Supreme Court Quashes Gujarat Factory Exemptions: Upholding Worker Rights During COVID-19 (1 October 2020)

Introduction

Date of the Judgment: 1 October 2020

Citation: (2020) INSC 732

Judges: Dr. Dhananjaya Y Chandrachud, J., Indu Malhotra, J., K M Joseph, J.

Can a state government use the COVID-19 pandemic as a reason to exempt factories from labor laws? The Supreme Court of India recently addressed this crucial question, examining the limits of emergency powers under the Factories Act, 1948. The court considered whether the pandemic and the resulting lockdown could be classified as a ‘public emergency’ justifying the suspension of worker protections. This judgment clarifies the scope of ‘public emergency’ and reinforces the importance of worker rights, even during crises. The bench comprised of Dr. Dhananjaya Y Chandrachud, J., Indu Malhotra, J., and K M Joseph, J., with the majority opinion authored by Dr. Dhananjaya Y Chandrachud, J.

Case Background

In response to the nationwide lockdown declared on 24 March 2020, to curb the spread of COVID-19, the State of Gujarat issued notifications on 17 April 2020, and 20 July 2020, under Section 5 of the Factories Act, 1948. These notifications exempted all factories registered under the Act from provisions related to weekly hours, daily hours, and rest intervals for adult workers, specifically Sections 51, 54, 55, and 56. The stated aim was to provide “certain relaxations for industrial and commercial activities.” The first notification was effective from 20 April 2020, to 19 July 2020, and the second extended the exemptions from 20 July 2020, to 19 October 2020. The petitioners, Gujarat Mazdoor Sabha, a trade union representing around ten thousand workers in Gujarat, and another federation of trade unions representing a hundred thousand workers across India, challenged these notifications, arguing that they were an overreach of power and violated workers’ rights.

Timeline:

Legal Framework

The core of this case revolves around the interpretation of Section 5 of the Factories Act, 1948, which allows the State Government to exempt factories from certain provisions during a “public emergency.” The section states:

“5. Power to exempt during public emergency. —In any case of public emergency the State Government may, by notification in the Official Gazette, exempt any factory or class or description of factories from all or any of the provisions of this Act except section 67 for such period and subject to such conditions as it may think fit:

Provided that no such notification shall be made for a period exceeding three months at a time.

Explanation. —For the purposes of this section “public emergency” means a grave emergency whereby the security of India or of any part of the territory thereof is threatened, whether by war or external aggression or internal disturbance.”

The explanation to Section 5 defines “public emergency” as a “grave emergency” threatening the security of India due to war, external aggression, or internal disturbance. The court was tasked with determining whether the COVID-19 pandemic and the resulting economic slowdown qualified as a “public emergency” under this definition.

Arguments

Petitioners’ Arguments:

• ✓ The petitioners argued that Section 5 of the Factories Act can only be invoked during a ‘public emergency’, which is defined as a grave emergency threatening India’s security due to war, external aggression, or internal disturbance. They contended that the COVID-19 pandemic and lockdown do not fall under this definition.
• ✓ They argued that the term ‘internal disturbance’ should be interpreted in the context of ‘war’ and ‘external aggression’, implying a threat to the security of India, not merely an economic downturn or a pandemic.
• ✓ The petitioners highlighted that the notifications were a blanket exemption for all factories, which is not permissible under Section 5, and that Section 65(2) of the Factories Act, which deals with exceptional work pressure, should have been applied instead.
• ✓ They argued that the notifications violate Section 59 of the Factories Act by not providing double wages for overtime and that the proportionate wages for overtime amount to forced labor.
• ✓ They also cited industrial accidents that occurred after the lockdown to show the dangers of overworking employees.

Respondent’s Arguments:

• ✓ The respondent contended that the COVID-19 pandemic constitutes a ‘public emergency’ under Section 5, as it has disrupted the social order and threatened the state’s integrity.
• ✓ They argued that the economic slowdown caused by the pandemic led to an ‘internal disturbance’ within the meaning of Section 5, justifying the temporary exemptions.
• ✓ The respondent stated that the notifications do not violate Section 59 of the Factories Act, as they provide for proportionate wages for overtime work.
• ✓ They argued that the State Government has the prerogative to determine which factories should be exempted and that listing all classes of factories would be an unnecessary exercise.
• ✓ They argued that the notifications were issued to maintain minimum production levels and not due to exceptional work pressure, therefore, Section 65(2) was not applicable.

Issues Framed by the Supreme Court

The Supreme Court framed the following key issues for consideration:

1. Whether the notifications issued by the State of Gujarat under Section 5 of the Factories Act, 1948 are valid?
2. Whether the COVID-19 pandemic and the ensuing lockdown constitute a ‘public emergency’ as defined in Section 5 of the Factories Act?
3. Whether the exemptions granted by the notifications violate the provisions of the Factories Act, particularly Section 59 concerning overtime wages?

Treatment of the Issue by the Court:

Authorities

The Supreme Court relied on several authorities to interpret the scope of ‘public emergency’ and the rights of workers.

Judgment

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• ✓ The strict interpretation of ‘public emergency’ under Section 5 of the Factories Act, which requires a grave threat to the security of India due to war, external aggression, or internal disturbance.
• ✓ The court’s concern for the welfare and rights of workers, particularly the right to fair wages and humane working conditions, as enshrined in the Constitution and the Factories Act.
• ✓ The principle of proportionality, which requires that any infringement of rights must be necessary and proportionate to the aim being pursued.
• ✓ The court’s view that the economic slowdown caused by the pandemic, while severe, did not constitute a threat to the security of the state that would justify the invocation of emergency powers.

The court rejected the argument that the economic slowdown caused by the pandemic constituted an internal disturbance threatening the security of the state. The court emphasized that emergency powers should be used sparingly and only when the conditions for their valid exercise exist. The court also noted that the notifications, by denying humane working conditions and overtime wages, violated the workers’ right to life and right against forced labor secured by Articles 21 and 23 of the Constitution. The court quoted from the judgment: “The notifications, in denying humane working conditions and overtime wages provided by law , are an affront to the workers’ right to life and right against forced labour that are secured by Articles 21 and 23 of the Constitution.” The court also stated: “Financial losses cannot be offset on the weary shoulders of the laboring worker, who provides the backbone of the economy.” and “A workers’ right to life cannot be deemed contingent on the mercy of their employer or the State.”

Key Takeaways

• ✓ The judgment clarifies that the term ‘public emergency’ under Section 5 of the Factories Act must be interpreted strictly and cannot be extended to cover economic downturns or pandemics unless they pose a grave threat to the security of the state.
• ✓ It reinforces the importance of worker rights, particularly the right to fair wages and humane working conditions, even during crises.
• ✓ It emphasizes that emergency powers should be used sparingly and only when the conditions for their valid exercise exist.
• ✓ It highlights that the State cannot use emergency powers to reduce overhead costs for factories at the expense of workers’ rights.
• ✓ The judgment sets a precedent that will likely influence future cases involving labor laws and emergency powers.

Directions

The Supreme Court directed that overtime wages shall be paid, in accordance with the provisions of Section 59 of the Factories Act, to all eligible workers who have been working since the issuance of the notifications.

Development of Law

The ratio decidendi of this case is that the term ‘public emergency’ under Section 5 of the Factories Act, 1948, must be interpreted strictly and cannot be extended to cover economic downturns or pandemics unless they pose a grave threat to the security of the state. This judgment reinforces the importance of worker rights and sets a precedent against the misuse of emergency powers to undermine labor laws. It also reiterates that workers cannot be denied their right to overtime wages at double the rate as mandated by Section 59 of the Factories Act, 1948. There is no change in the previous position of law, but this judgment clarifies the interpretation of the term “public emergency” in the context of the Factories Act.

Conclusion

In conclusion, the Supreme Court quashed the notifications issued by the State of Gujarat, holding that the COVID-19 pandemic and the resulting lockdown did not constitute a ‘public emergency’ under Section 5 of the Factories Act, 1948. The court emphasized that emergency powers should be used sparingly and only when the conditions for their valid exercise exist. The judgment reinforces the importance of worker rights and sets a precedent against the misuse of emergency powers to undermine labor laws. The court also directed that overtime wages be paid to all eligible workers in accordance with Section 59 of the FactoriesAct, 1948.