COVID 19Legislation UpdatesNotifications

In view of the extension of the nationwide lockdown, it has been decided by EPFO to allow grace period of 30 days from 16-04-2020 to 15-05-2020 for filing of Electronic Challan cum Return to the employers for those establishments which have disbursed the wages for march, 2020 to their employees.

Employers who seek to avail the above relief, need to file ECR for wage month March, 2020 on or before 15-05-2020, duly certifying the disbursement of wages to employees by declaring actual date of disbursement of wages for March, 2020 in the column “Salary disbursal date: in the ECR and remit the contributions and administrative/inspection charges on or before 15-05-2020.

To read the letter, please follow the link below:

EPF Contribution Due Date Extended For The Month Of March 2020

COVID 19Legislation UpdatesNotifications

In the wake of Outbreak of Corona Virus (COVID-19) Pandemic Secretary of Ministry of Labour and Employment issues advisory:

All the employers of Public/Private establishments are advised to extend their coordination by not terminating their employees, particularly casual or contractual workers from job or reduce their wages. If any worker takes leaves, he should be deemed to be on duty without any consequential deduction in wages.

If the place of employment is to be made non-operational due to COVID-19, employees of such unit will be deemed to be on duty.


Ministry of Labour and Employment

[Dated: 20-03-2020]

OP. ED.

Employees’ Compensation Act, 1923 (ECA) stipulates that an employer is required to compensate an employee (other than one covered under Employees’ State Insurance Act, 1948) if such employee (i) suffers personal injury due to an accident arising out of and in the course of employment; or (ii) contracts any disease peculiar to the employment.

One of the ingredients for ascertaining amount of compensation payable to such an employee is “monthly wages”. Section 5 of ECA defines term “monthly wages” to mean an amount of wages deemed to be payable for a month’s service. Section 4 provides for manner in which compensation amount is discovered as under:

Injury resulting in Compensation basis monthly wages
Death Higher of —

50% of deceased employee’s “monthly wages” multiplied by relevant factor;

OR

INR 1,20,000 i.e. rate of compensation.

Permanent total disablement Higher of —

60% of such employee’s “monthly wages” multiplied by relevant factor;

OR

INR 1,40,000 i.e. rate of compensation.

Total or partial temporary disablement  Half-monthly payment of the sum equivalent to 25% of “monthly wages”.

Thus, it is apparent that the amount of compensation payable to an employee is directly influenced by the quantum of monthly wages paid to an employee.

The Central Government by 2020 Notification[1] almost doubled the “monthly wages” to INR 15,000 from INR 8000 that was notified under 2010 Notification[2] but did not resolve the conundrum that is troubling employers, which is — 

Whether the notified monthly wage should be treated as “base amount” or “ceiling amount” for determining compensation under ECA?

Unfortunately, even the courts across India are divided on this question. The excerpts of differing judgments are reproduced below:

In New India Assurance Co. Ltd. v. Govindi Devi,[3] injury resulted in death of the employee. The claimants claimed that the employee was earning INR 5000 per month but failed to prove so. High Court of Himachal Pradesh at Shimla held:

19. … It is pertinent to mention here that prior to aforesaid amendment, the said wages were fixed at a sum of Rs 4000 and Explanation II specifically restricted the amount to be Rs 4000 only even if it exceeds. However, by virtue of Act 45 of 2009, the restriction as referred above came to be omitted and in its place, a sum of Rs 8000 has been substituted by way of notification taken note hereinabove. It is not in dispute that while amending the said clause, no restriction has been attached or specified that if the monthly wages of the deceased employee exceeds Rs 8000 whether it should be considered at Rs 8000 only and, as such, there appears to be considerable force in the arguments of learned counsel appearing for the claimants that since no restriction is imposed in case the monthly wages of the deceased employee exceeds to Rs 8000 liberal interpretation has to be made especially when the Act itself is a beneficial legislation.

***

26. It is quiet apparent from the aforesaid exposition of law that where the “language” is clear, the intention of the legislature is to be gathered from the language used. What is to be borne in mind is as to what has been said in the statute as also what has not been said. Having regard to the above, this Court is unable to accept the contention of Shri Praneet Gupta, learned counsel appearing for the Insurance Company, that the Court below ought not to have taken into consideration a sum of Rs 8000, which has otherwise been prescribed as minimum wages for the purpose of determining the compensation, especially when claimants themselves claimed that monthly wages of deceased were Rs 5000 per month including diet money. Accordingly, this Court is of the view that the monthly wages specified by the statute by way of amendment at Rs 8000 is appropriate for consideration for the purpose of computing the compensation and as such, the learned court below has rightly calculated the compensation by considering the wages of the deceased workman at Rs 8000, which in no manner requires any interference.                                                                                                                                                                (emphasis supplied)

High Court of Himachal Pradesh at Shimla once again toed on similar lines while adjudicating upon a compensation claim in Rajender Kumar v. Shyam Lal[4] by holding that the notified monthly wages is the base amount i.e. minimum wage amount for ascertaining compensation. In this case, the claimant claimed that he was earning INR 7500 per month but failed to prove income as claimed by him. High Court placed reliance on 2010 Notification and held:

23. Bare perusal of aforesaid “Statement of Objects and Reasons” suggests that the amendment came into force while empowering the Central Government to enhance the minimum rates of the said compensation from time to time as well as to specify the monthly wages in relation to an employee for the purpose of the aforesaid compensation, meaning thereby fixing the minimum wages by way of amendment at Rs 8000 is only for the purpose of determining the compensation under the Workmen’s Compensation Act and there is scope of further enhancement from time to time … (emphasis supplied)

In United India Insurance Co. Ltd. v. Kakali Sarkar Guha [5], injury resulted in death of the employee and the claimants claimed that the deceased employee was earning INR 13,765 per month. While adjudicating over the matter, High Court of Sikkim at Gangtok relied on the Supreme Court’s judgment and considered entire monthly wages for ascertaining the compensation. The High Court held:

16. … A similar situation arose before the Supreme Court in Jaya Biswal v. Iffco Tokio General Insurance Co. Ltd. [6] In the said case the learned Commissioner had taken Rs 8000 as the limited wage to calculate the compensation. Since neither of the parties produced any document on record to prove the exact amount of wages being earned by the deceased the wage of the deceased was accepted as Rs 4000 per month  + daily bhatta of Rs 6000 per month, which amounts to a total of Rs 10,000 at the time of the accident. In the present case, it has been proved that the monthly wages of the deceased was Rs 13,765. The learned Commissioner was thus required to calculate the employer’s liability for compensation in the following manner: 

Rs 13,765 (monthly wages) x 50% x 194.64 (the relevant factor) = Rs 13,39,609.8.  (emphasis supplied)

Unlike the High Court of Himachal Pradesh and Sikkim, in United India Insurance Co. Ltd. v. Seethammal, [7] the High Court of Madras held:

15. Therefore, according to the learned counsel for the petitioner, since the statute is a beneficial legislation, it has to be construed by interpreting liberally and in view of omission of Explanation II and the notification issued by the Central Government (Ministry of Labour and Employment) dated 31-5-2010, though a sum Rs 8000 has been mentioned as monthly wages, it should be construed as minimum and not as maximum and therefore, when evidence establishes that the workman was earning Rs 12,000 per month, the same has to be considered for arriving at just compensation.

***

21. … Therefore, in this context, the learned counsel appearing for the claimants would vehemently contend that since no restriction is imposed in case the monthly wages of the deceased employee exceeds Rs 8000 since the Act itself is a beneficial legislation, liberal interpretation has to be made which would be beneficial to the claimants.

22. Though the contention of the learned counsel for the claimants is logically sound and acceptable, but I am unable to countenance the same.

***

24. …  In my considered view, when the intent of the legislature is clear while amending the Act to enhance the minimum rates of the compensation from time to time as well as to specify the monthly wages in relation to an employee for the purpose of the said compensation, liberal interpretation beyond the prescription made in the Act, is not at all required. Further, it is pertinent to note that while amending the Act, the legislature has consciously in its wisdom, omitted the Explanation II of Section 4-A of the Act only in order to enhance the minimum rates of compensation….

***

26. … Having regard to the above, I am unable to give accept the contention of the learned counsel for the claimants. Accordingly, I am of the view that the monthly wages specified by the statute by way of amendment at Rs 8000 is appropriate for consideration for the purpose of computing the compensation and hence, the Deputy Commissioner has rightly calculated the compensation by considering the wages of the deceased workman at Rs 8000, which, in my opinion, requires no interference. (emphasis supplied)

Conclusion

It is stated with due respect, both the judgments of High Court of Himachal Pradesh in advancing the principle of “beneficial legislation” have ignored the fact that the quantum of compensation increases manifold as the “monthly wages” is multiplied by relevant factor set out in ECA. This not only overburdens the employer but also has a cascading effect on the earnings of other employees who are working for the employer.

Furthermore, High Court of Himachal Pradesh’s reading of “minimum rates of compensation” in the Statement of Objects and Reasons of Workmen’s Compensation Act, 1923 to mean “monthly wages” of INR 8000 stated in 2010 Notification as “minimum monthly wages” is against the cannons of construction especially the literal rule of interpretation. 

With due respect, High Court of Sikkim mechanically interpreted Supreme Court’s judgment in Jaya Biswal v. Iffco Tokio General Insurance Co. Ltd.[8] to determine compensation on full monthly wages of INR 13,765 in supersession of average monthly wage of INR 8000 as deduced by the Commissioner. In doing so, High Court failed to notice that even Supreme Court stopped short of considering entire monthly wages paid to the employee in the said judgment for deducing the compensation amount.

High Court of Madras, on the other hand, has endeavoured to balance conflicting interests of both the employer and employee. It has effectively deployed the tools of interpretation of statutes to gather intention of legislature by keeping in mind both what has been said in statute as well as what is not said. Thus the order, in our view, is a reasoned order and should be able to withstand the test of time. 

Other takeaways for employers: Aside the conundrum, the impact of 2020 Notification is that going forward, employers will have to pay higher compensation under ECA. Likewise, employers availing Workmen’s Compensation Policy from an Insurance Company may have to budget for premium hikes.


† Principal Associate, Vaish Associates Advocates

†† Associate, Vaish Associates Advocates

[1]Notification No. S.O. 71(E) dated 3-1-2020, source: <http://egazette.nic.in/WriteReadData/2020/215147.pdf>.

[2]Notification No. S.O. 1258(E) dated 31-5-2010, source: <http://egazette.nic.in/> (Notification available using the “search function” of the website).

[3] 2019 SCC OnLine HP 2529

[4] 2019 SCC OnLine HP 1709

[5] 2019 SCC OnLine Sikk 156

[6] (2016) 11 SCC 201

Case BriefsHigh Courts

Rajasthan High Court: Mohammad Rafiq, J. disposed of an application seeking a grant of last wages drawn by the employee under the Industrial Disputes Act, 1947.

In the present case, the respondent-employee had moved an application under Section 17-B of the Industrial Disputes Act, 1947 for receiving the amount of wages last drawn by him from the date of filing the application.

The counsel representing the petitioner-employer, Neeraj Jain submitted that the labour court erred in passing the award since there was no master-servant relationship subsisting between the parties.

The Court upon hearing both the parties stated, that once the labour court has declared in its award that the retrenchment of respondent-employee as illegal, even if the execution of the award has been stayed, according to mandate of Section 17-B of the Industrial Disputes Act, 1947 the respondent-employee is having statutory right to receive amount of wages last drawn by him from the date of filing of the application. However, the petitioner-employer will have an option to re-engage the respondent-employee as per the payable wages. The Court directed the petitioner-employer to pay the amount due to the petitioner within a period of six weeks.[Manager Employer v. Judge Industrial Dispute, 2019 SCC OnLine Raj 3027decided on 19-09-2019]

Case BriefsHigh Courts

Rajasthan High Court: The Bench of Arun Bhansali, J.,  allowed the writ petition filed in regard to payment of minimum wages as prescribed for skilled workman under the provisions of the Minimum Wages Act, 1948. 

The facts of the case were that the petitioners were employed as Pump Driver/Operator under Janata Jal Yojana, promulgated by Government of Rajasthan to provide drinking water to the citizens. They sought directions to the respondents to make payment of minimum wages as prescribed for skilled workman under the provisions of the Minimum Wages Act, 1948. They also prayed that the respondents should be directed to release 50% of the minimum wages withheld w.e.f. February 2013. Pawan Singh Rathore, counsel appearing for the petitioners, submitted that the controversy involved in the writ petition was covered by a decision of this Court rendered in Jagdish Singh v. State of Rajasthan, S.B. Civil Writ Petition No. 5954/17, which was allowed with the directions that the petitioners who were employed under Gramin Janta Jal Yojana as Pump Driver/Pump Operator should be entitled to the wages as prescribed for skilled workman by the State of Rajasthan as per the provisions of Minimum Wages Act, 1948. It also directed that the amount of 50% of the minimum wages payable to the petitioners withheld by the respondents should be released forthwith. It was made clear in this case that these directions would apply only to the cases where the scheme in question was floated and implemented and not in any other case. If the scheme Gramin Janta Jal Yojana was not floated in a particular Gram Panchayat, the respondents would not be liable for payment at the rate of minimum wages rather, in that case, if any of the petitioners was employed in other scheme or otherwise, he would be at liberty to approach the authority under the Minimum Wages Act for adjudication of the dispute. 

The Court upheld the decision given in Jagdish Singh case and allowed the writ petition. [Rupendra Singh v. State of Rajasthan, 2019 SCC OnLine Raj 491, decided on 15-05-2019]

Case BriefsHigh Courts

Bombay High Court: A Division Bench comprising of R.M. Savant and Nitin W. Sambre, JJ. allowed a petition filed by a suspended worker seeking payment of suspension allowance during the pendency of disciplinary enquiry against him.

The petitioner was registered with the respondent Board. In June 2018, he was served a show cause notice for initiating departmental proceedings against him. Subsequently, he was suspended from service. The petitioner requested the respondent for payment of suspension allowance which was not granted. Aggrieved thereby, the petitioner filed the instant petition.

The High Court perused the entire scheme of the service conditions and the statute under which the petitioner’s service was governed. It was observed that the object behind payment of suspension allowance is that the suspended employee is able to keep his body and soul together during his suspension period and is able to sustain himself. It was held that once there is a power to suspend vested in an employer, then the necessary concomitant is that the employer has to pay the suspension allowance to the employee. Furthermore, it was observed as well settled that suspension allowance is a part of “wages” defined under Section 2(vi) of the Payment of Wages Act, 1936. In light of the aforesaid, the petition was allowed and the respondent was directed to pay suspension allowance to the petitioner at a rate to be fixed by the Board. [Tanaji Genba Pawge v. Mumbai Vegetable Market Unprotected Workers Board,2018 SCC OnLine Bom 4140, dated 30-10-2018]

Case BriefsSupreme Court

Supreme Court: The bench of Madan B. Lokur and NV Ramana, JJ directed the the Ministry of Rural Development to prepare an urgent time bound mandatory program to make the payment of wages and compensation to the workers in consultation with the State Governments and Union Territory Administrations. The Bench said:

“This is not only in the interest of the workers who have expended unskilled manual labour but also in furtherance of the rule of law which must be followed in letter and spirit.”

On the issue pertaining to the delay in payment of wages and compensation to the beneficiaries under the Mahatma Gandhi National Rural Employment Guarantee Act, 2005 (Act) and the Scheme framed thereunder, the Court said that in terms of the Act and Schedule II thereof a worker is entitled to payment of wages within a fortnight of the date on which the work was done, failing which the worker is entitled to the compensation as prescribed in paragraph 29 of the Schedule II of the Act. Stating that one entity cannot pass on the burden to another and vice versa, the Court said that the burden of compliance is on the State Governments and Union Territory Administrations as well as the Central Government.

On Central Government’s argument that it has no responsibility after the second signature is placed on the Fund Transfer Orders, the Court said:

“The Central Government cannot be seen to shy away from its responsibility or taking advantage of a person who has been placed in the unfortunate situation of having to seek employment under the Act and then not being paid wages for the unskilled manual labour within the statutorily prescribed time. The State Governments and Union Territory Administrations may be at fault, but that does not absolve the Central Government of its duty.”

Stating that delays are simply not acceptable, the bench said that the law requires and indeed mandates payment of wages not later than a fortnight after the date on which the work was done by the worker or labourer. Any reason for the delay in receiving wages is not at all the concern of the worker. He or she is entitled to get the due wages within a fortnight of completion of the work. It was hence held that if there are any administrative inefficiencies or deficiencies or laxity, it is entirely for the State Government and the Ministry of Rural Development to sort out the problem. [Swaraj Abhiyan (VI) v. Union of India,  2018 SCC OnLine SC 578, decided on 18.05.2018]