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LABOUR LAWS PRIMER

Apprentices Act
The main purpose of the Act is to provide practical training to technically qualified
persons in various trades. The objective is promotion of new skilled manpower. The
scheme is also extended to engineers and diploma holders.
The Act applies to areas and industries as notified by Central government. [section !"#$.
Obligation of Employer - %very employer is under obligation to take apprentices in
prescribed ratio of the skilled workers in his employment in different trades. [section $.
&n every trade' there will be reserved places for scheduled castes and schedules tribes.
[section (A$. )atio of trade apprentices to workers shall be determined by Central
*overnment. %mployer can engage more number of apprentices than prescribed
minimum. [section +!#$. , , The employer has to make arrangements for practical
training of apprentice [section -!#$. %mployer will pay stipends to apprentices at
prescribed rates. &f the employees are less than ./0' /01 of cost is shared by
*overnment. &f employer is employing more than ./0 workers' he has to bear full cost of
training.
234 CA5 6% A77)%5T&C% , Apprentice should be of minimum age of " years and
he should satisfy the standard of education and physical fitness as prescribed. [section ($.
89)AT&45 4: T)A&5&5* , 8uration of training period and ratio of apprentices to
skilled workers for different trades has been prescribed in Apprenticeship )ules' --.
8uration of Apprenticeship may be from ; months to " years depending on the trade' as
prescribed in )ules. 7eriod of training is determined by 5ational Council for training in
<ocational Trades !established by *overnment of &ndia#.
C45T)ACT 2&T3 A77)%5T&C% = Apprentice appointed has to execute an contract of
apprenticeship with employer. The contract has to be registered with Apprenticeship
Adviser. &f apprentice is minor' agreement should be signed by his guardian. [section
"!#$. , , Apprentice is entitled to casual leave of . days' medical leave of / days and
extraordinary leave of 0 days in a year.
Legal Position of Apprentices - An apprentice is not a workman during apprentice
training. [section +$. 7rovisions of labour law like 6onus' 7:' %>& Act' gratuity'
&ndustrial 8isputes Act etc. are not applicable to him. 3owever' provisions of :actories
Act regarding health' safety and welfare will apply to him. Apprentice is also entitled to
get compensation from employer for employment injury. [section ;$.
An employer is under no obligation to employ the apprentice after completion of
apprenticeship. [section ..!#$. 3owever' in UP State Road Transport Corpn v. UP
Parivahan Nigam Shishukh Berogar Sangh A&) --/ >C " ? !--/# . >CC ' it was
held that other things being equal' a trained apprentice should be given preference over
direct recruits. &t was also held that he need not be sponsored by the employment
exchange. Age bar may also be relaxed' to the extent of training period. The concerned
institute should maintain a list of persons already trained and in between trained
apprentices' preference should be given to those who are senior. = same view in UP
Ra!"a #id"ut Parishad v. State of UP .000 @@) +;- !>C#.
Stipend payable - The minimum rate of stipend payable per month is as follows , !a#
%ngineering graduates , )s '-A0 p.m. for post,institutional training !b# >andwich course
students for degree examination , )s '"00 p.m. !c# diploma holders , )s '"00 p.m. for
post,institutional training !d# >andwich course students for degree examination , )s
'"0 p.m. !e# <ocational certificate holder , )s '0-0 p.m. [w.e.f. Bay .00$
&n case of " year training' the stipend is as follows = first year = )s +.0 pm. >econd year
= )s -"0 pm. Third year = )s '0-0 pm. :ourth year = )s '.(0 pm. [:rom Bay .00$.
Test and Proficiency certificate - 4n completion of training' every trade apprentice has
to appear for a test conducted by 5ational Council. &f he passes' he gets a certificate of
proficiency.
Apprenticeship Adviser - *overnment is empowered to appoint Apprenticeship Adviser'
8y Apprenticeship Adviser etc. to supervise the scheme. <arious powers have been
conferred on them under the Act.
han Nigam Shishukh Berogar Sangh A&) --/ >C " ? !--/# . >CC ' it was held
that other things being equal' a trained apprentice should be given preference over direct
recruits. &t was also held that he need not be sponsored by the employment exchange. Age
bar may also be relaxed' to the extent of training period. The concerned institute should
maintain a list of persons already trained and in between trained apprentices' preference
should be given to those who are senior. = same view in UP Ra!"a #id"ut Parishad v.
State of UP .000 @@) +;- !>C#.
Stipend payable - The minimum rate of stipend payable per month is as follows , !a#
%ngineering graduates , )s '-A0 p.m. for post,institutional training !b# >andwich course
students for degree examination , )s '"00 p.m. !c# diploma holders , )s '"00 p.m. for
post,institutional training !d# >andwich course students for degree examination , )s
'"0 p.m. !e# <ocational certificate holder , )s '0-0 p.m. [w.e.f. Bay .00$
&n case of " year training' the stipend is as follows = first year = )s +.0 pm. >econd year
= )s -"0 pm. Third year = )s '0-0 pm. :ourth year = )s '.(0 pm. [:rom Bay .00$.
Test and Proficiency certificate - 4n completion of training' every trade apprentice has
to appear for a test conducted by 5ational Council. &f he passes' he gets a certificate of
proficiency.
Apprenticeship Adviser - *overnment is empowered to appoint Apprenticeship Adviser'
8y Apprenticeship Adviser etc. to supervise the scheme. <arious powers have been
conferred on them under the Act.
Contract Labour (Regulation and Abolition) Act !"#$
7urpose of the Act is to regulate employment of contract labour and to provide for
abolition of contract labour in certain cases.
Establishment to which Act applies , The Act is applicable to every establishment in
which .0 or more workmen are emplo"ed as contract la$our or were so employed
anytime during last . months. [section !(#!a#$ . ct will not apply to establishment where
work of an intermittent or casual nature is performed. [section !/#!a#$.
C%stablishmentD means any office or department of *overnment or a local authority or
any place where any industry' trade' business' manufacturing or occupation is going on.
[section .!#!e#$. , , %very such establishment is required to get itself registered under the
Act. [section A$.
Banager or occupier of factory or head of department of *overnmentElocal authority is
termed as C7rincipal %mployerD. [section .!#!g#$.
7rincipal %mployer should maintain register of contractors in prescribed form. [section
.-$. 3e is required to ensure that contractor makes adequate provision for canteen' rest
rooms' supply of drinking water' latrines' urinals' wash rooms etc. to contract labour. &f
contractor fails to do so within prescribed time' the 7rincipal %mployer shall provide the
amenities. can recover from contractor the cost incurred by him in providing these
amenities. [section .0$.
Contract abour = A workman is deemed to be employed as Ccontract labourD in or in
relation to work of the establishment' if he is hired for such work by or through a
contractor' with or without knowledge of principal employer. [section .!#!b#$.
Contractor , The Act applies to every contractor who employs .0 or more workmen.
[section !(#!b#$. The contractor sill be licensed. [section .$. Contractor is required to
maintain muster roll and register of wages. [section .-$. , , 3e is required to follow other
provisions as my be contained in )ules made by Appropriate *overnment. Contractor is
required to pay wages to workmen on time' in presence of authorised representative of
principal employer. [section .$. , , 3e should issue wage slips to workman and obtain
signature or thumb impression on wage register. , , if contractor fails to make payment
of wages' 7rincipal %mployer is liable to make payment of wages to contract labour. 3e
can recover this amount from contractor. [section .!"#$.
Contractor is required to provide canteen facilities' first,aid' rest rooms' drinking water'
latrines and washing facilities' as per rules made by >tate *overnment. [sections ; and
A$.
Controlling authority = Control over contract labour will be exercised by CAppropriate
*overnmentD. , , Appropriate *overnment means F Central *overnment in case of
railways' docks' &:C&' %>&C' @&C' 45*C' 9T&' Airport Authority' industry carried on by
or under authority of Central *overnment F >tate *overnment in case of other industrial
disputes [section .!#!a#$. , , Appropriate *overnment can make rules. &t will appoint
inspecting staff to ensure that the provisions of Act are being followed. [section .+$.
Other laws applicable to contract labour = 6esides Contract @abour !)egulation and
Abolition# Act' various other Acts are applicable to contract labour = !a# :actories Act =
The Act makes no distinction between persons directly employed and employed through
contractor !b# %mployees 7rovident :unds Act !c# %>&C !d# 7ayment of 2ages Act !e#
Binimum 2ages Act !f# &ndustrial 8isputes Act !g# 2orkmenDs Compensation Act.
Prohibition of employment of contract labour = Appropriate *overnment can prohibit
employment of contract labour in any process' operation or work in any establishment' by
issuing a notification. >uch order can be issued after consultation with Advisory 6oard.
[section 0!#$. 6efore issuing such order in respect of any establishment' *overnment
will consider aspects of conditions of work and benefits provided to contract labour'
whether process operation or work is incidental or necessary for the
industryEtradeEbusiness' perennial nature' whether it is done ordinarily through regular
workmen in other similar establishment. [section 0!.#$.
&n Steel Authorit" of %ndia v. National Union &ater 'ront .00!/# >CA@% ;.; ? .00
@@) -; ? A&) .00 >C (/.A ? GT .00!/# >C ;0. ? .00 &&& C@) ("- ? !.00# A >CC
? .00 @@5 (/ ? .00 A&) >C2 (/A" !>C / member Constitution bench#' it was
held that Central E >tate *overnment can issue notification uEs 0 abolishing contract
labour only after following prescribed procedure regarding consultation etc. &t was also
held that even if such a notification is issued' the employees with contractor will not be
automatically absorbed in the employment of the company' if the contact was genuine.
3owever' company will give preference to them. 3owever' if the contract was not
genuine but a mere camouflage' the so called contract labour will have to be treated as
employees of principal employer.
E%plo&ees Pro'ident (unds Act !")*
As per 7reamble to the Act' the %7: Act is enacted to provide for the institution of
provident funds' pension fund and deposit lined insurance fund for employees in factories
and other establishments. , , The %mployeesD 7rovident :unds and Biscellaneous
7rovisions Act is a social security legislation to provide for provident fund' family
pension and insurance to employees. %mployee has to pay contribution towards the fund.
%mployer also pays equal contribution. The employee gets a lump sum amount when he
retires' which will be useful to him after retirement. The Act covers three schemes i.e. 7:
!7rovident :und scheme#' :7: !:amily 7ension :und scheme# and %8@& !%mployees
8eposit @inked &nsurance scheme#.
The %7: Act contains basic provisions in respect of applicability' eligibility' damages'
appeals' recovery etc. The three schemes formed by Central *overnment under the Act
make provisions in respect of those schemes.
Applicabilit& o+ t,e Act - The Act applies to !a# %very establishment which is a factory
engaged in industry specified in >chedule & to the Act and in which .0 or more persons
are employed and !b# any other establishment or class of establishment employing .0 or
more persons which may be specified by Central government by notification in official
gaHette. , , Central *overnment can also apply provisions of the Act to any establishment
even if it employs less than .0 persons. [section !(#$.
&n RP'C v. T S (ariharan -A @ab &C -/ !>C#' it was held that temporary workers
should not be counted to decide whether the Act would apply.
%ven if the provisions of 7: Act are not applicable in a particular establishment' if
employer and majority of employees agree' the Central 7rovident :und Commissioner
can apply the provisions to that establishment by issuing a notification in 4fficial
*aHette. [section !"#$. 4nce the provisions of Act become applicable' it continues to be
applicable even if number of employees fall below .0. [section !/#$.
Coverage of Act - The Act has been extended to F :actories F Bines other than coal
mines F 3otels and restaurants F 7lantation of tea' coffee' rubber [Tea factories in Assam
have been excluded vide para !(#!a# of %7: >cheme$ F Trading and commercial
establishments engaged in purchase' sale or storage of goods F %stablishments of
exporters' importers' advertisers' stock exchanges F Canteens F %stablishments of
Attorneys' CA' &C2As' %ngineers and Contractors' architects and medical practitioners F
3ospitals F Travel agencies F 6anks doing business only in one >tate F *eneral &nsurance
F %xpert services F Clubs and societies rendering services to their members F
Agricultural farms F :inancial %stablishments other than banks F 6uilding and
construction &ndustry F 7oultry farming F 9niversity' college or schools. , , The Act has
been extended w.e.f. ."..00 vide notification dated ...(..00' to F courier services F
Aircraft or airlines other than aircraft or airline owned or controlled by *overnment F
%stablishment engaged in rendering cleaning and sweeping services.
4nce an establishment is covered under 7:' all its departments and branches wherever
they are situated are also covered.
4T3%) 545,:ACT4)I %>TA6@&>3B%5T> C4<%)%8 , 6esides factories' other
establishments employing .0 or more persons can be covered under the Act uEs !(#!b#.
<arious notifications have been issued extending the provisions of 7: Act to non,factory
establishments. >ome major among them are , plantation' mines' coffee' hotels and
restaurants' cinema and theatres' trading and commercial establishments' laundry'
canteens' establishments of attorneysECAE &C2AEengineersE architectsEmedical
practitioners' hospitals' financial establishments !other than &:C&' 9T&' &86&' >:C#'
building and construction industry' poultry' university' college' schools' scientific
institutions etc.
T)A5>&T4)I 7)4<&>&45> 23%5 ACT &> %JT%58%8 - &t is possible that when 7:
Act is extended to certain establishment' some 7: scheme may be already in existence.
>uch scheme will continue and the balance amount in such scheme to credit of the
employee will be transferred to the 7rovident :und under statutory scheme of 7: Act.
[section /$.
Establishment to include all departments and branches - Where an establishment
consists of different departments or has branches' whether situate in the same place or in
different places' all such departments or branches shall be treated as parts of the same
establishment. [section .A$. , , Thus' if factory is covered' the head office and branches
will also be covered under the Act.
Act not applicable to certain establishments , As per section ;!#' the 7: Act does not
apply to !a# any establishment registered under Cooperative >ocieties Act or >tate law
relating to cooperative societies' employing less than /0 persons and working without
paid of power !b# to any establishment belonging to or under Control of Central
*overnment or a >tate *overnment and whose employees are entitled to benefit of
contributory provident fund or old age pension. !c# to any establishment set up under any
Central or >tate Act and whose employees are entitled to benefit of contributory
provident fund or old age pension..
&here P' Act is not applica$le - The 7: Act is not applicable to certain establishmentsK
F :actories or establishments employing less than .0 employees. 3owever' once Act
becomes applicable' it continues to apply even if subsequently' the number is lower than
.0 F 6anks doing business in more than one >tate F Coal mines F 9nits established under
Cooperative >ocieties Act employing less than /0 workers and working without aid of
power F 4ther establishments belonging to or under control of Central *overnment or
>tate *overnments and whose employees are entitled to benefits of contributory
provident fund or pension. F Tea factories in Assam F %xemption granted by Central
*overnment by a special notification.
Administration of the !und , 6oth employer and employee have to pay contribution at
prescribed rates.. These amounts are credited to a fund. The fund vests in and is
administered by Central 6oard. [section /!A#$.
Employees covered under the scheme , As per section .!f#' LemployeeM means any
person who is employed for wages in any kind of work' manual or otherwise' in or in
connection with the work of an establishment' and who gets his wages directly or
indirectly from the employer. &t includes any person , !i# employed by or through a
contractor in or in connection with the work of the establishment !ii# engaged as an
apprentice' not being an apprentice engaged under the Apprentices Act' -; or under the
standing orders of the establishment.
Thus' !a# 7ersons employed through contractor in connection with work of establishment
are covered !b# Apprentices employed under Apprentices Act or under standing orders of
establishment are excluded' i.e. they are not employees. [The model standing orders
merely state that an CapprenticeD is a learner who is paid an allowance during the period
of his training$.
Non-)ligi$le emplo"ees under P' - F %mployee whose CpayD is more than )s. ;'/00 per
month are not eligible. !&t may be noted that limit of pay was )s /'000 upto (./..00
and )s. ('/00 upto (0th >ept.' -"# F Apprentices as per certified standing orders or under
Apprentices Act F Casual employees. 3owever' employees employed through contractors
have also to be covered under 7:.
Employee to become member of !und immediately on "oining * %very employee
employed in or in connection with work of a factory or establishment to which the Act
applies is entitled and required to become member of 7rovident :und' unless he is an
excluded employee. [para .;!# of %7: >cheme$. An employee who is drawing CpayD
above prescribed limit !presently )s ;'/00# can become member with permission of
Assistant 7: Commissioner' if he and his employer agree. [para .;!;# of %7: >cheme$.
Contribution by employer and employee , As per section .!c# LcontributionM means a
contribution payable in respect of a member under a >cheme or the contribution payable
in respect of an employee to whom the &nsurance >cheme applies.
As per section ;' contribution shall be paid by employer N 01 of basic wages plus
dearness allowance plus retaining allowance. This amount is defined as CpayD as per
explanation to para .!f#!ii# of %7: >cheme.
%qual contribution is payable by employee also. This contribution can be increased to
.1 by Central *overnment and in fact' has been increased to .1 in most of the cases.
A person who is already a member continues to be a CmemberD even if his CpayD exceeds
)s ;'/00. 3owever' the contribution is limited to )s ;'/00 only. [para .;A!.# of %7:
>cheme$.
#P!C is liable under Consumer Protection Act , The )egional 7rovident :und
Commissioner is providing service under the Act and hence he is liable under Consumer
7rotection Act. , RP'C v. Shiv +umar ,oshi !--;# " CTG +0/ ? --; @@) ;" !5C8)C
/ member bench# , confirmed in RP'C v. Shiv +umar ,oshi --- A&) >C2 ""/; ?
---!A# >CA@% "/( ? .000 @@) .A ? A&) .000 >C (( ? -- Comp Cas ("A ? !.000#
C@A,6@ >upp .; ? ." >C@ "; !>C#.
Employees Provident !und Scheme , This is the main scheme under the Act. 6oth
employer and employee have to pay contribution to 7rovident :und. The employer has to
deduct contribution of employee from the salary of employee and has to pay both
employeesD contribution as well as employerDs contribution by a challan in prescribed
form. The amount has to be paid in approved bank.
%B7@4I%% CA5 7AI 3&*3%) C45T)&69T&45 , %mployee has to contribute
.E01 of his OpayO as contribution. The employee can voluntarily pay higher contribution
above the statutory rate. 3owever' employer does not have to match the voluntary
contribution' over and above the statutory rate. [para .;!.# of %7: >cheme$.
Contri$ution pa"a$le under P! Scheme - The 7rincipal %mployer is liable to pay
contribution of his own employees as well as employees employed through contractor.
7rincipal %mployer can recover from contractor the amount paid by him on behalf of
contractor. The contribution is .1 of CpayD i.e. basic wages' plus dearness allowance'
cash value of food concession and retaining allowance. Contribution of both employer
and employee is same i.e. .1 each. [para .- of %7: >cheme$.
%mployer has to pay his contribution to %7:. 3e cannot deduct his contribution from
wages of the employee. [7ara ( of %7: >cheme$. 3owever' he has to deduct employeeDs
share from his salary and pay the same in %7: scheme. This deduction can be only from
the wages pertaining to period for which contribution is paid. 3owever' if there is
accidental omission' the amount can be recovered later. Amount deducted from salary of
employees is held in trust by the employer or contractor. [7ara (. of %7: >cheme$.
4ut of employerDs contribution of .E01' the %mployerDs contribution of +.((1 will be
diverted to %mployeesD 7ension >cheme. The balance will be retained in the %7: scheme.
Thus' on retirement' the employee will get his full share plus the balance of %mployerDs
share retained to his credit in %7: account. [This diversion is only w.e.f. ;th 5ovember'
-/. %arlier %mployerDs contribution to their credit will continue to remain to their credit$.
ower contribution in certain cases - The employerOs and employeeDs contribution is
.1 each. This is applicable to many of industries and establishments. 3owever' this
contribution is not applicable to , F any establishment employing less than .0 persons F
any establishment registered with 6oard for &ndustrial and :inancial )econstruction
!6&:)# as a sick company , the lower rate of contribution continues till its net worth is
positive F any other establishment which has accumulated loss equal to or more than its
assets and has also suffered cash loss in last two years. F Gute industry F 6eedi industry F
6rick industry F Coir industry other than the spinning sector F *uar gum factories. &n
these cases' the contribution is 01.
$nterest on account = 7: Commissioner shall maintain account of each member of %7:
scheme. [7ara /- of >cheme$. &nterest is credited to the account of employee. The &nterest
is calculated on monthly running balance basis. Amount standing to credit at end of the
month is considered for calculation of interest for the following month. The interest rate
is declared every year by Central *overnment in consultation with Central 6oard of
Trustees of 7rovident :und. [7ara ;0 of %7: >cheme$.
E%plo&ees. Pension Sc,e%e - This scheme has been introduced w.e.f. ;th 5ovember'
-/. The >cheme is applicable to all subscribers of %mployersD 7rovident :und. &t is also
compulsory to persons who were subscribers as on ;..-/.
C45T)&69T&45 , The employerDs contribution of +.((1 will be diverted to the fund of
7ension >cheme. %mployee does not have to make any contribution. %mployerDs
contribution is .1E 01. &n such cases' +.((1 is diverted to 7ension scheme and
balance .;A1E(.;A1 as the case may be' will be in credit of employeeDs name in
7rovident :und account. The +.((1 is on maximum salary of )s. ;'/00. &f some
employers are paying contribution on salary in excess of )s. ;'/00' the excess
contribution will be credited to 7rovident :und account and not to 7ension scheme.
5o separate administration charges or inspection charges are payable' as these are already
paid along with 7rovident :und contribution.
6%5%:&T> 958%) T3% >C3%B% , Bembers will get pension on superannuation or
retirement from service and upon disablement during employment. :amily pension will
be available to widowEwidower for life or till heEshe remarries. &n addition' children will
be entitled to pension' upto ./ years of their age. &n case of orphans' pension at enhanced
rate is available upon death of widowEwidower or ceasing payment of widow pension.
6enefit of pension to children or orphan is only restricted for two childrenEorphans.
&f the person is unmarried or has no family' pension is available to nominee for a
specified period.
C4BB9TAT&45 4: 7%5>&45 , The member can commute ((.((1 of the pension' so
as to receive hundred times the monthly pension so commuted as commuted value of
pension. 6alance will be paid on monthly basis.
E%plo&ees /eposit Lin0ed Insurance Sc,e%e - The purpose of the scheme is to
provide life insurance benefits to employees who are already covered under 7:E:7:. The
employer has pay contribution equal to 0./01 of the total wages of employees &n
addition' administrative charges of 0.1 of total wages. [5otification 5o. A4 /0(!%#
dated .+,A,-A; issued uEs ;C!.# of 7: Act$.
The employee does not contribute any amount to the scheme. The salary limit for
coverage of employees is same as that of 7rovident :und.
%xemption from the scheme can be obtained from )7:C if @&C *roup *ratuity scheme is
adopted by employer. &f exemption is granted' only inspection charges N 0.00/1 are
payable to 7: authorities.
Benefit to nominee of emplo"ee - &f an employee dies during employment' his nominee or
family member gets an amount equal to average balance in the 7rovident :und Account
of the deceased employee during last . months. &f such balance is more than )s. (/'000'
the insurance amount payable is )s. (/'000 plus ./1 of the amount in excess of )s.
(/'000' subject to overall limit of )s. ;0'000. &f the employees are covered under another
life insurance scheme whose benefits are better than this scheme' an exemption from this
scheme can be obtained. [&ncreased to (/'000 and ;0000 w.e.f. (.;..000$P
1,e E%plo&ees State Insurance Act (ESI Act)
The %>& Act has been passed to provide for certain benefits to employees in case of
sickness' maternity and employment injury and to make provisions for related matters. As
the name suggests' it is basically an CinsuranceD scheme i.e. employee gets benefits if he
is sick or disabled.
%>&C , %mployees >tate &nsurance Corporation !%>&C# has been formed to supervise the
scheme under section ( of the Act. The Corporation supervises and controls the %>&
scheme.
54 8&>B&>>A@ 4) 795&>3B%5T 89)&5* 7%)&48 4: >&CQ5%>> , >ection A( of
the Act provides that no employer shall dismiss' discharge or reduce or otherwise punish
an employee during the period employee is in receipt of sickness benefit or maternity
benefit. 3e also cannot dismiss' discharge or otherwise punish employee when he is in
receipt of disablement benefit or is under medical treatment or is absent from work due to
sickness.
This gives protection to employee when he is in receipt of sickness benefit or maternity
benefit. %mployer cannot take disciplinary action against employee in such cases. This
provision is grossly misused by employees.
3owever' in Buckingham - Carnatic Co v. #enkata""a , A&) -;" >C .A. ? -;(!A#
:@) ("( ? !-;"# " >C) .;/ ? !-;(# . @@G ;(+ ? ./ :G) ./ !>C#' it was rightly held
that this provision !of section A(# is applicable only in case of punitive action for all kinds
of misconduct during which employee has received sickness benefits. This protection is
not applicable in case of abandonment of employment or when termination is automatic
as per contract. = followed in )a!veer Singh v. ,udge --; @@) ; !)aj 3C#' where it
was hold that provisions of section A( are not applicable when termination of an
employee is automatic.
Applicability of ES$ Scheme - The scheme is applicable to all factories. [section !"#$.
The Appropriate *overnment can also make it applicable to any other industrial'
commercial' agricultural or other establishments' by issuing notification and giving ;
month notice. [section !/#$.
Thus' %>& Act can be made applicable to CshopsD also. 3owever' since *overnment has to
provide for hospitals and medical facilities' the Act can be made applicable to different
parts of >tate at different dates. Thus' if a factory is at a place where %>&C is unable to
provide medical facilities' %>& Act may not be made applicable to that area. *overnment
can exempt a factory or establishment or persons or class of persons from provisions of
%>& Act' if the employees are getting better medical facilitiesE [e.g. if *overnment is
convinced that the factory itself is providing very good medical facilities e.g. like
T&>C4$.
)%*&45A@ 4::&C%> E 6)A5C3 4::&C%> *%T C4<%)%8 , )egional offices of a
factory' which have their connection to the factory and where the 7rincipal %mployer has
control over the regional offices' the regional offices will be covered under )S%C -
("dera$ad As$estos Cement Products v. )S%C , A&) -A+ >C (/; ? !-A+# . >C) ("/ ?
!-A+# >CC -". &f head office is covered under %>&C' branch offices are also covered
when branch and principal office are inter,dependent and there is unity of relationship. ,
Transport Corporation of %ndia v. )S%C ---!A# >CA@% ;( ? .000 @@) ( ? +( :@)
-A0 ? --- A&) >C2 "("0 ? A&) .000 >C .(+ !>C ( member bench#.
49T>&8% A*%5C&%> CA5 6% C4<%)%8 , &n P. Patel v. U/% !-+;# >CC (. ?
A) -+A >C ""A ? -+/ && C@) (.. !>C#' workers were given work of making ObidisO as
home. )ight of rejection of bidis was with employer. &t was held that test of control and
supervision lies in the right of rejection. &t was held that employees working outside can
be covered under %>&C' if there is master servant relationship.
0efinition of 1factor"2 as per )S% Act - The C:actoryD means any premises where
manufacturing process is carried out. &f manufacture is without aid of power' the Act is
applicable if persons employed are at least .0. &f manufacture is with aid of power' the
Act applies if persons employed are at least 0. [section .!.#$. , , 3owever' CminesD have
been excluded. , , CBanufacturing processD has same meaning as defined under :actories
Act. [section .!"AA#$.
4ne a factory or establishment is covered' it continues to be covered even if number of
employees reduce. [section !;#$
C45>T)9CT&45 24)Q%)> 54T C4<%)%8 = Construction workers employed in
construction activities are not covered under %>&C. = %>&C circular 5o. 7,.!#,
E.AE-- &ns.&< dated ",;,---. , , 3owever' if administrative office employs .0 or
more eligible employees' that establishment and employees working in administrative
office will be covered.
)mplo"er under )S% Act * C7rincipal %mployerD means F owner or occupier of factory F
3ead of department in case of *overnment department and F 7erson responsible for
supervision and control' in case of any other establishment. [section .!A#$. , , %mployees
working though contractor are also covered. CContractorD is termed as C&mmediate
%mployerD. C&mmediate employerD means a person who has undertaken the execution' on
the premises of factory or establishment to which this Act applies. 3e may do on his own
or under the supervision of 7rincipal %mployer. The work should be part of work of
factory or establishment of principal employer or is preliminary or incidental to the work
of factory or establishment. [section .!(#$. 7rimary liability of %>& contribution is of
7rincipal %mployer. [section "0!#$. 3e can recover the contribution paid by him from
the Cimmediate employerD i.e. contractor. [section "$.
)mplo"ee under )S% Act - C%mployeeD means any person employed for wages in or in
connection with work of a factory or establishment to which the %>& Act applies.
%mployees drawing wages upto )s. 0'000 per month can be presently covered under the
%>& Act scheme. [section .!-#$ [The limit was )s A'/00 upto (0,-,.00;' which is
enhanced to )s 0'000 w.e.f. ,0,.00;$
%mployees include F persons employed through contractor F Apprentices other than
those covered under CApprentices ActD F 7ersons employed in administration office'
department or branch for purchase or sale of products. F Casual workers engaged in work
incidental to or connected with work of factory or establishment F %mployees working at
head office when factory is located at different place F Canteen staff' watch and ward
staff are employees F >taff in hospital attached to factory are employees. , , Bembers of
&ndian 5aval' Bilitary or Air :orces are excluded.
&f an employee is drawing wages less than )s. A'/00 per month at the beginning of his
Ccontribution periodD' his contributions are payable for whole period of contribution
period of six months even if in between his wages go above )s. A'/00 p.m. [proviso to
section .!-#$.
:4@@42&5* A)% 54T %B7@4I%%> , F 7ersons drawing wages over
)s. A'/00 per month F member of Army' 5avy or Air :orce. F 7artners of firm are not
employees even if they are drawing wages , R03 )S%C v. Ramanu!a .atch %ndustr" A&)
-+/ >C .A+ ? -+/!# >CC .+ ? --+!;# >CA@% (+ F 7ersons employed in
*overnment establishments. F construction workers engaged in raising additional
building subsequent to initial set up of factory.
Contribution to ES$C !und - 6oth employee and employer have to make contribution to
%>&C. The employer has to deduct contribution from wages of employee and pay to %>&C
both the employerDs contribution as well as employeesD contribution. [section (-!#$.
The contribution is payable for Cwage periodD i.e. the period in respect of which wages are
payable to employee. [section (-!.#$. 5ormally' Cwage periodD is a month. The
employeeDs contribution is .A/1 of wages. &t should be rounded off to next / paise.
%mployees contribution is not payable when daily wages are below )s /E,.
%mployerDs contribution is ".A/1 of total wage bill of all employees in respect of every
wage period. Thus' it is not necessary to calculate employerOs contribution separately for
each employee. ".A/1 of gross wages should be calculated and rounded off to next /
paise. %mployees drawing wages lower than )s ./ per day do not have to pay employeeOs
share. The contribution has to be paid within . days from close of the month. &t is
payable by a challan in authorised bank. , , &f the contribution is not paid in time' interest
N .1 is payable. [section (-!/#!a#$.
&n addition' %>&C authorities can impose CdamagesD varying between /1 to ./1 of
arrears of contribution uEs +/6.
%mployer cannot deduct employerDs contribution from the salary of employee. [section
"0!(#$.
@&A6&@&TI 4: 7)&5C&7A@ %B7@4I%) = &n case of employees of contractor' liability
is of 7rincipal %mployer. &n Britannia %ndustries v. )S%C !.00# -+ :G) /.0 !Bad 3C#' it
was held that 7rincipal %mployer will be liable to penalty and damages also if
contribution is not paid on due date. = same view in Padmini Products v. )S%C .000!.#
Qar @G (;- !Qarn 3C#.
%age for purpose of ES$ Act - C2agesD means all remuneration paid or payable
in cash to employee according to terms of contract of employment and includes any
payment made to an employee in respect of period of authorised leave' lock,out' lay,off'
strike which is not illegal and other additional remuneration paid at interval not
exceeding two months. &t does not include F contribution paid by employer to any
pension fund or provident fund F Travelling allowance F )eimbursement of expenses
made by nature of employment of the employee F gratuity. [section .!..#$.
Thus' wages include basic pay' dearness allowance' city compensatory allowance'
payment of day of rest' overtime wages' house rent allowance' incentive allowance'
attendance bonus' meal allowance and incentive bonus. 3owever' wages do not include
annual bonus' unilateral rewards scheme 4inam#' e5 gratia payments made every quarter
or every year travelling allowance' retrenchment compensation' encashment of leave and
gratuity.
Contribution period and &enefit period - Contribution period is !a# st >eptember to
(st Barch !$# st April to (0th >eptember. The corresponding benefit period is !a#
following st Guly to (st 8ecember !$# following st Ganuary to (0th Gune. Thus'
Cbenefit periodD starts three months after the Ccontribution periodD is over. The relevance
of this definition is that sickness benefit and maternity benefit is available only during
Cbenefit periodD. Thus' an employee gets these benefits only after - months after joining
employment and paying contribution. 3owever' other benefits are available during
contribution period also.
&enefits to employees covered under ES$ Act - An employee is entitled to get benefits
which are medical benefits as well as cash benefits. 3e also can get disablement benefit.
E2ual Re%uneration Act
As the name of the Act suggests' the object of the Act is to provide for payment of equal
remuneration to men and women workers and to prevent discrimination on the ground of
sex against women in employment. , , The Act has overriding effect over other Acts.
[section ($
89TI 4: %B7@4I%) T4 7AI %R9A@ )%B95%)AT&45 = &t is duty of each
employer not to make any discrimination while paying remuneration to any worker of
opposite sex. 3e should pay same wages to workmen of both sex for performing same
work or work of a similar nature. [section "$.
>ame work or work of similar natureD means work in respect of which the skill' effort and
responsibility required are the same' when performed under similar working conditions'
by a man or woman and the difference' if any' between the skill' effort and responsibility
required of a man and those required of a woman are not of practical importance in
relation to the terms and conditions of employment. [section .!h#$.
54 8&>C)&B&5AT&45 23&@% )%C)9&TB%5T 4) 7)4B4T&45 = There should be
no discrimination on recruitment' promotion' training or transfer' except where
employment of women is restricted. [section /$. , , These provisions are not applicable
when priority is to be given to schedules castes' schedules tribes' ex,servicemen or
retrenched employees.
(actories Act !"34
This is one of the earliest welfare legislation. The object is to secure to workers health'
safety' welfare' proper working hours and other benefits., , &n Bhikusa 6amasa +shatri"a
v. U/% A&) -;( >C /-' it was observed that :actories Act is enacted primarily with
object to of protecting workers employed in factories against industrial and occupational
haHards. , , The Act requires that workers should work in healthy and sanitary conditions
and for that purpose it provides that precautions should be taken for safety of workers and
prevention of accidents. , , &ncidental provisions have also been madeD.
&n S . 0atta v. State of 7u!arat .00!/# >CA@% "/A ? 00 :G) .; ? .00 A&) >C2
(((' it was observed' C:irst :actories Act was passed in ++0. :actories Act' -"+ was
engrafted in the >tatute 6ook where emphasis had been on the welfare of the workers.
:actory &nspectors have been placed with heavy responsibility on them. , , The Act
undoubtedly is a welfare legislation and cannot be termed to be a complete code in itself.
, , &n this case' it was held that if a workman is found working during period not notified
beforehand' prosecution can be launched.
O:actoryO means any premises where 0 or more workers are working and a
manufacturing process is carried out with aid of power !.0 if manufacture is without aid
of power#. [section .!m#$. CBanufacturing processD means process of altering' repairing'
ornamenting' finishing' packing' oiling' washing' cleaning' breaking up' demolishing or
otherwise treating or adopting any article or substance. &t also includes F pumping oil'
water' sewage or any other substance F *enerating' transforming or transmitting power F
Composing' typing' printing F Constructing' repairing' breaking of ships or vessels F
7reserving articles in cold storage. [section .!k#$. , , 2orker means a person employed in
any manufacturing process or cleaning or any work incidental to manufacturing process.
&t includes persons employed through contractor. [section .!l#$.
$f the employment is less than these numbers' the unit gets covered under Shop (
Establishment Act. - - &n )S%C v. ,aihind Road8a"s .00 @@) /A0 ? 0 :G) (+ !Qar
3C#' it was held that transportation of goods on contract basis from one place to another
is not Cmanufacturing processD.
O:actoryO should be licensed E registered with Chief &nspector of :actories !termed as
8irector of &ndustrial 3ealth S >afety in some >tates#. [section ;$. The license E
registration has to be renewed every year by paying prescribed fees.
4CC97&%) 4: T3% :ACT4)I = C4ccupierD of a factory means the person who has
ultimate control over the affairs of factory. &t includes a partner in case of firm and
director in case of a company. &n case of *overnment company' OoccupierO need not be a
director. &n that case' person appointed to manage affairs of the factory shall be
CoccupierD. [section .!n#$. , , 5ame of OoccupierO of the factory should be informed to
:actories &nspector. The OoccupierO will be held responsible if provisions of :actories Act
are not complied with. , , 3e has to give notice / days before he begins to occupy the
premises as a factory' giving details as prescribed in section A.
6esides OoccupierO' name of OBanagerO should also be informed. Any change in name of
Banager shall also be informed. [section A!"#$.
89T&%> 4: 4CC97&%) = The occupier shall ensure' as far as possible' health' safety
and welfare of workers while they are working in factory. [section AA$.
89T&%> 4: %<%)I BA59:ACT9)%) = %very manufacturer or importer of ay article
or substance in factory shall design it in such a way that it is safe to use and carry.
Adequate safety information about the article should be given. [section A6$.
:AC&@&T&%> A58 C45<%5&%5C%> , The factory should be kept clean. [section $.
There should be arrangement to dispose of wastes and effluents. [section .$. <entilation
should be adequate. )easonable temperature for comfort of employees should be
maintained. [section ($. 8ust and fumes should be controlled below permissible limits.
[section "$. Artificial humidification should be at prescribed standard level. [section /$.
4vercrowding should be avoided. [section ;$. Adequate lighting' drinking water'
latrines' urinals and spittoons should be provided. [sections A to -$. Adequate
spittoons should be provided. [section .0$.
2%@:A)% , Adequate facilities for washing' sitting' storing cloths when not worn during
working hours. [section ".$. &f a worker has to work in standing position' sitting
arrangement to take short rests should be provided. [section ""$. Adequate :irst aid boxes
shall be provided and maintained [section "/$.
:AC&@&T&%> &5 CA>% 4: @A)*% :ACT4)&%> , :ollowing facilities are required to be
provided by large factories , F Ambulance room if /00 or more workers are employed F
Canteen if ./0 or more workers are employed. &t should be sufficiently lighted and
ventilated and suitably located. [section ";$. F )est rooms E shelters with drinking water
when /0 or more workmen are employed [section "A$ F CrTches if (0 or more women
workers are employed. [section "+$ F :ull time 2elfare 4fficer if factory employs /00 or
more workers [section "-$ F >afety 4fficer if '000 or more workmen are employed.
>A:%TI , All machinery should be properly fenced to protect workers when machinery
is in motion. [section . to .A$. 3oists and lifts should be in good condition and tested
periodically. [section .+ and .-$. 7ressure plants should be checked as per rules. [section
($. :loor' stairs and means of access should be of sound construction and free form
obstructions. [section (.$. >afety appliances for eyes' dangerous dusts' gas' fumes should
be provided. [sections (/ and (;$. 2orker is also under obligation to use the safety
appliances. 3e should not misuse any appliance' convenience or other things provided.
[section $. &n case of haHardous substances' additional safety measures have been
prescribed. [sections "A to "3$. , , Adequate fire fighting equipment should be
available. [section (+$. , , >afety 4fficer should be appointed if number of workers in
factory are '000 or more. [section "06$.
24)Q&5* 349)> , A worker cannot be employed for more than "+ hours in a week.
[section /$. 2eekly holiday is compulsory. &f he is asked to work on weekly holiday' he
should have full holiday on one of three days immediately or after the normal day of
holiday. [section /.!#$. 3e cannot be employed for more than - hours in a day. [section
/"$. At least half an hour rest should be provided after / hours. [section //$. Total period
of work inclusive of rest interval cannot be more than 0./ hours. [section /;$. A worker
should be given a weekly holiday. 4verlapping of shifts is not permitted. [section /+$.
5otice of period of work should be displayed. [section ;$.
4<%)T&B% 2A*%> , &f a worker works beyond - hours a day or "+ hours a week'
overtime wages are double the rate of wages are payable. [section /-!#$. A workman
cannot work in two factories. There is restriction on double employment. [section ;0$.
3owever' overtime wages are not payable when the worker is on tour. Total working
hours including overtime should not exceed ;0 in a week and total overtime hours in a
quarter should not exceed /0. )egister of overtime should be maintained. , , An
employee working outside the factory premises like field workers etc. on tour outside
headquarters are not entitled to overtime. = R Ananthan v. Aver" %ndia -A.!".# :G) (0"
!Bad 3C# F 0irector of Stores v. P S 0u$e -A+ @ab &C (-0 ? /. :G) .-- ? -A+ & @@5
";" ? (; :@) ".0.
%B7@4IB%5T 4: 24B%5 , A woman worker cannot be employed beyond the hours
; a.m. to A.00 pm. >tate *overnment can grant exemption to any factory or group or class
of factories' but no woman can be permitted to work during 0 7B to / AB. >hift change
can be only after weekly or other holiday and not in between. [section ;;$.
)%C4)8 4: 24)QB%5 , A register !muster roll# of all workers should be
maintained. 5o worker should be permitted to work unless his name is in the register.
)ecord of overtime is also required to be maintained. [section ;.$.
@%A<% , A worker is entitled in every calendar year annual leave with wages at the rate
of one day for every .0 days of work performed in the previous calendar year' provided
that he had worked for ."0 days or more in the previous calendar year. Child worker is
entitled to one day per every / days. 2hile calculating ."0 days' earned leave' maternity
leave upto . weeks and lay off days will be considered' but leave shall not be earned on
those days. [section A-$. = @eave can be accumulated upto (0 days in case of adult and "0
days in case of child. @eave admissible is exclusive of holidays occurring during or at
either end of the leave period. 2age for period must be paid before leave begins' if leave
is for " or more days. [section +$. @eave cannot be taken for more than three times in a
year. Application for leave should not normally be refused. [These are minimum benefits.
%mployer can' of course' give additional or higher benefits$.
2A*%> :4) 4T A58 @%A<% >A@A)I , O2agesO for leave encashment and overtime
will include dearness allowance and cash equivalent of any benefit. 3owever' it will not
include bonus or overtime.
C3&@8 %B7@4IB%5T , Child below age of " cannot be employed. [section ;A$.
Child above " but below / years of age can be employed only for "./ hours per day or
during the night. [section A$. 3e should be certified fit by a certifying surgeon. [section
;+$. 3e cannot be employed during night between 0 pm to ; am. [section A$. A person
over / but below + years of age is termed as CadolescentD. 3e can be employed as an
adult if he has a certificate of fitness for a full dayOs work from certifying surgeon. An
adolescent is not permitted to work between A pm and ; am. [section A0$. There are more
restrictions on employment of female adolescent. , , )egister of child workers should be
maintained. [section A($.
8&>7@AI 45 54T&C% 64A)8 , A notice containing abstract of the :actories Act and
the rules made thereunder' in %nglish and local language should be displayed. 5ame and
address of :actories &nspector and the certifying surgeon should also be displayed on
notice board. [section 0+!#$.
54T&C% 4: ACC&8%5T>' 8&>%A>%> %TC. , 5otice of any accident causing
disablement of more than "+ hours' dangerous occurrences and any worker contacting
occupational disease should be informed to :actories &nspector. [section ++$. 5otice of
dangerous occurrences and specified diseases should be given. [sections ++A and +-$.
54 795&>3B%5T T4 2%@:A)% 4::&C%) 2&T349T >A5CT&45 , 5o
punishment can be imposed on 2elfare 4fficer without prior sanction of Chief
Commissioner. 3owever' a simple order of termination as per terms of appointment is not
a CpunishmentD and such termination order is valid. = Arun +umar Bali v. 7overnment of
NCT of 0elhi .00. @@) (/- !8el 3C# = relying on Associated Cement Co Ltd. v. P N
Sharma A&) -;/ >C /-/.
46@&*AT&45 )%*A)8&5* 3AUA)849> 7)4C%>>%> E >96>TA5C%> ,
&nformation about haHardous substances E processes should be given. 2orkers and general
public in vicinity should be informed about dangers and health haHards. >afety measures
and emergency plan should be ready. >afety Committee should be appointed.
Labour La5s (E6e%ption (ro% +urnis,ing returns and %aintaining registers b&
Certain Establis,%ents) Act !"447
The Act has been passed to give relief to establishments employing small number of
persons from furnishing returns and maintaining registers under certain labour laws.
C>mall establishmentD means an establishment in which not less than ten and not more
than nineteen persons are employed or were employed during past . months. [section
.!e#$. C<ery >mall establishmentD means an establishment in which not more than nine
persons are employed or were employed during past . months. [section .!f#$.
>uch establishments are expected to submit only a Ccore returnD in prescribed form as on
(st 8ecember every year. The return should be filed on or before /th :ebruary of
succeeding year. &n addition' a Csmall establishmentD is required to maintain registers in
prescribed form 6' C and 8. A Cvery small establishmentD is required to maintain only
register in form %. [section "!#$.
&n addition' employer is required to issue wage slips to workmen. )eturns relating to
accidents are required under :actories Act and 7lantation @abour Act are required to be
submitted.
4nce such annual return is filed and registers are maintained' no further return or records
are required under any of following laws , F 7ayment of 2ages Act F 2eekly 3olidays
Act F Binimum 2ages Act F :actories Act F 7lantations @abour Act F 2orking
Gournalists and 4ther 5ewspaper %mployees Act F Contract @abour !)egulation and
Abolition# Act F >ales 7romotion %mployees !Conditions of >ervice# Act F %qual
)emuneration Act. [:irst >chedule to the Act$. [section "!(#$.
Pa&%ent o+ Bonus Act !"8)
6onus is really a reward for good work or share of profit of the unit where the employee
is working. 4ften there were disputes between employer and employees about bonus to
be paid. &t was thought that a legislation will solve the problem and hence 6onus Act was
passed. 9nfortunately' in the process' bonus has become almost as deferred wages due to
provision of payment of minimum +.((1 and maximum .01 bonus. 6onus Act has not
in any way reduced the disputes.
The Act is applicable to !a# any factory employing 0 or more persons where any
processing is carried out with aid of power !b# 4ther establishments !established for
purpose of profit# employing .0 or more persons. Binimum bonus payable is +.((1 and
maximum is .01. 6onus is payable annually within + months from close of accounting
year. 6onus is payable to all employees whose salary or wages do not exceed )s ('/00
per month provided they have worked for at least (0 days in the accounting year.
3owever' for calculation of bonus' maximum salary of )s .'/00 is considered.
4nce the Act is applicable' it continues to apply even if number of employees fall below
.0. The Act is applicable to *overnment companies and corporations owned by
*overnment which produces goods or renders services in competition with private sector.
3owever' the Act is not applicable to *overnment employees' the employees of
Bunicipal Corporation or Bunicipality' railway employees' university and employees of
educational institutions' public sector insurance employees' employees of )6& and public
sector financial institutions' charitable hospitals' social welfare organisations and defense
employees. The Act does not apply to any institution established not for purposes of
profit.
Establishments to which the Act is applicable - 1,e Act applies to9 (a) e'er& +actor&:
and (b) e'er& ot,er establis,%ent in 5,ic, t5ent& or %ore persons are e%plo&ed on
an& da& during an accounting &ear7 ;section !(<)=7
C:actoryD has same meaning as per :actories Act. [section .!A# of 6onus Act$.
The words used are Cnumber of persons employedD. 3ence' all persons employed are to
be considered' including those who are not eligible for bonus. Thus' all employees
including those' whose salary or wages exceed )s ('/00 per annum will have to be
considered for purpose of deciding eligibility.
B%A5&5* 4: C%>TA6@&>3B%5TD , The word CestablishmentD is not defined in the
Act. 5ormally' CestablishmentD is a permanently fixed place for business. The term
CestablishmentD is much wider than CfactoryD. &t covers any office or fixed place where
business is carried out.
%>TA6@&>3B%5T &5 796@&C >%CT4) C4<%)%8 45@I &5 C%)TA&5 CA>%> ,
The Act applies to establishment in public sector only if the establishment in public sector
sells the goods or renders services in competition with an establishment in private sector'
and the income from such sale or services or both is not less than twenty per cent' of the
gross income of the establishment in public sector for that year. [section .0!#$. &n other
cases' the provisions of this Act do not apply to the employees employed by any
establishment in public sector. [section .0!.#$. As per section (.!v#!c#' the Act does not
apply to any institution established not for purposes of profit.
%stablishment in public sector means an establishment owned' controlled or managed by
K !a# a *overnment company as defined in section ;A of the Companies Act' -/; !
of -/;# !$# a corporation in which not less than forty per cent of its capital is held
!whether singly or taken together# by the *overnmentV or the )eserve 6ank of &ndiaV or a
corporation owned by the *overnment or the )eserve 6ank of &ndia. [section .!;#$.
%stablishment which is not in public sector is Cestablishment in private sectorD [section
.!/#$.
LCorporationM means any body corporate established by or under any Central 7rovincial
or >tate Act but does not include a company or a co,operative society. [section .!#$.
%>TA6@&>3B%5T> T4 &5C@98% 8%7A)TB%5T>' 958%)TAQ&5*> A58
6)A5C3%> - 2here an establishment consists of different departments or undertakings
or has branches' whether situated in the same place or in different places' all such
departments or undertakings or branches shall be treated as parts of the same
establishment for the purpose of computation of bonus under this Act. [section ($
%ho are eligible for bonus - %mployees drawing salary or wages upto )s ('/00 per
month are entitled to bonus' if he has worked for at least (0 working days in an
accounting year. %ven a worker working in seasonal factory is eligible if he has worked
for at least (0 working days. Apprentices are not eligible for bonus.
>alary above )s. .'/00 is not considered for calculation of 6onus. [section .$.
%mployee drawing salaryEwage exceeding )s ('/00 is not entitled to any bonus under the
Act.
Thus' minimum bonus N +.((1 will be )s .'/00 and maximum N .01 will be )s ;'000
for the year' when salary of employee exceeds )s .'/00 but is less than )s ('/00.
%@&*&6&@&TI :4) 6459> &: 24)Q%8 :4) B&5&B9B (0 8AI> - Every
employee shall be entitled to be paid be his employer in an accounting year' bonus' in
accordance with the provisions of this Act' provided he has worked in the establishment
for not less than thirty working days in that year. [section +$
Computation of amount available for distribution as bonus - The establishment has to
prepare a balance sheet and profit and loss account of the year and calculate the Cgross
profitD' Cavailable surplusD and Callocable surplusD as per method and formula given in
6onus Act.
The first step is to calculate C*ross 7rofitD. As per section "' the gross profit in respect of
any accounting year is required to be calculated as per :irst >chedule to Act in case of
banking company and as per second schedule in case of other establishments. After
calculation of C*ross 7rofitD as per section "' next step is to calculate CAvailable >urplusD.
As per section /' Cavailable surplusD is calculated by deducting sums as specified in
section ; from Cgross profitD arrived at as per section ; and adding difference equal to
income tax on the bonus paid in the preceding year.
Thus' Available >urplus is equal to *ross 7rofit [as per section "$ less prior charges
allowable as deduction uEs ; plus amount equal to income tax on bonus portion calculated
as per proviso !b# to section /.
Allocable surplus is equal to ;01 of Cavailable surplusD calculated as per provisions of
section /. [&n case of company which does not deduct tax at source as per provisions of
section -" of &ncome Tax Act' Callocable surplusD will be ;A1 of Cavailable surplusD.
:rankly' & am not able to visualise a situation where a company can legally ignore
provisions of section -" of &ncome Tax Act$. , , This Callocable surplusD has to be
distributed as bonus among employees in proportion to the salary or wages actually
earned by each employee during the year. 3owever' this is subject to minimum +.((1
and maximum .01 as explained below.
Set off and set on provisions - &t may happen that in some years' the allocable surplus is
more than the amount paid to employees as bonus calculating it N .01. >uch excess
Callocable surplusD is carried forward to next year for calculation purposes. This is called
Ccarry forward for being set on in succeeding yearsD. The ceiling on set on that is required
to be carried forward is .01 of total salary and wages of employees employed in the
establishment. &n other words' even if actual excess is more than .01 of salaryEwages'
only .01 is required to be carried forward. The amount set on is carried forward only
upto and inclusive of the fourth accounting year. &f the amount carried forward is not
utilised in that period' it lapses [section /!#$.
>imilarly' in a particular year' there may be lower Callocable surplusD or no Callocable
surplusD even for payment of +.((1 bonus. >uch shortfall is also carried to next year.
This is called Ccarry forward for being set off in succeeding yearsD. Thus' in every year'
Callocable surplusD is calculated. To this amount' set on from previous years is added.
>imilarly' set off' if any' from previous years is deducted. This gives amount which is
available for distribution as bonus. The amount set off is carried forward only upto and
inclusive of the fourth accounting year. &f the amount carried forward is not set off in that
period' it lapses. [section /!.#$
)inimum bonus , %very employer shall be bound to pay to every employee in respect of
any accounting year' a minimum bonus which shall be +.(( per cent of the salary or wage
earned by the employee during the accounting year or one hundred rupees' whichever is
higher' whether or not the employer has any allocable surplus in the accounting year.
2here an employee has not completed fifteen years of age at the beginning of the
accounting year' the minimum bonus payable is +.((1 or )s ;0 whichever is higher.
[section 0$.
2hile computing number of working days' an employee shall be deemed to have worked
in an establishment even on the days on which !a# 3e was laid off !b# 3e was on leave
with salaryEwages!c# 3e was absent due to temporary disablement caused by accident
arising out of and in course of employment and !d# %mployee was on maternity leave
with salaryEwages. [section "$.
Payment of ma*imum bonus - 2here in respect of any accounting year' the allocable
surplus exceeds the amount of minimum bonus payable to the employees' the employer
shall' in lieu of such minimum bonus' be bound to pay to every employee in respect of
that accounting year bonus which shall be an amount in proportion to the salary or wage
earned by the employee during the accounting year subject to a maximum of twenty per
cent of such salary or wage. [section !#$. , , &n computing the allocable surplus under
this section' the amount set on or the amount set off under the provisions of section /
shall be taken into account in accordance with the provisions of that section. [section
!.#$.
Thus' maximum bonus payable to employee is .01 in any accounting year.
Salary or wages for calculating bonus , 2here the salary or wage of an employee
exceeds )s .'/00 per month' the bonus payable to such employee under sections 0 or
shall be calculated as if his salary or wages were )s .'/00 per month. [section ($. &n
other words' employees drawing salary or wages between )s .'/00 to )s ('/00 per
month' are entitled to bonus on the basis of )s .'/00 per moth salary only.
Pa&%ent o+ >ratuit& Act !"#*
*ratuity is a lump sum payment to employee when he retires or leaves service. &t is
basically a retirement benefit to an employee so that he can live life comfortably after
retirement. 3owever' under *ratuity Act' gratuity is payable even to an employee who
resigns after completing at least / years of service.
&n 0TC Retired )mplo"ees v. 0elhi Transport Corporation .00!"# >CA@% (0 ? .00
A&) >C2 .00/' it was observed that gratuity is essentially a retiring benefit which as per
>tatute has been made applicable on voluntary resignation as well. *ratuity is reward for
good' efficient and faithful service rendered for a considerable period.
ACT 7)4<&8%> :4) B&5&B9B *)AT9&TI 45@I = The *ratuity Act provides only
for minimum gratuity payable. &f employee has right to receive higher gratuity under a
contract or under an award' the employee is entitled to get higher gratuity. [section "!/#$.
Employers liable under the scheme - The Act applies to every factory' mine' plantation'
port' and railway company. &t also applies to every shop and establishment where 0 or
more persons are employed or were employed on any day in preceding . months.
[section!(#$. >ince the Act is also applicable to all shops and establishments' it will
apply to motor transport undertakings' clubs' chambers of commerce and associations'
local bodies' solicitorDs offices etc. ' if they are employing 0 or more persons.
Employees eligible for gratuity + D%mployeeD means any person !other than apprentice#
employed on wages in any establishment' factory' mine' oilfield' plantation' port' railway
company or shop' to do any skilled' semi,skilled or unskilled' manual' supervisory'
technical or clerical work' whether terms of such employment are express or implied' and
whether such person is employed in a managerial or administrative capacity. 3owever' it
does not include any CentralE>tate *overnment employee. [section .!e#$. Thus' the Act is
applicable to all employees , workers as well as persons employed in administrative and
managerial capacity.
*ratuity is payable to a person on !a# resignation !$# termination on account of death or
disablement due to accident or disease !c# retirement !d# death. 5ormally' gratuity is
payable only after an employee completes five years of continuous service. &n case of
death and disablement' the condition of minimum / yearsD service is not applicable.
[section "!#$.
The Act is applicable to all employees' irrespective of the salary.
Amount of gratuity payable - *ratuity is payable N / days wages for every year of
completed service. &n the last year of service' if the employee has completed more than ;
months' it will be treated as full year for purpose of gratuity. , , &n case of seasonal
establishment' gratuity is payable N A days wages for each season. [section "!.#$.
2ages shall consist of basic plus 8.A' as per last drawn salary. 3owever' allowances like
bonus' commission' 3)A' overtime etc. are not to be considered for calculations. [section
.!s#$.
&n case of employees paid on monthly wages basis' per day wages should be calculated
by dividing monthly salary by .; days to arrive at daily wages e.g. if last drawn salary of
a person !basic plus 8A# is )s. .';00 per month' his salary per day will be )s. 00 !.';00
divided by 00#. Thus' the employee is entitled to get )s. '/00 [/ days multiplied by
)s. 00 daily salary$ for every year of completed service. &f he has completed (0 years of
service' he is entitled to get gratuity of )s. "/'000 !)s. '/00 multiplied by (0#.
Baximum gratuity payable under the Act is )s. (./0 lakhs !the ceiling was )s. '00'000
which was increased to ../0 lakhs on .".-.-A by an ordinance which was later increased
to )s (./0 lakhs while converting the ordinance into Act$.
BAJ&B9B *)AT9&TI 7AIA6@% = Baximum gratuity payable is )s (./0 lakhs.
[>ection "!(#$. [4f course' employer can pay more. %mployee has also right to get more
if obtainable under an award or contract with employer' as made clear in section "!/#$.
&5C4B%,TAJ %J%B7T&45 , *ratuity received upto )s. (./0 lakhs is exempt from
&ncome Tax. *ratuity paid above that limit is taxable. [section 0!0# of &ncome Tax Act$.
, , 3owever' employee can claim relief uEs +- in respect of the excess amount.
,o Compulsory insurance of gratuity liability + >ection "A provides that every
employer must obtain insurance of his gratuity liability with @&C or any other insurer.
3owever' *overnment companies need not obtain such insurance. &f an employee is
already member of gratuity fund established by an employer' he has option to continue
that arrangement. &f an employer employing more than /00 persons establishes an
approved gratuity fund' he need not obtain insurance for gratuity liability. , , 3owever'
this section has not yet been brought into force. 3ence' presently' such compulsory
insurance is not necessary.
-ratuity cannot be attached - *ratuity payable cannot be attached in execution of any
decree or order of any civil' revenue or criminal court' as per section ( of the Act.
Industrial /isputes Act
The object of the Act is to make provisions for investigation and settlement of industrial
disputes. 3owever' it makes other provisions in respect of lay off' retrenchment' closure
etc. The purpose is to bring the conflicts between employer and employees to an amicable
settlement. [The Act is achieving e5actl" opposite$. The Act provides machinery for
settlement of disputes' if dispute cannot be solved through collective bargaining.
.$ndustry/ under $ndustrial 0isputes Act + The definition of CindustryD is as follows =
C&ndustry means any business' trade' undertaking' manufacture or calling of employers
and includes any calling' service' employment' handicraft or industrial occupation or
avocation of workmen. [section .!j#$. Thus' the definition is very wide. , , The scope is
much wider than what is generally understood by the term CindustryD.
&n Bangalore &ater Suppl" - Se8erage Board v. Ra!appa !-A+# . >CC .( ? (; :@)
.;; ? -A+!.# >C) .( ? -A+!# @@G ("- ? A&) -A+ >C /"+ !>C A member bench / v
. judgment#' a very wide interpretation to the term OindustryO was given. &t was held that
profit motive or a desire to generate income is not necessary. Any systematic activity
organiHed by cooperation between employer and employees for the production andEor
distribution of goods and services calculated to satisfy human wants and wishes is
CindustryD.
Thus' many hospitals' educational institutions' universities' charitable institutions and
welfare organisations have got covered under the Act. 7rofessions' clubs' cooperatives'
research institutes etc. are also covered.
.$ndustry 0ispute/ and .%or1man/ + The definition of Cindustrial disputeD and
CworkmanD is as follows ,
&589>T)&A@ 8&>79T% = &ndustrial dispute means any dispute or difference between
employers and employers' or between employers and workmen' or between workmen and
workmen' which is connected with the employment or non,employment or the terms and
conditions of employment or with the conditions of labour' of any person. [section .!k#$.
, , >ection .A provides that dismissal' discharge' retrenchment of even a single workman
will be Cindustrial disputeD even if no other workman or any union is a party to the
dispute.
24)QBA5 = C2orkmanD means any person !including apprentice# employed in any
industry to do any manual' clerical or supervisory work for hire or reward. &t includes
dismissed' discharged or retrenched person also. 3owever' it does not include !i# Armed
:orces i.e. those subject to Air :orce Act' Army Act or 5avy Act !ii# 7olice or employees
of prison !iii# %mployed in mainly managerial or administrative capacity or !iv# person in
supervisory capacity drawing wages exceeding )s ';00 per month or functions are is
mainly of managerial nature. [section .!x#$.
Ad"udication of disputes = The Act provides for C2orks CommitteeD in factories
employing 00 or more workers. [section ($. The committee will consist of equal number
of representatives of employer and employees. )epresentatives of employees will be
selected in consultation with )egistered Trade 9nion. The 2orks Committee will first try
to settle disputes. &f dispute is not solved' it will be referred to CConciliation 4fficerD. 3e
is appointed by *overnment. [section "$. The matter may also be referred to C6oard of
ConciliationD. [section "$. 3e will try to arrive at fair and amicable settlement acceptable
to both parties. &f he is unable to do so' he will send report to appropriate *overnment.
[section .!"#$. The *overnment may then refer the industrial dispute to 6oard of
conciliation' @abour Court or &ndustrial Tribunal. [section .!/#$.
%mployer and employees can voluntarily refer the matter to arbitration. [section 0A$.
[This provision is very rarely used by employer and workmen. *enerally' they prefer the
Court route$.
&f no settlement is arrived at' there is three tier system of adjudication = @abour Court'
&ndustrial Tribunal and 5ational Tribunal. The order made by them is CawardD.
CAwardD means an interim or final determination of any industrial dispute or of any
question relating thereto by any @abour Court' &ndustrial Tribunal or 5ational Tribunal. &t
also includes arbitration award. [section .!b#$. , , The CawardD is required to be published
by >tateECentral *overnment within (0 days. [section A$. The award becomes effective
(0 days after its publication. [section AA$.
@A649) C49)T = @abour Courts are constituted by >tate *overnments uEs A. &t will
be presided over by C7residing 4fficerD. The @abour Court has powers in respect of F
&nterpretation of >tanding 4rders F <iolation of >tanding 4rders F 8ischarge or dismissal
of a workman F 2ithdrawal of any customary concession or privilege F &llegality or
otherwise of a strike or lock,out F 4ther matters which are not under &ndustrial Tribunal.
[>econd >chedule to the Act$
&589>T)&A@ T)&695A@ = &ndustrial Tribunal is constituted by >tate *overnment uEs
AA. The tribunal will be presided over by C7residing 4fficer. The &ndustrial Tribunal has
powers in respect of F 2ages' including period and mode of payment F Compensatory
and other allowances F 3ours of work and rest intervals F @eave with wages and holidays
F 6onus' profit sharing' provident fund and gratuity F >hift working changes F
Classification by grades F )ules of discipline F )atinlanisation and retrenchment of
workmen. [Third >chedule to Act$.
5AT&45A@ T)&695A@ = 5ational Tribunal is formed by Central *overnment for
adjudication of industrial disputes of national importance or where industrial
establishments situated in more than one >tates are involved. [section A6$.
)%:%)%5C% 4: 8&>79T% = Appropriate *overnment can refer any dispute to 6oard
of Conciliation' Court of %nquiry' @abour Court or &ndustrial Tribunal. [section 0!#$. , ,
Appropriate *overnment means F Central *overnment in case of railways' docks' &:C&'
%>&C' @&C' 45*C' 9T&' Airport Authority' industry carried on by or under authority of
Central *overnment F >tate *overnment in case of other industrial disputes [section
.!a#$.
C49)TET)&695A@ CA5 )%89C% 795&>3B%5T A58 4)8%)
)%&5>TAT%B%5T , As per section A' the @abour Court and Tribunal have wide
powers. They can reappraise evidence. They can also see whether the punishment is
disproportionate to the gravity of the misconduct proved. &f the Court or Tribunal is of the
view that the punishment is disproportionate' it can impose lesser punishment or even set
aside the termination and order reinstatement. , , &f Court orders reinstatement and
employer files appeal in 3igher Court' the employer is required to pay full wages to the
employee during the period of pendency of proceedings with 3igh Court or >upreme
Court. 3owever' if the workman was gainfully employed elsewhere' Court can order that
payment of such wages is not to be made. [section A6$.
>%TT@%B%5T , C>ettlementD means a settlement arrived at in the course of conciliation
proceedings. &t includes a written agreement between employer and workmen arrived at
otherwise than in course of conciliation proceedings !i.e. outside the conciliation
proceedings#. , , The difference is that settlement arrived at in course of conciliation or an
arbitration award or award of labour court or Tribunal binds all parties to industrial
dispute including present and future workmen and all parties who were summoned to
appear in the proceedings. [section +!(#$. &f settlement is arrived at by mutual
agreement' it binds only those who were actually party to agreement. [section +!#$. , ,
The settlement is binding during the period it is in force. %ven after that period is over' it
continues to be binding' unless a . month notice of termination is given by one party to
another. [section -!.$. , , &f no period has been specified' settlement is valid for ;
months and an award is valid for one year.
G9)&>8&CT&45 4: C&<&@ C49)T R9A &589>T)&A@ 8&>79T% + Termination of a
workman constitutes an &ndustrial 8ispute. )elief sought can be given by forum under
&ndustrial 8isputes Act and hence' jurisdiction of civil court is impliedly barred. =
Chandrakant Tukaram Nikam v. .unicipal Corporation .00. A&) >C2 A0 ? .00.!.#
>CA@% AA ? .00. @@) "-+ ? 00 :G) /- !>C ( member bench#.
ay off' retrenchment and closure + D@ay offD means failure' refusal or inability of
employer on account of shortage of coal' power or raw materials or accumulation of
stock or break down of machinery or natural calamityV to give employment to a workman
on muster roll. , , C@ay offD means not giving employment within two hours after
reporting to work. , , @ay off can be for half day also. &n such case' worker can be asked
to come in second half of the shift. [section .!kkk#$.
A factory employing /0 or more but less than 00 employees on an average per working
day can lay off the workmen' who have completed one year of service' by paying
compensation equal to /01 of salary !basic plus 8A# !section ./C of &8A#. , , %mployer
can offer him alternate employment' if the alternate employment does not call for any
special skill or previous experience' and lay off compensation will not be payable if
employee refuses to accept the alternate employment !section ./%#.
Above provisions of compensation for lay off do not apply to !a# &ndustrial
establishments employing less than /0 workmen !b# seasonal industry !c# %stablishments
employing 00 or more workmen' as in their case' prior approval of Appropriate
*overnment is necessary uEs ./B!#.
)%T)%5C3B%5T = C)etrenchmentD means termination by the employer of service of a
workman for any reason' other than as a punishment inflicted by a disciplinary action.
3owever' CretrenchmentD does not include voluntary retirement or retirement on reaching
age of superannuation or termination on account of non,renewal of contract or
termination on account of continued ill,health of a workman. [section .!oo#$.
C)etrenchmentD means discharge of surplus labour or staff by employer. &t is not by way
of punishment. The retrenchment should be on basis of Clast in first outD basis in respect
of each category' i.e. junior,most employee in the category !where there is excess# should
be retrenched first. [section ./*$. &f employer wants to re,employer persons' first
preference should be given to retrenched workmen. [section ./3$.
A worker who has completed one year of service can be retrenched by giving one month
notice !or paying one monthDs salary# plus retrenchment compensation' at the time of
retirement' N / daysD average wages for every completed year of service !section ./:#.
&n Parr"2s )mplo"ees Union v. Third %ndustrial Tri$unal .00 @@) ";. !Cal 3C#' it was
held that for purposes of retrenchment compensation under &8 Act' the monthly salary
should be divided by (0. [9nder *ratuity Act' it has to be divided by .;$.
&f number of workmen are 00 or more' prior permission of Appropriate *overnment is
necessary uEs ./5!#$.
B%A5&5* 4: CC45T&5949> >%)<&C%D = 7rovisions of compensation for lay off
and retrenchment are applicable only to workman who is in Ccontinuous serviceD for one
year. As per section ./6' Ccontinuous serviceD includes service interrupted by sickness'
authorised leave' accident or strike which is not illegal' or lock,out or cessation of work
which is not due to fault of workman. ,, &n &orkmen v. .anagement of American
)5press A&) -+; >C /"+ ? -+/!"# >CC A' it was held that Cactually workedD cannot
mean only those days where workman worked with hammer' sickle or pen' but must
necessarily comprehend all those days during which he was in the employment of
employer and for which has been paid wages either under express of implied contract of
service or by compulsion of statute' standing orders etc.
C@4>9)% = CClosureD means permanent closing down of a place of employment or part
thereof. [section .!cc#$. , , Thus' closure can be of part of establishment also. , , ;0 days
notice should be given for closure to *overnment' if number of persons employed are /0
or more. ;0 days notice is not necessary if number of persons employed are less than /0.
[section ./::A$. Compensation has to be given as if the workman is retrenched. [section
./:::!#$. , , &f number of workmen employed are 00 or more' prior permission of
*overnment is necessary for closure uEs ./,4.
Provisions for large industries for lay off and closure - @arge industries employing 00
or more workmen on an average for preceding . months cannot lay,off' retrench or
close down the undertaking without permission from *overnment !sections ./B to ./,4
of &ndustrial 8isputes Act#. &nvariably' such permission is almost never given' whatever
may be the merits of the case.
7rovisions of section ./B in respect of prior permission for lay off have been upheld in
Papnasan La$our Union v. .adura Coats A&) --/ >C ..00. 7rovisions of section ./5
were upheld in &orkmen v. .eenakshi .ills Ltd9 , !--.# ;. Taxman /;0 ? --.!#
>CA@% ."+ ? --. A&) >C2 (A+ ? !--.# ( >CC ((; ? GT --.!(# >C ""; ? --.
@@) "+ ? A&) --" >C .;-; !/ member bench#. &n this case' it was held that powers to
give prior permission are quasi,judicial and hence opportunity of hearing must be given
and the order giving permission or refusing permission is subject to judicial review. &n
Bharatia )lectric Steel Co9 Ltd9 v. State of (ar"ana --+ @@) (.. !7S3 3C 86#' it was
observed that operation of section ./,4 should be limited to cases where employer is
acting arbitrarily or unfairly. &f the reasons given by employer for closure are genuine and
adequate' permission cannot be refused.
&n /rissa Te5tiles v. State of /rissa .00. A&) >C2 ((( ? .00. @@) ../ ? 00 :G) (".
!>C / member Constitution 6ench#' it was held that order uEs (/,4 should be in writing
with reasons. The order can be reviewed after one year' even for the same reasons.
&f 6anks refuse to give further loans to run the plant' the employer has to either abandon
the plant or devise some dubious ways to surmount the difficulties. 4ne of the major
reason why foreign investors are reluctant to come to &ndia in a big way is lack of Cexit
policyD. >ome industrial sickness and closures are inevitable in a Cmarket oriented
economyD. Absence of official exit policy creates problems for honest employers
!8ishonest employers devise their own ways#.
,otice of change in conditions of service = >ection -A provides that an employer cannot
effect any change in the conditions of service applicable to any workman without giving
. days notice. >uch notice is not required if there is settlement or award of @abour Court
or Tribunal. As per fourth schedule to the Act' such . day notice is required if there is
going to be change in wages' wage period' 7: contribution' allowances' hours of work
and rest intervals' shift timings' new rules of discipline' increase or decrease in number of
persons employed in any department or shift.
Stri1e and loc1-out = C>trikeD means a cessation of work by a body of persons employed
in any industry' acting in combination' or a concerted refusal' or a refusal under a
common understanding' of any number of persons who are or have been so employed to
continue to work or to accept employment. [section .!q#$.
As per section .(' workman should not go on strike in F during pendency of conciliation
proceedings and A days thereafter F during pendency of proceedings before @abour
Court' &ndustrial Tribunal or 5ational Tribunal F 8uring period of arbitration proceedings
F 8uring period when settlement or award is in operation in respect of the matters
covered by award or settlement.
7)43&6&T&45 4: >T)&Q% A58 @4CQ 49T &5 796@&C 9T&@&TI >%)<&C% , .&n
case of public utility' employees have to give at least " days notice for strike. The notice
is valid only if strike commences within ; weeks. 4therwise' fresh notice is required. , ,
>imilarly' an employer cannot declare lock out without giving " days notice. [section
..$. &f such notice is received' *overnment authority should be informed within five
days. , , As per section .!n#' C7ublic 9tility >erviceD includes railways' major port and
docks' section of industry on the working of which safety of establishment depends'
postalEtelegraphE telephone services' industry supplying powerE lightE waterV system of
public conservancy or sanitation. [section .!n#$. &n addition' *overnment can declare
industry specified in >chedule & as C7ublic 9tility >ervicesD. >uch declaration can be
made for ; months at a time [section .!n#!vi#$. [&ndustries in first schedule include
banking' transport' cement' coal' defence establishments' security press' hospitals and
dispensaries' oil fields' mining of certain specified ores' foodstuff' cotton textiles' iron
and steel etc$.
@4CQ,49T = C@ock,outD means temporary closing or a place of employment or the
suspension of work' or the refusal by an employer to continue to employ any number of
persons employed by him. [section .!l#$. , , 2orkers go on strike' while Clock,outD is to
be declared by employer.
&ages during strike period - 2ages during strike period are payable only if the strike is
both legal and justified , S"ndicate Bank v. + Umesh Naik !--"# / >CC /A. ? --" A&)
>C2 ""-; ? --" && @@G +(; ? --" && @@5 .-; ? !--"# ( >CA@% /;/ ? A&) --/
>C (- ? --" && C@) A/( ? --" @@) ++( !>C constitution bench# , followed in (.T
Ltd9 v. (.T (ead /ffice )mplo"ees Assn --A A&) >C2 /( ? A&) --A >C /+/ ?
--A @@) A/+. &n (AL )mplo"ees Union v. Presiding /fficer --; @@) ;A( !>C#' it was
held that when lockout by employer is legal and justified' workmen are not entitled to
payment of wages for the period during which the lock,out continued.
,o wor1 no pay - 7rinciple of C5o work no payD has been accepted by >upreme Court. ,
Bank of %ndia v. T S +ela8ala -+- @@) .AA !--0 @@) (( W# ? --0!>97# >CA@%
"0!.# ? !--0# " >CC A"" !>C# F S"ndicate Bank v. + Umesh Naik !--"# / >CC /A.
? --" A&) >C2 ""-; ? --" && @@G +(; ? --" && @@5 .-; ? A&) --/ >C (- ?
--"!(# >CA@% /;/ ? --" && C@) A/( ? --" @@) ++( !>C constitution bench#. The
principle of Cno work no payD is also applicable when a man was eligible for promotion
but was not promoted and in fact did not work in the higher post. &n such case' he is not
eligible to get pay for higher scale , Paluru Ramkrishnaiah v. U/% , !-+-# . >C) -. ,
followed in State of (ar"ana v. /P 7upta , --;!# >CA@% ;0..
&@@%*A@ >T)&Q% 4) @4CQ,49T = >trike or lock out in violation of sections .. or .(
and when it is continuing in violation of order issued by *overnment uEs 0!(# !when
matter is referred to Conciliation 6oard or Tribunal# is illegal. [section ."$. :ine upto )s
/0 per day to workman and )s '000 to employer can be imposed. &n addition' he can be
imprisoned upto one month. [section .;$.
#estrictions on employer pending proceedings + &f any conciliation proceedings or
proceedings are pending before arbitrator' labour court or &ndustrial Tribunal' following
restrictions are applicable to employer.
54 C3A5*% &5 C458&T&45> 4: >%)<&C% &5 BATT%)> )%@AT%8 T4
8&>79T% = %mployer shall not make any change in condition of service connected to
dispute without permission of authority before whom proceedings are pending. [section
((!#!a#$. Change which is not related to dispute can be made in accordance with
standing orders without any permission. [section ((!.#!a#$
54 )%B4<A@ 4: 24)QBA5 &5 BATT%)> )%@AT%8 T4 8&>79T% = %mployer
shall not discharge' dismiss or punish any workman in matter for any misconduct
concerned to dispute' without permission of authority before whom proceedings are
pending. [section ((!#!b#$. 7unishment which is not connected to dispute can be made in
accordance with standing orders without any permission. 3owever' dismissal or
discharge of workman will require approval of the action. Application for approval
should be made after action is taken. [section ((!.#!b#$. 7rior permission is not
necessary. Application for approval is required to be submitted after action is already
taken. , ,&n ,aipur :ila Sahakari Bhoomi #ikas Bank v. Shri Ram 7opal .00. A&) >C2
."- ? .00. @@) .(A !>C / member constitution bench#' it was held that if the approval
is not granted uEs ((!.#!b# of &ndustrial 8isputes Act' the order of dismissal becomes
ineffective from the date it was passed and employee becomes entitled to wages from
date of dismissal to date of disapproval of application.
7)4T%CT%8 24)QBA5 , &n every establishment' 1 of total workmen are
recognised as C7rotected workmanD uEs ((!(# !but minimum / and maximum 00#. &n
case of such workmen' order for his dismissal' discharge or punishment cannot be passed
without permission of authority before whom proceedings are pending' 8hether the issue
is related to dispute or not. >uch permission is required only during the period
proceedings are pending and not after main reference is decided.
2nfair abour Practices = >ection ./T prohibits unfair labour practices by employer or
workman or a trade union. &f any person commits unfair labour practice' he is punishable
with fine upto )s '000 and imprisonment upto ; months. [section ./9$. :ifth schedule
to Act gives list of what are C9nfair @abour 7racticesD. Then major are as follows =
&5 CA>% 4: %B7@4I%) , F &nterfering in Trade 9nion activities F Threatening
workmen to refrain them from trade union activities F %stablish employer sponsored
Trade 9nion F 8iscourage trade union activities by various means F 8ischarge or dismiss
by way of victimiHation or falsely implicating workman F Abolish work of regular nature
and to give that work to contractors F .ala fide transfer of workman under guise of
management policy F %mploy badli or casuals and continue them for years F )ecruitment
workmen during strike which is not illegal F Acts of force and violence F 5ot
implementing settlement or agreement or award F )efuse collective bargaining F
Continue illegal lock,out
&5 CA>% 4: 24)QB%5 A58 T)A8% 95&45> , F >upport or instigate illegal strike
F Coerce workmen to join or not to join a particular trade union F Threatening or
intimidating workmen who do not join strike F )efuse collective bargaining in good faith
F Coercive actions including Cgo slowD' CgheraoD' Csquatting on work premises after
working hoursD etc. F 2ilful damage to employerDs property F Acts of force or violence
or intimidation.
Industrial E%plo&%ent (Standing Orders) Act
There are Cservice conditionsD or Cservice rulesD for various employees like *overnment
employees' bank employees' @&C employees etc. The &ndustrial %mployment !>tanding
4rders# Act' -"A is designed to provide service rules to workmen.
The object of the Act is to require employers in industrial establishments to formally
define conditions of employment under them.
%hat are .Standing Orders/ - C>tanding 4rdersD means rules of conduct for workmen
employed in industrial establishments. C>tanding ordersD means rules relating to matters
set out in the schedule to the Act. [section .!g#$. The schedule to the Act requires that
following should be specified in >tanding 4rders , !a# classification of workmen i.e.
temporary' badli' casual' permanent' skilled etc. !b# manner of intimating to workmen
working hours' shift working' transfers etc. !c# 3olidays !d# Attendance and late coming
rules !e# @eave rules !f# @eave eligibility and leave conditions !g# Closing and reopening
of sections of industrial establishment !h# termination of employment' suspension'
dismissal etc. for misconduct and acts or omissions which constitute misconduct !i#
)etirement age !j# Beans of redressal of workmen against unfair treatment or wrongful
exactions by employer !k# Any other matter that may be prescribed.
Coverage of Act - The Act is applicable to all Cindustrial establishmentsD employing 00
or more workmen. [section !(#$.
C&ndustrial establishmentD means !i# an industrial establishment as defined in section .!i#
of 7ayment of 2ages Act !ii# :actory as defined in section .!m# of :actories Act !iii#
)ailway !iv# %stablishment of contractor who employs workmen for fulfilling contract
with owner of an industrial establishment. [section .!e#$.
The term Cindustrial establishmentD includes factory' transport service' construction work'
mines' plantation' workshop' building activity' transmission of power etc.
24)QBA5 , C2orkmanD has meaning assigned to it under section .!s# of &ndustrial
8isputes Act. [section .!i#$. Thus' CworkmanD includes skilled' unskilled' manual or
clerical work. 3owever' CworkmanD does not include employees engaged in managerial or
administrative capacity or supervisory capacity. C2orkmanD does not include workers
subject to Army Act' 5avy Act or Air :orce Act or to police or prison services.
Approval of Standing Orders - %very employer covered under the Act has to prepare
C>tanding 4rdersD' covering the matters required in the C>tanding 4rdersD. :ive copies of
these should be sent to Certifying 4fficer for approval. [section (!#$. CCertifying
4fficerD means @abour Commissioner and any officer appointed by *overnment to be
CCertifying 4fficerD. [section .!c#$.
The Certifying 4fficer will inform the 9nion and workmen and hear their objections.
After that' he will certify the C>tanding 4rdersD for the industrial establishment. [section
/$. Till standing orders are certified' CBodel >tanding 4rderD prepared by *overnment
will automatically apply. [section.A$.
>tanding order should be displayed in %nglish and local language on special notice
boards at or near entrance of the establishment. [section -$. Bodifications of >tanding
4rder shall be done by following similar procedure. [section 0$.
4nce the C>tanding 4rdersD are certified' they supersede any term and condition of
employment' contained in the appointment letter. &f there is inconsistency between
C>tanding 4rderD and CAppointment @etterD' the provisions of C>tanding 4rderD prevail ,
)icher 7oodearth Ltd9 v. R + Soni , !--(# JJ&< @@) /." ? --( @@) /." !)aj 3C# F
Printers (ouse v. State of (ar"ana -+. && @@5 (.A.
>tanding orders are binding on employer and employee. These are statutorily imposed
conditions of service. 3owever' they are not statutory provisions themselves !meaning
that the C>tanding 4rdersD even when approved' do not become ClawD in the sense in
which )ules and 5otifications issued under delegated legislation become after they are
published as prescribed.# , Ra!asthan SRTC v. +rishna +ant , A&) --/ >C A/ ?
!--/# / >CC A/ ? A :@) . ? +A :G) .0" ? --/ A&) >C2 .;+( ? --/ @@) "+
!>C#.
)odel Standing Orders - The Act has prescribed Bodel >tanding 4rders. These are
automatically applicable till employer prepares his own C>tanding 4rdersD and these are
approved by CCertifying 4fficerD. [section .A$.
0isciplinary Action - The most important use of C>tanding 4rdersD is in case of
disciplinary action. A workman can be punished only if the act committed by him is a
CmisconductD as defined under the C>tanding 4rdersD. The CBodel >tanding 4rdersD
contain such acts like insubordination' disobedience' fraud' dishonesty' damage to
employerDs property' taking bribe' habitual absence or habitual late attendance' riotous
behaviour' habitual neglect of work' strike in contravention of rules etc. as misconducts.
The CCertified >tanding 4rdersD may cover other acts as CmisconductD' if approved by
CCertifying 4fficerD.
Subsistence Allowance = 2here a workman is suspended by employer pending
investigation or enquiry into complaints or charges of misconduct against him' the
workman shall be paid subsistence allowance equal to /01 of wages for first -0 days of
suspension and A/1 of wages for remaining period till completion of disciplinary
proceedings. [section 0A!#$. , , C2agesD has same meaning as under section .!rr# of
&ndustrial 8isputes Act. [section .!i#$.
Mini%u% Wages Act
The purpose of Act is to provide for fixing of minimum rates of wages in certain
employments.
2A*%> = 2ages means all remuneration capable of being expressed in terms of money.
&t includes house rent allowance but does not include F value of house accommodation'
supply of light' water' medical attendance F <alue of any other amenity provided' if
excluded by *overnment order F Contribution to pension fund or provident fund or
insurance F Traveling allowance F special expenses incurred by the nature of employment
F *ratuity payable on discharge. [section .!h#$.
:&J&5* 4: B&5&B9B 2A*%> = Binimum wages will be fixed by Appropriate
*overnment after following prescribed procedure. The rate fixed can be revised
periodically. [section (!#$.The rate can be fixed on F time work basis F piece work basis
F a Cguaranteed rateD when rate is fixed on piece work basis and F overtime rate. [section
(!.#$. 8ifferent minimum wage rates can be fixed for F different scheduled employments
F different class of work in the same scheduled employment F adults' adolescents'
children and apprentices F 8ifferent localities. [section (!(#!a#$. )ates can be fixed on
basis of hour' day or month' or even larger period. [section (!(#!b#$. , , The rate shall
consist of basic rate of wages with or without allowance for cost of living allowance
based on Ccost of living index numberD. An all inclusive rate allowing for basic wage'
cost of living allowance and cash value of concession can also be fixed. [section "$.
7)4C%89)% :4) :&J&5* B&5&B9B 2A*%> = Binimum wages will be fixed after
appointing a committee. Their proposals will be published by way of notification. After
hearing representations' rate of minimum wages will be notified. [section /$.
*overnment is required to constitute Advisory 6oard to recommend minimum wages.
The recommendations of Advisory 6oard are not binding on *overnment. = State of AP
v. Nara"ana #ellur Beedi .fg 'actor" A&) -A( >C (0A.
&T &> >9::&C&%5T &: T4TA@ 2A*%> 7A&8 A)% B4)% T3A5 B&5&B9B 2A*%>
, %ven if >tate *overnment notification prescribes variable dearness allowance which is
linked with cost of living index' amount paid on basis of 8A is not to be taken as an
independent component of minimum wages' but as part and parcel of process of
computing minimum wages. 3ence' in cases where employer is paying total sum which
is higher than minimum rates of wages fixed under the Act including the cost of living
index !<8A#' he is not required to pay <8A separately. , Airfreight Ltd9 v. State of
+arnataka ---!"# >CA@% "/ ? --- A&) >C2 .;0+ ? A&) --- >C ."/- ? -/ :G)
(-/ ? --- @@) 00+ ? +( :@) .; !>C# = same view in (arilal ,echand 0oshi v.
.aharashtra 7eneral +amgar Union .000!# 6om C) ;.0 !6om 3C# F .anagement of
Ramkrishna Pharmaceuticals v. State Authorit" .00. @@) -++ !A7 3C# F Andhra
Pradesh (otels Association v. 7overnment of AP .00. @@) .. ? 0 :G) A0( !A7 3C
86#. = Thus' even if rates fixed by >tate *overnment indicate basic and 8A separately'
it is not necessary to show them separately by employer in his wage sheet. &t is sufficient
if employer pays total amount which is equal to or more than total minimum wages
!including 8A# as specified by >tate *overnment in a notification.
%B7@4I%) T4 C@4>% 95&T &: 3% CA554T A::4)8 T4 7AI B&5&B9B
2A*%> , &f an employer cannot pay minimum wages' he has to close down the
undertaking. F Cro8n Aluminium &orks v. Their &orkmen A&) -/+ >C (0 ? -/+ & @@G
/+A !>C# F 0eepak Photos v. State of +erala .00 @@) 0 !Qer 3C 86# F Andhra
Pradesh (otels Association v. 7overnment of AP .00. @@) .. ? 0 :G) A0( !A7 3C
86#. 7aying capacity is not relevant consideration for rate of minimum wages. Cost of
living and general wages in locality are relevant. = Chandra$havan Boarding v. State of
."sore A&) -;+ Bys /; ? -;+ @ab &C +A-.
Binimum wages are payable irrespective of financial position of individual employer. =
(industan Aeronautics v. &orkmen A&) -;A >C -"+.
Pa&%ent o+ Wages Act
The Act is to regulate payment of wages to certain class of employed persons. The Act
applies to payment of wages to persons employed in factory or railways. &t also applies to
any Cindustrial or other establishmentD specified in section .!ii#. [section !"#$. C:actoryD
means factory as defined in section .!m# of :actories Act. , , &ndustrial or other
establishment specified in section .!ii# are , F Tramway or motor transport services F Air
transport services F 8ock wharf or jetty F &nland vessels F Bines' quarry or oil,field F
7lantation F 2orkshop in which articles are produces' adopted or manufactured. , , The
Act can be extended to other establishment by >tateECentral *overnment.
7resently' the Act applies to employees drawing wages upto )s ';00. [section !;#$. The
limit is being increased to )s ;./00 by amending the Act.
%very employer is responsible for payment to persons employed by him on wages.
[section ($.
B%A5&5* 4: 2A*%> , 2ages means all remuneration expressed in terms of money
and include remuneration payable under any award or settlement' overtime wages' wages
for holiday and any sum payable on termination of employment. 3owever' it does not
include bonus which does not form part of remuneration payable' value of house
accommodation' contribution to 7:' traveling allowance or gratuity. [section .!vi#$
342 2A*%> >349@8 6% 7A&8 , 2ages can be paid on daily' weekly' fortnightly or
monthly basis' but wage period cannot be more than a month. [section "$. 2ages should
paid on a working day. 2ages are payable on or before Ath day after the Cwage periodD. &n
case of factories employing more than '000 workers' wages can be paid on or before
0th day after Cwage periodD is over. [section /!#$. [5ormally' Cwage periodD is a
CmonthD. Thus' normally' wages should be paid by Ath of following month and by 0th if
number of employees are '000 or more$. , , 2ages should be paid in coins and currency
notes. 3owever' with authorisation from employee' it can be paid by cheque or by
crediting in his bank account. [section ;$.
8%89CT&45> 7%)B&>>&6@% , 8eduction on account of absence of duty' fines' house
accommodation if provided' recovery of advance' loans given' income tax' provident
fund' %>& contribution' @&C premium' amenities provided' deduction by order of Court
etc. is permitted. Baximum deduction can be /01. 3owever' maximum deduction upto
A/1 is permissible if deduction is partly made for payment to cooperative society.
[section A$.
:&5%> = >pecific notice specifying acts and omissions for which fine can be imposed
should be exhibited on notice board etc. >uch notice can be issued only after obtaining
specific approval from >tate *overnment. :ine can be imposed only after giving
employee a personal hearing. :ine can be maximum (1 of wages in a month. :ine
cannot be recovered in instalments. [section +$.
1rade Unions Act !"*8
The object of Trade 9nions Act' -.; is to provide for registration of Trade unions and to
define law relating to registered trade unions in certain aspects.
Trade 2nion ? Trade 9nion means any combination' whether temporary or permanent'
formed primarily for the purpose of regulating the relations between workmen and
employers or between workmen and workmen' or between employers and employers' or
for imposing restrictive conditions on the conduct of any trade or business. &t includes
federation of two or more trade unions. [section .!h#$.
Thus' technically' there can be CunionD of employers also' though' almost universally' the
term Ctrade unionD is associated with union of workmen or employees.
CTrade disputeD means any dispute between workmen and employers or between
workmen and workmen' or between employers and employers. 3owever' it should be
connected with employment or non,employment' or the conditions of labour' of any
person. C2orkmanD means all persons employed in trade or industry' whether or not in the
employment of the employer with whom the trade dispute arises. [section .!g#$.
Any seven or more members of a Trade 9nion can apply for registration' by subscribing
their names to rules of trade 9nion and complying with provisions of the Act for
registration of Trade 9nion. [section "!#$. )ight and liabilities of a )egistered Trade
9nion are specified in section /.
#egistration of trade union = Appropriate *overnment shall appoint a person as
)egistrar of Trade 9nions for each >tate. [section (!#$. Application for registration is
required to be made signed by at least A members. Application should be accompanied by
rules of trade union. and other required details. [section /$. )ules should contain
provisions as prescribed in section ;. )egistrar shall register Trade 9nion and enter
particulars in the register maintained by him. [section +$. Trade 9nion will have a
registered office. [section .$.
Other provisions = 4ther important provisions are as follows ,
T)A8% 95&45 &> A 648I C4)74)AT% = )egistered Trade 9nion shall be a body
corporate by the name under which it is registered. &t will have perpetual succession and a
common seal. &t can acquire both movable and immovable property in its own name and
contract in its own name. [section ($.
:958 :4) 74@&T&CA@ 79)74>%> , Trade 9nion can constitute separate fund for
political purposes. [section ;$.
%J%C9T&<% C4BB&TT%% A58 4::&C% 6%A)%)> 4: 95&45 = The management
of trade union will be conduced by CexecutiveD. &t is a body by whatever name called.
[section .!a#$. Thus' controlling body of Trade 9nion may be called as C%xecutive 6odyD
or C*overning 6odyD or CBanaging CommitteeD or any such name. The members of the
executive body are termed as C4fficer 6earersD. [section .!b#$. At least /01 of office
bearers of registered trade union shall be persons actually engaged or employed in an
industry wit which the trade union is connected. [section ..$.
A559A@ )%T9)5> = %very registered trade union will prepare a general statement of
assets and liabilities of trade 9nion as on (st 8ecember. The statement will be sent to
)egistrar along with information about change of office bearers during the year. [section
.+!#$.
&BB95&TI :)4B 7)4<&>&45 4: C)&B&5A@ C45>7&)ACI &5 T)A8%
8&>79T%> = 4ffice bearer of a trade union shall not be liable to punishment uEs .06!.#
of &ndian 7enal Code in respect of agreement made between members for purpose of
object of trade union' unless the agreement is agreement to commit an offence. [section
A$. , , Thus' office bearer of trade union cannot be prosecuted for criminal conspiracy in
respect of agreement relating to object of trade union.
&BB95&TI :)4B C&<&@ >9&T = A civil suit or other legal proceeding is not
maintainable against any registered trade union or office bearer in furtherance of trade
union activity on the ground that !a# such act induces some person to break a contract of
employment or !b# &t is in interference with the trade' business or employment of some
other person. [section +!#$.
)%*&>T)AT&45 84%> 54T B%A5 )%C4*5&T&45 = )egistration and recognition
of 9nion by an employer are independent issues. )egistration of Trade 9nion with
)egistrar has nothing to do with its recognition in a particular factoryEcompany.
)ecognition of Trade 9nion is generally a matter of agreement between employer and
trade union. &n >tates like Baharashtra and Badhya 7radesh' there are specific legal
provisions for recognition of a trade union.
Wor0%en.s Co%pensation Act !"*<
This is a very old enactment for providing social security to workmen. 9nder this Act' a
workman who dies or suffers disablement !partial or total# due to accident is entitled to
get compensation from employer.
Act does not apply where wor1man covered under ES$ Act - >ince a workman is entitled
to get compensation from %>&C' a workman covered under %>& Act is not entitled to get
compensation under 2orkmenDs Compensation Act' as per section /( of %>&C.
3owever' Act is applicable to factories' mines' plantations' transport establishments'
construction work etc. !who are not covered under %>& Act#.
Employer/s liability for compensation = An employer is liable to pay compensation if
personal injury is caused to a workman by accident arising out of and in the course of his
employment. [section (!#$. An employer is not liable in following cases =
&njury which does not result in total or partial disablement of workman for a period
exceeding ( days
&njury caused by an accident directly attributable to F workman under influence of
drinks or drugs F wilful disobedience of express orders for safety F wilful removal of
safety guard or device. [%ven if such case' if the workman dies or suffers permanent
total disablement' the employer will be liable$.
%B7@4IB%5T 8&>%A>% = %mployer is liable if a workman contracts any specified
occupational disease' while he is in service of employer for at least ; months. [section
(!.#$.
%B7@4I%)D> :A9@T &> &BBAT%)&A@ , The compensation is payable even when
there was no fault of employer. &n Ne8 %ndia Assurance Co9 Ltd9 v. Pennamna +uriern ,
!--/# +" Comp. Cas. ./ !Qer 3C 86#' claim of workmen for compensation under
Botor <ehicle Act was rejected due to negligence of employee' but compensation was
awarded under 2orkmenDs Compensation Act on the principle of Cno faultD.
C4B7%5>AT&45 7AIA6@% %<%5 &: 24)QBA5 2A> CA)%@%>> ,
Compensation is payable even if it is found that the employee did not take proper
precautions. An employee is not entitled to get compensation only if !a# he was drunk or
had taken drugs !$# he wilfully disobeyed orders in respect of safety !c# he wilfully
removed safety guards of machines. 3owever' compensation cannot be denied on the
ground that workman was negligent or careless. = .ar Themotheous v. Santosh Ra! .00
@@) ;" !Qer 3C 86#.
59B6%) 4: 24)QB%5 %B7@4I%8 &> 54T C)&T%)&A = &n definition of
CworkmanD in schedule &&' in most of the cases' number of workmen employed is not the
criteria. &n most of cases' employer will be liable even if just one workman is employed. ,
, The Act applies to a workshop even if it employs less than .0 workmen and is not a
CfactoryD under :actories Act. = Sunil %ndustries v. Ram Chander .000 A&) >C2 "0- ?
.00 @@) ;" ? .000!A# >CA@% "/.
%or1man under the Act = C2orkmanD means F railway servant F crew of ship F Crew of
aircraft F 8river' cleaner' helper or mechanic of motor vehicle F 7erson recruited abroad
F %mployed in capacity specified in >chedule &&.
The >chedule && covers many activities like manufacturing process' explosives' mine'
ship' loadingEunloading' construction' electricity generation and distribution' drivers'
horticulture' circus etc. , , Cultivation of land' fishing' rearing of live stock is covered if
more than ./ persons are employed. , , 7ersons employed outside are also covered.
3owever' persons employed in clerical capacity are excluded.
Compensation payable under the Act + Bode of computation of compensation is given
in section " of the Act. Compensation is payable to workmen. &t is payable to dependents
of workman in case of death.
&n case of death resulting from injury' minimum compensation is )s. +0'000. Baximum
compensation is an amount equal to /01 of monthly wages of deceased workman
multiplied by factor depending on age !Bore the age' lower the compensation#. &f salary
exceeds )s "'000' it will be considered as )s "'000 only for purpose of calculating the
compensation. Baximum compensation is )s. "'/A'0+0 if a person at the time of death
was ; years of age an. &n addition' funeral expenses upto )s .'/00 are payable. [section
"!(#$.
&n case of permanent total disablement' minimum compensation is )s. -0'000. Baximum
compensation is an amount equal to ;01 of monthly wages of deceased workman
multiplied by factor depending on age !Bore the age' lower the compensation#.
Baximum compensation payable is )s. /'"+'"-;' if workman was ; years of age at the
time of accident. , , &n case of permanent partial disablement' compensation is payable on
basis of percentage of loss of earning capacity.
5o compensation is payable if disablement is upto only three days.
7)4T%CT&45 T4 C4B7%5>AT&45 , The compensation paid under the Act is
protected' i.e. it cannot be attached or assigned. [section -$.
iability of Principal Employer - 7rincipal %mployer is liable to pay the amount of
compensation for the injury suffered by workman employed through contractor' if the
accident arises as a result of accident arising out of and during the course of employment.
[section .$.
Payment of compensation only through Commissioner - A Commissioner for
2orkmenDs Compensation is appointed by *overnment. The compensation must be paid
only through the Commissioner in case of death or total disablement. Any lump sum
payment to workman under the Act must be made only through Commissioner. 8irect
payment to workman or his dependents is not recognised at all as compensation.
3owever' in case of death' if employer has paid some compensation to dependent' that
will be refunded to employer. [section +!#$.
%xpenditure made by employer for medical treatment of workman is not considered for
purposes of the compensation.
Employees entitled - %very employee' including those employed through contractor' but
excluding casual employees who is engaged for purpose of employerDs business is
eligible. The Act does not cover employees employed in clerical capacity. 3owever'
workmen in manufacturing processes' mines' ships' construction' tractor or mechanical
appliances in agriculture' circus etc. and also drivers' watchmen etc. are covered. The
compensation is payable if accident arises out of and during the cause of employment'
and such accident causes either death or disablement.
$n"ury arising out of and during the course of employment - The employee is eligible to
get Cdisablement benefitD only when the injury arises out of and during the course of
employment. >imilarly' a workman is entitled to get compensation only if accident is
Carising out of and during the course of employmentD.
Punis,%ent to E%plo&ee
Any punishment of suspension or dismissal can be imposed after conducting a C8omestic
%nquiryD. 7rinciples of natural justice have to be followed. Termination of an employee
without following principles of natural justice is violative of Article . of Constitution ,
0 + 6adav v. ,.A %ndustries Ltd. --(!;A# :@) !>C# ? --( @@) /+" ? --( A&)
>C2 --/ ? !--(# ( >CC ./- ? --(!(# >CA@% (- ? GT !--(# ( >C ;A ? --(!.#
@@5 /A/ !>C#.
:or proper conduct of enquiry !# %mployee should be informed of charges leveled
against him !.# 2itnesses should be ordinarily examined before him. !(# The employee
should be given fair opportunity to cross examine the witnesses' including himself !"#
The enquiry officer should record his findings with reasons. = Sur )namel v. &orkmen
!-;"# ( >C) ;; ? !-;(# . @@G (;A !>C# F Calcutta 0ock La$our Board v. , %mam
!-;/# ( >C) "/( ? -;/!.# @@G . !>C#.
The workman is issued with a C>how Cause 5oticeD giving details of charges of
misconduct against him. 3e has to give his reply. Then' enquiry into charges is conducted
by an C%nquiry 4fficerD appointed by Banagement. >uch C%nquiry 4fficerD can be an
employee of the company or an outsider. The workman can defend himself before the
%nquiry 4fficer or he can be defended by his co,worker or a 9nion )epresentative. The
workman is not allowed to engage a lawyer to defend his case. After enquiry' the
C%nquiry 4fficerD has to give his findings and state whether he finds the workman CguiltyD
or Cnot guiltyD. 3e should give reasons for his views. 3owever' the C%nquiry 4fficerD
should not give his opinion about the punishment that should be imposed on the
workman. Copy of the report of %nquiry 4fficer has to be given to the workman. , U/% v.
.ohd Raman +han , !--# >CC /++ ? A&) -- >C "A ? GT !--0# " >C "/; ?
--0!.# >CA@% 0-" ? -- & C@) ; !>C#. The workman has right to state his case on
the basis of C%nquiry )eportD e.g. the workman may agree that he is guilty but may plead
for leniency' or he may point out discrepancies in the report of C%nquiry 4fficerD. After
the reply of workman' the authorised Banager will go through enquiry papers' report of
%nquiry 4fficer and observationsEreply of workman on the report of %nquiry 4fficer. The
Authorised Banager will then issue suitable order. The C8isciplinary AuthorityD should
not be lower in rank or grade than the CAppointing AuthorityD.