upon to take up an investigation of the reasonableness of the rates of wages fixed by the Government by following the due procedure of law.
• u)      The contention that minimum wages being much higher than the neighbouring states is legally untenable in a federal country with a quasi-federal constitution. Every state can take its own decision with regard to minimum wages keeping in mind socio-economic conditions of the working class in that state as mandated by the Act. Therefore, what a neighbouring state would do is irrelevant.
• v)      India being a contiguous land mass, it does not follow that what one tiny state in North East does puts a fetter on the power of other states in the matter of fixation / revision of minimum wages. The constitutionally ordained federal structure of our country and also the power of appropriate Government to fix / revise minimum wages repulses such a contention. An argument to the contrary would rob off the federal autonomy of the provincial Governments.
• w)    Bringing in a uniform wage structure throughout the Country regardless of the varying socio-economic conditions may go against Article 14 of the Constitution which prohibits treating unequals as equals.
• x)       The notification covering employments not covered in any notification is in the nature of residuarily universal in inclusion. Two more notifications have been issued after consulting the Advisory Board and no challenge having been laid to these universal notifications, the notifications are held to be valid.
• y)      Employees such as supervisory staff who answer the definition of employer under the Act do not fall under the definition of ‘employee’ under Section 2(e) of the Act. The definition ‘employee’ under the Act has two parts – “means definition” and “inclusive definition”. Those employees who fall within the first definition are within the Act. Those employees who do not fall within the first part cannot be held as employees under this Act and hence the notification to that extent is bad in law. However, such employees with designation as supervisory or managerial may also show that they fall within the first part of the definition in which case, they are entitled to the benefits under this Act.
• z)       The contention of three consumption units for one male earner since women are also now in the workforce does not merit consideration in the absence of any data on male-female employment ratio. No data is forthcoming form the contenders whose onus it was to furnish such data. This being a post Reptakos development, it is for the appropriate Government / Board to take a suitable decision in this regard keeping in mind new Acts such as “Maintenance and Welfare of Parents and Senior Citizens Act, 2007”.
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• aRRent component of Rs. 4000.00 being too high, with steady increase in standard of living, the fixing of rent being data driven and not whimsical and therefore held valid.
• bb)  Granting Service Seniority Weightage at the rate of 1% of minimum wages for each year of service over ten years cannot be held to be a factor admissible under the Act for fixing / revising minimum wages, it does not per se constitute as a relevant component of minimum wage. There is no provision under the Act to support this addition and hence held invalid.
• cc)    Mandate for continuing the current wages when they are above minimum wages, there is no authority vested in the appropriate Government under this Act for directing the employer to continue to pay such current wages.
• dd)  Retrospective revision of minimum wages is held to be valid more so in view of the fact that revisions have not taken place exactly every once five years.
• ee)   Establishment of dispute resolution mechanism especially when provisions of Section 20 provide for the very same purpose is held invalid.
• ff)     The amount of wages that remain unpaid shall be paid by the employers within 8 weeks with interest at 6% per annum from the date of notification.

Writ Appeal (No. 1611/2019 and connected WAs) before Division Bench and highlights of the judgement dated 13th April, 2020. 

1. The notification dated 22.3.2018 issued by the Government withdrawing three finalnotifications pertaining to textile industry (Silk), spinning industry (Mills) and clothing dying and printing industry has been set aside. Further the withdrawal of the preliminary notification dated 22.2.2018 pertaining to Tailoring industry stand revived. A direction has been issued to the State Government to take further steps on the basis of the draft Notification dated 20.2.2018 in accordance with section 5 of MW ACT as expeditiously as possible.
2. Liberty has been reserved to the Managements to challenge 3 revived final Notifications dated 30.12.2017 in accordance with law. 
3. So far as the Writ Appeal preferred by the Management challenging the order of theLearned Single judge, the Division bench confirmed the order of the learned single judge only with modification that the entire Clause 3 shall stands set aside subject to the observation and clarification made in para 84 of the Judgment.
4. Considering the present situation, to enable the aggrieved parties to approach the higher Court, this judgment will not be implemented for twelve weeks from the date of judgement

IMPLICATIONS OF THE JUDGMENT:

i) The Managements have to pay minimum wages as per the rates prescribed in the notification pertaining to their Scheduled Employment with effect from the date of the notification.

ii) Any arrears of wages payable i.e., the difference between the wages payable as per the

notification (including VDA applicable) and the actual wages paid from the date of the

notification shall carry an interest of 6% per annum which shall be paid along with the

next salary due to the employees.

iii) Seniority Service Allowance is not payable. Fixing of minimum wages for supervisors

and managers in the minimum wage notification is also invalid so long as the salary

payable to such employees is not less than the minimum wage prescribed and their right

of redressal under Section 20 of the MW Act regardless of their designation is retained.

iv) If the total wage paid to an employee is equal to or more than the statutory minimum

wage prescribed (minimum wage + VDA), then compulsory payment of VDA

separately is not applicable.

v) Since the Hon’ble High Court has held that withdrawal of three final Notifications in

relation to Textile (Silk) Industry, Spinning Mills Industry, cloth Dyeing and Printing were made effective from 30th December 2017, the corresponding three final Notifications issued by the Government during the pendency of the Writ Appeals on 31.10.2019 in respect of the same industries will be of no legal effect.

vi) Since the Hon’ble High has also held that the draft notifications in respect of Tailoring

Industry was illegally withdrawn, the final Notification dated 31.10.2019 in respect of

the said Tailoring industry will have no effect at all.

vii) In view of the above three Final Notifications pertaining to Textile etc which were

withdrawn by the Government would now stand revived. As the Preliminary

Notification dated 22.2.2018 in respect of Tailoring Industry should gets revived, the

Government also takes necessary steps to issue Final Notification in accordance with

law.

General Guidelines for implmentation of the revised Minimum Wages with applicable interest, for the industry:

1. To pay the arrears of minimum wages - differential wages between the amount actually paid (not the CTC, but the components permissible for reckoning under the minimum wages, as declared by the SC.

2. 6% interest to be paid from the date of revision/joining of the employee, up to the date of payment either as separate payroll or intergrated payroll

3. Deduction of Provident Fund on basic+ any other components covered under PF for the whole period as one single payment to EPFO by way of arrears

4. As for ESI, it would apply only from the date the amount fell due, i.e., the date of judgement, upto the date of payment - only those months including part April to be reckoned

What about employees/workmen/outworkers who are no more in the payroll/ inactive employes

• Obligation for payment for such ex employees/workers would arise if and when such persons file a claim to the company in writing 
• Interest of 6% would apply only for the differential wages recokned during their tenure of 
  employment
• No question of PF or ESI and any recoverable amount due from those claimants may be adjusted in the current payment
• The prescribed limitation for the claim is 6 months (before the prescribed authority) from the date of due i.e., date of judgement. However, the authority may consider condonation of delay basis 
  bona fide reasons
• It is advisable for employer to consider any direct claims/requests from such persons rather than letting them knock the door of authorities/court and subject to KYC norms, may initiate payment as guided above

Labour Welfare Fund: The Karnataka LWF Act as it stands covers only employees and hence there is no need to ear mark any unclaimed fund for remittance to the LWF. However, review may be made as the law evolves, viz. the Wage Code and any amendments to LWF.

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