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/ 104
THE TAMIL NADU
Dr. AMBEDKAR LAW UNIVERSITY
(State University Established by Act No. 43 of 1997)
M.G.R. Salai, Perungudi, Chennai - 600 113.
LABOUR LAW - II
STUDY MATERIAL
By
Dr. J. MAHALAKSHMI, LL.M., Ph.D (Law)
Assistant Professor (S.G)
Department of Labour Law and Administrative Law
The Tamil Nadu Dr. Ambedkar Law University
Chennai PREFACE
Social security is as old as man itself but in India it was a late entrant on the legal scene. In the
19th Century, industrialization started in India and this modern industrialization developed a new
class of industrial proletariats. With the advent of industries, new problems arose and with the growth
of the modern factory system, various health and safety problems created a demand for the
institutionalization of protection measures. Union activities increased to pressurize the Government
to enact some social security legislations. Before independence, British Government was not very
interested in the welfare of the working classes so fewer legislations existed at that time. After
independence, Indian Government took keen interest to provide social security to workers. The social
security legislations enacted were:
© Employees Compensation Act, 1923
© Employees’ State Insurance Act, 1948;
¢ Employees’ Provident Funds and Miscellaneous Provisions Act, 1952;
© Maternity Benefit Act, 1961;
© Payment of Gratuity Act, 1972
© Payment of Bonus Act,
The Employees (earlier Workmen's) Compensation Act, 1923, was the first planned step in the
field of social security in India with the primary objective of ensuring compensation to the workman.
for all personal injuries caused by industrial accidents which result in death or disablement. The
Employee's State Insurance Act, 1948 is to provide social insurance for workers. It isa contributory
and compulsory health insurance scheme that provides medical facilities and unemployment insurance
to industrial workers for the period of their illness, which includes medical benefit, sickness,
disablement, dependents benefit, etc.,
The Employee's Provident Funds and Miscellaneous Provision? Act, 1952 ims to afford retired
workers financial security by way of provident fund, family pension, and deposit linked insurance. It
acts as a post-retirement benefit provided to employees. The Maternity Benefit Act, 1961 is to regulate
women’s employment in industrial establishments for certain specified period before and after
childbirth; while the Payment of Gratuity Act, 1972 seeks to provide economic assistance on the
termination of an employee. The payment of Bonus Act is intended to provide a share to the employees
in the profit of the business of the company, asit is considered that employees are the backbone in any
business and they should be given due benefit in the share of the employers.
This course material is designed to provide only a brief outline of the subject. The students are
advised to refer the prescribed textbooks and other reference books for an enhanced understanding of
the subject.
Dr.J.MAHALAKSHMI, LL.M., Ph.D (Law)
Assistant Professor (S.G)
Department of Labour Law and Administrative Law
The Tamil Nadu Dr. Ambedkar Law University
Chennai TABLE OF CONTENTS
UNITS TITLE PAGE No.
UNIT-I INTRODUCTION -
SOCIAL SECURITY AND LABOUR WELFARE 1
jon SOCIAL SECURITY: INDUSTRIAL INJURIES oT
UNIT-III SOCIAL SECURITY: SOCIAL INSURANCE 26
UNIT-IV OTHER SOCIAL SECURITY LEGISLATIONS 41
UNIT-V LABOUR WELFARE LEGISLATIONS 73 UNIT - I
INTRODUCTION
SOCIAL SECURITY AND LABOUR WELFARE
Introduction
The concept of social security has evolved over a period of time. In primitive societies it was mankind’s
struggle against insecurity and his struggle to protect himself from the vagaries of nature or to find the
basic necessities of day-to-day life. Later, community living came into existence, which created the family
to provide adequate social measures for the needy. With rapid industrialisation, there was break in the
family setup, destroying the traditional system and resulting in the need for an institutionalised and state-
cum-society regulated social security arrangement. Therefore, the concept of social security constantly
evolves and widens and there is no commonly accepted definition of the term.
Concept of Social Security
Allindustrialised countries of the world have developed measures to promote the economic security and
welfare of the individual and his family. These measures have come to be called Social Security. Social
security isa dynamic concept and an indispensible chapter of a national programme that seeks to strike at
the root of poverty, unemployment and diseases.
The International Labour Organization, in various Conventions, has been giving due emphasis to social
security; and various laws were added and existing legislations were amended. The ILO has suggested
multiple methods of organizing, establishing, and financing various social security schemes. The status of
Social security legislations and measures is different in developed, underdeveloped and developing countries.
In underdeveloped countries there are only a very few social security schemeshaving a fairly low level of
benefits.
Social security may provide for the welfare of persons who become incapable of working by reason of old
age, sickness and invalidity/disability and/or are unable to earn anything for their livelihood. It is necessary
to analyse various definitions of social security in order to appreciate the nature and concept of social
security.
Definitions of Social Security
Sir William Beveridge defines Social Security as, “The security of an income to take place of the
earnings when they are interrupted by unemployment, by sickness or accident to provide for retirement
through age, to provide against the loss of support by the death of another person and meet exceptional
expenditure, such as those connected with birth, death and marriage.
‘The International Labour Organization defines social security as ‘security that society furnishes through
appropriate organizations against certain risks to which its members are exposed’ i., the security is furnished
by society, tothe members of the society. The origin of society itself is an outcome of the fact that man is a
social animal and he can survive only in collective humane circumstances. Being a part of society, he expects
help from society when he facesa risk, which is the most common factor in human life. The ILO castsa duty
on society to furnish that protection to its members when one is exposed toa risk in life.
1 ‘The ILO Social Security (Minimum Standards) Convention No.102 of 1952 defines Social Security
tomean: ‘The result achieved by a comprehensive and successful series of measures for protecting the public
(ora large sector of it) from the economic distress, that, in the absence of such measures, would be caused by
the stoppage of earning in sickness, unemployment or old age and after death; for making available to that
same public medical care as needed; and for subsidizing families bringing up young children’.
‘According to theNational Commission on Labour, the concept of social security is based on the ideas
ofhuman dignity and social justice. According to the Commission the underlying idea behind social security
measures is that a citizen who has contributed or i likely to contribute to his country's welfare, should be
given protection against certain hazards.
According to the National Council on Labour also, social security envisages that the members of the
community shall be protected by collective action against social risks causing undue hardships and privation
to individuals whose private resources can seldom be adequate to meet them. Individuals working in
various fields and in different capacities contribute towards the enrichment of society and in turn ‘deserve
to be taken care of, in times, when calamity befalls them’.
Need for Social Security
Human development insists that everyone should enjoy a minimum level of security. Workers also want
to be free from the economic threats which disrupt their daily lives. Hence, there must be a system in
which the State bears the responsibility for providing and ensuring a basic level of social security which is
an essential ingredient in the protection, development and full utilisation of human resources.
As social security is one of the fundamental needs of modern human society to ensure provision for alternative
sourcesof income to workers at the time of contingencies through a concerted effort of the most appropriate
organisations, the State keenly realised the importance of protecting the victims from the contingencies of
work life. It is to meet this type of need that the institution of social security was developed.
Hence, social security is a protection rendered by society through collective action against social risks
causing hardship to individuals whose resources are seldom adequate to meet them. According to this
definition, social security is ensured by way of different schemes which provide the citizens with benefits
designed to support when unable to earn and to restore them to gainful activity. Itis an opportunity to earn
‘one’s living and freedom from fear, especially of economic ruin which involves physical or moral ruin.
Social security law involves those legal mechanisms primarily concerned with ensuring the provision for
their individual of a cash income adequate, when taken along with the benefits in kind provided by other
social services, to assure him a culturally acceptable minimum standard of living where the normal means
of doing so fail.
Need for Social Security Legislations
A comprehensive service of social security is designed to encompass the five giants in the path of social
progress—want, disease, ignorance, squalor and idleness. Thus, itis a programme of protection provided
by security against those contingencies of modern life, sickness, unemployment, old age, dependency,
industrial accidents and invalidity against which the individual cannot be expected to protect himself and
his family by his own ability or foresight. According to the overview prepared by the Ministry of Labour
2 Targe part of, the income from work;
‘+ Thesystem must be initiated by legislations so as to define obligations upon the public or other
organizations to ensure the same;
©The system must be administered by public or private organizations;
‘©The system must assure that the benefits will be available when required and the protection will
beadequate both in quantity and quality
Characteristics of Social Security
‘The purpose of any social security measure is to provide individuals and families with the confidence that
their standard of living will not be eroded by meeting with unexpected socio-economic contingencies in
their life. The concept of social security varies from country to country. This isunderstandable, ina way,
‘because of the differential social and economic development of societies in difference parts of the world.
But the need for economic protection is universal and hence social security measures have three major
characteristics even though they vary from country to country and from time to time according to the need
‘of the people and the availability ofthe countries’ resources.
Social security measures are established by law. They provide cash benefit to replace atleast a part ofthe
{income in case of contingencies such as unemployment, maternity, employment injury sickness, old age
etc. These benefits are provided in three major ways, namely, social assistance, social insurance and public
services. The most well known techniques adopted by social security at present are no doubt social assistance
and social insurance.
Social assistance schemes will grant benefits to people who need them. The ILO defines a social assistance
scheme as one that provides benefits to persons of small means granted as of right in amounts sufficient to
‘meet a minimum standard of need and financed from taxation. The special characteristic ofthis measure is
that itis financed wholly from the general revenues of the state and the benefits are provided free of cost.
But the beneficiary has to satisfy the means test which means certain prescribed conditions. The first risk
tobe covered was that of old age, but gradually non-contributory benefits were also introduced for invalids,
survivors and unemployed persons as well. Today social assistance programmes include schemes like
‘unemployment assistance, old age asistance, national assistance.
‘Thus, social assistance underlines the dea that the care of people could not be left to voluntary charity and.
should be placed on a compulsory and statutory basis. It represents, “the unilateral obligation of the
‘community towards its dependent groups”.
‘Aim of Social Security
Social security represents society's current answer to the problem of economic insecurity. Social security
measures have a twofold significance for every developing country. They constitute an important step
towards the goal of a welfare state, by improving living and working conditions and affording the people
3 + Compensation - It aims to substitute income when there is interruption of earnings due to
‘unemployment, sickness, permanent disability old age etc.
= Restoration - It is designed to provide certain services like medical care to the sick and invalid as
well as rehabilitation in cases of need
= Prevention - Social security measures not only provide relief when occasions require expenditure
that strains family budget, but also prevents the risks from arising in the fist place itself. Prevention
{is designed to avoid the loss of productive capacity due to sickness, unemployment or invalidity
and to make available resources which are used up by voidable disease and idleness and to increase
the material, intellectual and moral well being ofthe community.
Social Security and the Indian Constitution
‘The Constitution of India guarantees fundamental rights to every citizen including the right to life and,as
the Supreme Court has pointed out, the right to livelihood is inherent in the right to life. The ultimate aim
of social security is to ensure that everyone has the means of livelihood and hence the right to social
security and protection ofthe family are integral parts of right to life. Further, the Supreme Court has also
held that security against sickness and disablement and also right to family pension form part ofthe right
tolife under Article 21 of the Constitution.
‘The Directive Principles of State policy set standards of achievement based on a socialistic pattern of
society as it embraces principlesand policies pertaining to social security measures which are tobe followed
by the State in the future. Its pertinent to discuss the following provisions which are relevant to social
security:
* ToSecure a Social Order for the Promotion of Welfare of the People
+ Directives to the State to Secure Social Security Measures While Enacting Legislations
Adequate means of livelihood; Proper distribution of ownership and control of the material
resources ofthe community so that it may sub-serve the common need;
+ Prevention ofthe concentration of wealth and means of production; Equal pay for equal work for
‘men and women; The health and strength of workers; and Childhood and youth are protected
against exploitation,
Right to Work, to Education and to Public Assistance in Certain Cases
© Provision for Just and Humane Conditions
Article 43 requires the state to strive to secure to the worker work, a living wage, conditions of work
‘ensuring a decent standard of life and ull enjoyment of leisure and social and cultural opportunities. In Standard Vacuum Refining Co. of India v. Workmen, AIR 1961 SC 895, 901 it has been
observed that every workman shall have a wage which will maintain him in the highest state of industrial
efficiency, which will enable him to provide his family with the material things which are needed for their
health and physical well-being, enough to enable him to discharge his duties asa citizen.
From the above discussion itis clear that social security measures have introduced an element of stability
and protection in the midst of the stresses and strains of modern life. Lack of social security impedes
production and prevents the formation of a stable and efficient labour force. Social security is, therefore,
nota burden, but a wise investment which yields good dividends in the long run
Emergence of Social Security as a Human Right
Human Rightsisa 20* Century term for what have been traditionally known as natural rights or rights of
man. The Declaration of Independence issued by the Thirteen American States in July 1776 stated “that all
men are created equal; that they are endowed with certain inalienable rights; and among these are life,
liberty and pursuit of happiness”, The Declaration of Rights of Man and Citizen issued by Constituent
‘Assembly in France asserts that “men are born and remain free and equal in rights.”
‘The natural rights to life, liberty etc., have been understood as categorical rights, ie., nobody could find
any excuse for disrespecting those rights. Such political right can be secured by legislation. But social and
‘economic rights can rarely be secured by legislations alone. The rights like right to work, right to social
security etc., come under the second category. India enacted the Protection of Human Rights Act, 1993
which defines human right as the rights relating to life, liberty, equality, and dignity of the individual
guaranteed by the constitution or embodied in the International Covenants. The International Covenant
referred to therein which is relevant to Social Security, is the International Covenant on Economic, Social
and Cultural Rights adopted by General Assembly ofthe UN.
Evolution of Social Security Laws
‘The Indian Social Security Schemes for organized sector have been influenced by these factors:
© British policy to raise labour cost in the established industries.
* A policy of corporate paternalism leading to a variety of benefits like promoting loyalty of
employees.
© Inthe post-independence era, the emergence of the welfare state concept which has led toa series
of welfare and protective legislations based on relevant international labour standards.
= Many ofthe social security and welfare measures became statutory obligation of employers.
* Due to rapid industrialization there was a need to promote the commitment to work force for
industrial and urban life.
In India due to rapid industrialization a new class of Industrial proletariat was created, having a rural
background and with very little social and material resources. For them there was a great need of
systematized help through social security agencies. The non-industrial classes were also in urgent need of
social security due to industrialization in 19th Century.
5 Indian social reformers, labour welfare organizations and many progressive employers persuaded the
government to undertake social security measures as a protection for the workers against a few contingencies.
The Indian Government appointed a Committee of Enquiry and the Committee reported that steps should
be taken by mill owners to alleviate the distress caused by unemployment. It further recommended that a
voluntary gratuity scheme should be introduced but, unforcunately, no action was taken for its
implementation.
In 1929, the Government of Bombay was the first to give a proposal for enacting a Maternity Act. It was
observed that productivity depends upon the quality of labour which further depends upon its health,
nutrition, literacy, social values and customs.
‘The Bombay textile Labour Enquiry observed, “That in all pursuits a high standard of efficiency can be
expected only from persons who are physically fit and free from mental worries, that is, only from persons
who are properly trained, properly housed, properly fed and properly clothed.”
tis understood that to neglect the labour isto neglect productivity as, finally, the welfare of the country
lies in their welfare. To build up a stable labour force with full commitment was only possible by creating
a genuine welfare state, good perceptions and psychological feelings for creating good moral habits.
Pre-Independence Period and the Social Security of Workers
In 1877, the first labour unrest took place at “Empress Mills Nagpur” with the aim of improving their
‘wages. In 1890, the first Trade Union - Bombay Mill Hands Association - was formed under the leadership
of NM. Lokhande.
In 1885, the first Fatal Accidents Act was passed. Despite this, workers were living under very poor and
inhumane conditions. There was no provision of any measure for social security before 1920.
In 1920, the International Labour Organization gave a boost to labour welfare and social security schemes.
Inthe ILO Convention of 1929, the workers social security schemes were considered to be of high importance.
Then there came strong recommendations on labour welfare and social security.
After the First World War, due to the Indian National movement, the British Government started thinking
about the employees and accordingly (i) Workmen’s compensation Act, 1923 (ii) The payment of wages Act’
1936 (iii) Minimum wages Payment Act (iv) Maternity Benefits Act were passed from time to time. Dr.B.R.
Ambedkar was appointed asa ‘Labour Member of the Viceroy’s Council” after Second World War.
“The Whitley Commission” recommended that some suitable measures should be taken to restore health
tothe workers. On the recommendation of the Commission and in consultation with the “Standing Advisory
Committee of Labour and Industries” the government agreed to a contributory Medical scheme in which
both employer and employee would contribute towards a common fund.
In 1937, a contributory Health Insurance Scheme was formulated. At the same time , the Bombay Textile
Enquiry Committee also recommended the formulation of a Health Insurance Scheme in which the (i)
Employer (ii) Employee and (iii) The State Government contributed towards the fund.
In 1940, during the first Labour Minister's Conference, the need for a Sickness Benefit Fund was felt. In
1943, Indian Government appointed a Commission under the Chairmanship of Dr.B.R. Ambedkar and its
report was submitted in 1944.
6 of theEmployee’s State insurance Act 1948.
Post-Independence period and Social Security
In 1947, India got Independence and the Indian Government intensified labour welfare and social security
‘measures, In 1948, Employees’ State Insurance Act was duly modified and that was beginning ofthe era of
Social Insurance for Indian labour.
1n 1952, the International Labour Organization provided the specialist advice from eight experts on social
security for six ong months forthe proper implementation ofthe schemes ofthe Employee State Insurance
‘Act. They devised and advised on the method ofits administration, the development of the panel system of
‘medical benefit and training of the necessary staff in order to extend the scheme throughout the country.
In 1948, the Indian government made certain important amendments in the existing Indian act 1934 and
‘came up with an entirely new nomenclature “The Factories Act 1948” with the main purpose of regulating.
conditions of work in manufacturing establishments for ensuring adequate health, welfare measures, hours
‘of work and leave with wage.
‘The real sense of social security legislations took shape only after independence even though its birth may
be traced back to the industrial revolution. India witnessed the introduction of industrial adjudication in
1947-The interim Government formulated a five year programme for the welfare ofthe labour class with.
4 view to raising the living standards of workers. The significant features of the programmes were as
follows:
‘Organisation of health insurance scheme, applicable initially to factory workers;
‘Revision of Workmen's compensation Act;
+ Acentral law for maternity benefit;
‘+ Extension to other classes of workers ofthe right, within specific limits, to leave with allowance
during sickness
Further, the Constitution of India provides an overarching framework for the regulation of conditions of
‘work as well as protection and promotion of livelihoods. The Constitution of India guarantees Fundamental
Rights to every citizen including the right to life. The ultimate aim of social security i to ensure means of
livelihood and therefore, the right to socal security isalso inherent in the right tolife. Thus, there wasa
complete change inthe approach to labour legislations after independence as the ideas of Socal Justice and
‘Welfare State were enshrined in the Constitution which laid down directives to the State under part IV.
relating to labour and its welfare. + Maternity Benefit Act, 1961;
+ Paymentof Gratuity Act, 1972.
* Payment of Wages Act, 1936;
+ Factories Act, 1948;
+ Minimum Wages Act, 1948;
+ Plantation Labour Act, 1951;
+ Contract Labour (Regulation and Abolition) Act, 1970;
+ Bonded Labour (Abolition) Act, 1976;
‘© Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979;
+ Child Labour (Prohibition and Regulation) Act, 1986:
‘© Building and other Construction Workers (Regulation of Employment and Conditions of Service)
Act, 1996;
‘© Beedi and Cigar (Conditions of Employment) Act, 1996.
From the above observations it can be concluded that there is considerable development in social security
‘measures during the post-independence period. Even from the perusal of Five Year Plans itcan be inferred
that the State has moved to translate the objectives stated in the Directive Principles of State Policy to
statutes which are to safeguard the interests of workers against sickness, accident, disease, old age and
‘unemployment. Particularly, the programmes of the Sixth Plan were focussed on the effective
implementation of different legislative enactments regarding labour and special programmes for agricultural
labourers, artisans, handloom weavers, leather workers etc.,and it paid special attention tothe problems
‘of bonded labour, child labour, women labour, contract labour, construction labour and inter-state migrant
labour. The Eighth Five Year Plan also pointed out that the enforcement of labour laws, especially laws
relating to the unorganised labour, should be effective.
International Labour Organisation
‘The International Labour Organization is one of the 12 specialized agencies of UN. Ithas one of the mgst
effective and well-developed mechanisms for human rights protection in the international system. The
preamble of ILO states the objective of regulating the hours of work including the establishment of maximum
‘working days and weeks, the regulation of labour supply, the prevention of unemployment, the provision
of adequate living wage, the protection of workers against sickness, disease and injury arising out of his
‘employment, the protection of children, young persons and women, provisions for old age and injury,
recognition ofthe principle of equal remuneration for work of equal value, recognition ofthe principle of
freedom of association, the organization of vocational and technical education and other such measures.
8 justice alone, but that it required the securing of social justice also. The need for Workers’ well-being,
regulation of labour supply, the prevention of unemployment, provision for adequate living wage, protection
of weaker sections,provision for sickness, disease, injury, old age and protection of young persons and
‘women led to the creation of ILO in 1919 as a part of League of Nations by Part XIII of the Treaty of
Versailles.
‘The Treaty is “the first known to history for containing a provision dealing with labour” and provides for
establishing a standard setting mechanism called ILO. The ILO is distinct from other international institutions
as its major concer is social justice. The aims and purposes of this institution were reaffirmed in 1944
through the Philadelphia Charter. In 1946, the ILO and United Nations entered into an agreement and ILO
‘was recognized as a specialized agency of the UN. In the era ofthe UN, there was greater attainment of
social justice as part of the aim of International co-operation and cooperative actions.
‘The conference recognizes the solemn obligation of ILO to further among the nations of the world
programmes which will achieve—
‘+ fallemployment and a raise in the standard of living;
‘© theemployment of workersin which they can have the satisfaction of giving the fullest measure
of their skills and attainments and make their greatest contribution to the common well-being;
‘+ facilities for training and transfer of labour for employment and settlement;
‘© policies with regard to wages and earning hours and other conditions of work calculated to ensure
1a just share of the fruits of progress to all and minimum living wage to all employed and all in
need of such protection;
© official recognition of collective bargaining, co-operation of management and labour;
* provision for child welfare and maternity protection;
= assurance of equality of educational and vocational opportunity;
* provision for adequate nutrition, housing and facilities for recreation and culture;
* adequate protection of life and health ofall workers in all occupations; and
* extension of social security measures to provide basic income toa in need of such protection and
comprehensive medical care.
In this declaration, ILO emphasizes states’ social commitment to the upliftment of working class and
affirms the right of workers for decent living.
While recognizing these rights, ILO actually assures a life with human dignity which is one of the basic
Jhuman rights. To en ee)
political, economic, social and cultural rights including right to work, right to leisure and rest, right to
social security, right to just and favourable conditions of work, right to equal pay for equal work, right to
fair remuneration, right to form and join trade unions, right to maximum working hours and periodic
holidays with pay, right to adequate standard of living, including food, clothing and shelter, right to medical
‘care and education, right to special protection and assistance, right to motherhood and childhood, right to
‘equal access to all for higher education on the basis of merit, right to participate in the cultural life ofthe
‘community and right to enjoyment of artand cultural activities and rightto share scientific advancement
and its benefit. All the above recognized rights aim at general welfare of a democratic society. Article
25(1) explicitly deals with the right of workers. It reads,
“Everyone has the right to a standard of living adequate for the health of and well-being of himself and of.
his family including food, clothing, housing and medical care and necessary social services and the right to
security inthe event of unemployment, sickness, disability, in widowhood, old age or other lack of livelihood
in circumstances beyond his control”.
Hence, the above Article categorically establishes the security measures which are basic rights not only ofthe
‘wage earner but also of his family. All aspects or ingredients of social security are dealt within this Article.
Conclusion
twas ILO experts and Professor Adarkar whose joint efforts instigated the Government of India in 1946 to
introduce these important elements of social security legislations:
* Organization of health Insurance scheme.
‘= Revision of Workmen's Compensation Act.
© Central Law of Maternity Benefits.
‘Extension ofthese schemes to other classes of Workers
‘= Some other schemes like leave with allowance during sickness were introduced which lead to
enactment of Employee's State Insurance Act, 1948, The Plantation Labour Act, 1951 and
Employees Provident Fund Act, 1952.
‘An analysis of the development of social security asa term and concept reveals the fact that it evolved as a
protective measure for the benefit ofthe poor; and the acceptance of poverty asa social problem placed the
‘burden on the Government to protect its citizens from economic distress. Considering the fact that the
‘working class contributes towards the development of society, s the guardian ofthe community, the State
is duty-bound to protect workers in case of disruption of their income arising out of disablement, accident,
death or old age. The present system of social security is developed from a series of public measures
reshaped from time to time by expanding coverage and risks, Inthe Indian context, social security should
be, in essence, a measure for ensuring social justice and human dignity as envisaged in the Constitution of
India. The international community accepts socal security asa human right and ILO has come forward to
‘guide member States to ensure social security to workers in their countries.
10 UNIT - If
SOCIAL SECURITY: INDUSTRIAL INJURIES
THE EMPLOYEES’ COMPENSATION ACT, 1923
Introduction
The Employees’ Compensation Act was enacted by the Legislature in 1923 with a view to providing for the
payment of compensation by certain classes of employers to their workmen for injury by accident in their
establishment. Prior to this enactment, ifan employee was injured, or the injury resulted in death because
of any employment in which he was engaged, he, or those representing him or dependent on him, could
recover compensation for such injury or death, only when the same could be attributed to the negligence of
the employer. Hence, it was thought necessary that there should be a legislation which would secure
‘workmen and their dependents against becoming objects of charity, by making provision for reasonable
compensation for all such calamities as are incidental to the employment.
The Employees’ Act, 1923 is one of the earliest labour welfare and social security legislations enacted in
India. It recognizes the fact that ifa workman is a victim of an accident or an occupational disease in the
course of his employment, he needs to be compensated. The Act does not apply to those workers who are
insured under the Employees’ State Insurance Act, 1948. The Karnataka High Court held that the object
behind the legislation is the protection of weaker sections with a view to ensuring social justice. Hence,
the provisions of the Act have to be interpreted liberally so much so that, other things being equal, the
leaning of the Court has to be towards the person for whose benefit the legislation is made. (United India
Insurance Co. Ltd. v. (Smt.) Susheela, 2004 (101) FLR 393 (Karn HC)).
Objectives
The Himachal Pradesh High Court observed in Gian Chand v. Mani Karan, [1989 (58) FLR 360)
observed as follows:
“Although the Workmen's Compensation Act, 1923 is a pre-constitutional law, it isa beneficial piece of
legislation reflecting the constitutional goal of socio-economic justice and the mandate contained in the
Directive Principles of State Policy embodied in Articles 41, 42 and 43 of the Constitution”.
The objective of the Employees’ Compensation Act is to ensure that in the case of injury or permanent
disablement or death of a workman by accident arising out of and in the course of employment, his employer
pays him compensation in accordance with the provisions contained in the Workmen’s Compensation Act
and such employee who has suffered injuries or permanent disablement or the dependants of the deceased
employee are not left high and dry [ B.T. Shipping London Ltd. v. Anati Narayanan, 2000 (86)
FLR 901 (Bom HC)]
Nature and Scope
‘The Employees’ Compensation Act, 1923 imposes statutory liability upon an employer to discharge his
moral obligations towards employees when they suffer from any physical disabilities or diseases, during
the course of employment in hazardous working conditions. The aim of the Act is to provide quicker and
1 cheaper disposal of disputes relating to compensation than would be possible in cases of proceedings under
civil law. The Act also provides relief to the dependants from hardships rising from accident.
The Actextends to the whole of India and it applies to railways and other transport establishments; factories;
establishments engaged in making, altering, repairing, adapting, transport or sale of any articles; mines;
docks; establishments engaged in construction; fire-brigade; plantations; oilfields, and other employments
listed in Schedule Il of the Act. The Workmen's Compensation (Amendment) Act, 1995, has extended the
scope of the Act to cover workers of newspaper establishments, drivers, cleaners, etc. working in connection
with motor vehicles, workers employed by Indian companies abroad, persons engaged in spraying or
dusting of insecticides or pesticides in agricultural operations, mechanized harvesting and threshing,
horticultural operations and doing other mechanical jobs.
Definitions
Section 2 (1) (d) “dependant” means any of the following relatives of deceased employee, namely:-—
(i) awidow, a minor legitimate or adopted son, an unmarried legitimate or adopted daughter or a
widowed mother; and
(ji) if wholly dependent on the earnings of the employee at the time of his death, a son or a daughter
‘who has attained the age of 18 years and who is infirm;
(ii) if wholly or in part dependant on the earnings of the employee at the time of his death, —
(a) awidower,
(©) parent other than a widowed mother,
(©) aminor illegitimate son, an unmarried illegitimate daughter or a daughter, legitimate or
illegitimate or adopted if married and a minor or if widowed and a minor,
(@) minor brother or an unmarried sister or a widowed sister if minor,
(©) awidowed daughter-in-law,
() _aminor child of a pre-deceased son,
(g)_aminor child of a pre-deceased daughter where no parent of the child isalive, or
(t) paternal grandparent if no parent of the employee is alive;
Explanation. —For the purposes of sub-clause (ii) and items (6) and (g) of sub-clause (iii), references toa
son, daughter or child include an adopted son, daughter or child respectively.
Section 2(1)\(dd) “Employee” means any person who is : ~
i) Arailway servant as defined in clause (34) of section 2 of the Railways Act, 1989 (24 of 1989), not
permanently employed in any administrative district or sub-divisional office of arailway and not
employed in any such capacity as is specifies in schedule II; or
12 ii) (a) _amaster, a seamen or other members of the crew of a ship,
(b) acaptain or other member of the crew of an aircraft,
(©) aperson recruited as driver, helper, mechanic, cleaner or in other capacity in connection
with a motor vehicle,
(@)__aperson recruited for work abroad by a company and who is employed outside India in any
such capacity asi specified in schedule II and the ship, aircraft or motor vehicle, or company,
asa case may be, is registered in India; or
(iii) employed in any such capacity ass specified in schedule II, whether the contract of employment
‘was made before or after the passing of this Act, and whether such contract is expressed or implied,
oral or in writing; but does not include any person working in the capacity of a member of the
armed forces of the Union; and any reference to any employee who has been injured shall, where
the employee is dead, include a reference to his dependants or any of the them.
Section 2(1){e) “employer” includes any Body of persons, whether incorporated or not, and any managing
agent of an employer and the legal representative of a deceased employer, and, when the services of a
employee are temporarily lent or let on hire to another person by the person with whom the employee has
entered into contract of service or apprenticeship, means such other person while the employee is working
forhim;
Section 2(1) (f) “managing agent” means any person appointed or acting as the representative of
another person for the purpose of carrying on such other person's trade or business, but does not include an
individual manager subordinate to an employer,
Section 2(1) (g) “partial disablement” means, where the disablement is of a temporary nature, such
disablement as reduces the earning capacity of a employee in any employment in which he was engaged at
the time of the accident resulting in the disablement, and, where the disablement is ofa permanent nature,
such disablement as reduces his earning capacity in every employment which he was capable of undertaking
at that time; provided that every injury specified in Part IT of Schedule I shall be deemed to result in
permanent partial disablement;
Section 2(1) (1) “total disablement” means such disablement, whether of a temporary or permanent
nature, as incapacitates an employee for all work which he was capable of performing at the time of the
accident resulting in such disablement:
Provided that permanent total disablement shall be deemed to result from every injury specified in Part I
of Schedule I or from any combination of injuries specified in Part II thereof where the aggregate percentage
of the loss of earning capacity, as specified in the said Part II against those injuries, amounts to one hundred
percent or more;
Section 2(1) (m) “wages”, includes any privilege or benefit which is capable of being estimated in
money, other than a travelling allowance or the value of any travelling concession or a contribution paid
by the employer of an employee towards any pension or provident fund or a sum paid to an employee to
cover any special expenses entailed on him by the nature of his employment;
13 (2) The exercise and performance of the powers and duties of a local authority or of any department acting
on behalf of the Government shall, for the purposes of this Act, unless a contrary intention appears, be
deemed to be the trade or business of such authority or department.
(3) The Central Government or the State Government, by notification in the Official Gazette, after giving
not less than three months’ notice of its intention so to do, may, by a like notification, add to Schedule II
any class of persons employed in any occupation which it is satisfied is a hazardous occupation, and the
provisions of this Act shall thereupon apply, in case of a notification by the Central Government, within
the territories to which the Act extends, or, in the case of a notification by the State Government, within
the State, to such classes of persons:
Provided that in making addition, the Central Government or the State Government, as the case may be,
may direct that the provisions of this Act shall apply to such classes of persons in respect of specified
injuries only.
Section 3 - Liability of the employer to pay compensation
‘The Compensation extends to cases of “personal injury caused to an employee by accident arising out of or
in the course of the employment.”A plain reading of the material provision ofSection 3 of the Act, makes
it crystal clear that the employer's liability to pay compensation to a workman arises only ifthe employee
suffers personal injury; such personal injury is caused to the workman by an accident, and the accident
arises out of and in the course of his employment. But the injury must have resulted either in the death of
the employee or in total or partial disablement for a period exceeding three days. [Ananthamma v. M.D.
Co-operative Spinning Mill Ltd., Raichur, 1999 I LL} 1053 (Kant)]
‘Thus, in order for Section 3(1) to render an employer liable to pay compensation to his employee under the
provisions of the Act, the following three conditions must be satisfied:
1. Hemustsuffer personal injury
2. Such personal injury must be caused by an accident
3. Theaccident must arise out of and in the course of employment.
Hence, the Employees’ Compensation Act excludes the employer from liability in respect of any injury
which does not result in total or partial disablement exceeding three days.
Let us now analyse the various terms used in the Act; namely, ‘personal injury’, ‘accident arising out of and
in the course of employment’, ‘disablement’ etc.
Accident
‘The word ‘Accident’ has not been defined in the Act. So, one must rely on the ordinary dictionary meaning
ofthe term. The meaning of the word ‘accident’ is to be gathered from the context, the subject-matter, the
intention of the Legislature, effect of the meaning given and the object of the enactment. [National
Insurance Co. Ltd. v. SabitaGope, 2000 I LL} 1375 (Gau)]
14 the occurrence are so unexpected that they may be fairly considered as accidental (Warmer v. Couchmen,
(1912) AC 35). It was held in Tbrahim v. MacKinon Mackenzie & Co., [1966 ML] 220] that in
case of doubt whether the death was due to accident or not, the benefit of doubt should be given to the
‘employee by holding the death to be due to accident.
Disablement
Partial Disablement $2(1)(g): partial disablement means, where the disablement is ofa temporary nature,
such disablement as reduces the earning capacity of an employee in any employment in which he was
engaged atthe time ofthe accident resulting in the disablement, and, where the disablement s ofa permanent
nature, such disablement as reduces his earning capacity in every employment which he was capable of
‘undertaking at that time: provided that every injury specified in Part Il of Schedule I shall be deemed to
result in permanent partial disablement;
Total Disablement $ 2(1) (V: total disablement means such disablement, whether of a temporary or
permanent nature, as incapacitates an employee forall work which he was capable of performing at the
‘time of the accident resulting in such disablement: Provided that permanent total disablement shall be
deemed to result from every injury specified in Part I of Schedule I or from any combination of injuries
specified in Part Il thereof where the aggregate percentage of the loss of earning capacity, as specified in
the said Part Il against those injuries, amounts to one hundred per cent. or more
Section 3 (2)
An occupational disease contracted by an employee is deemed tobe a personal injury caused tothe employee
bbyan accident arising out of or in the course of employment. Occupational diseases have been listed out in
Parts A, Band Cof Schedule III of the Act
Doctrine of Notional Extension of ‘Time’ and ‘Place’
‘Asa general rule, the employment of a workman does not commence until he has reached the place of
‘employment and does not continue when he has left the place of employment, the journey to and from the
place of employment being excluded. The doctrine of notional extension refers toa reasonable extension of
both time and place of an employee ie. the employee may beregardedasin the coun ofemplaymenteven
though he had not reached or had left his employer's pre
In New India Assurance Co VsSmtPadmavati [2005 Lab IC 3190 AP}, the deceased was working as
acleaner ofa vehicle. The accident occurred while the deceased was bringing tiffin on the instruction of
the driver when the vehicle was parked after reaching the destination. It was held in this case that the job
‘undertaken by the deceased was ancillary and incidental to his employment and has to be construed as.
“arising out of and in the course of employment’. Thus, the dependents of the deceased were entitled to
compensation under the Act.
18 SS oo
concept of during the course of employment’ can be extended from the time the workman leaveshome and
returns back after completion of his duty.
In Saurashtra Salt Manufacturing Co. v. BaiValu Raja,[AIR 1958 SC 881: (1958) 2 LL] 249],
the Supreme Court while discussing the scope of section 3 (1) observed that tis now well settled that the
‘employment ofa workman does not commence until he has reached the place of employment and does not
‘continue when he has lft the place of employment, the journey toand from the place of employment being,
‘excluded, is subject tothe theory of notional extension ofthe employers premises sos to include an area
which the workman passes and repasses in going toand in leaving the actual place of work.
Circumstances under which an employer is not liable for compensation
1. When the injury does not exceed three days
2, Influence of drink, wilfl disobedience etcon the part of the employee
However, these exceptions do not apply in cases where the accident results in the death or total permanent
disablement of the employee.
Section 3 (5)
“In order to avoid unnecessary litigation, and to prevent double claims against employers, workman who
‘considers that, in addition to a claims against employers, for compensation, he could also sue in a Civil
‘Court for damages is compelled to choose which remedy he will take, and is bound by his own decision
when taken. In the case ofall but the most highly paid workmen there would be litle advantage in choosing
to sue for damages, but a workman in receipt of high salary may prefer to do so as no limit is set to the
amount he can recover in a Civil Court, whereas strict limits are set to compensation.
Under section 3(5) of the Employees’ Compensation Act, 1923, the workman or his dependents have to
lect between filing a civil suit in Civil Court or claim before Workmen's Compensation Commissioner
tunder the Act. Certainly, he cannot seek both remedies at one time since only one of the remedies can be
sought.
Section 4 — Amount of Compensation
‘Sec. 4 deals with the amount of compensation. The amount of compensation allowable under the Act has,
‘been fixed by the Statue itself thereby leavingno option tothe Commissioner but toallow the compensation,
10 fixed once he holds the employee or his heirs entitled to claim compensation.
(Clause (a) of sub-section (1) of Section 4 deals with the case where death results from the injury. Clause (b)
of sub-section (1) of Section 4 deals with the compensation where permanent total disablement results
from the injury. Clause (c) of sub-section (I)of Section 4 deals with the case where partial permanent
16 ‘Asper Clause (A) of Section 4(1), the injured would be entitled to the half- monthly payment of sum equivalent
‘to particular percentage of wages for the period during which the worker was temporarily disabled from
attending to his duties. The sub-section (2) of Section 4 prescribes the limit to which the injured would be
‘entitled to compensation as per Clause (A). As per the proviso to sub-section (2)ofSection 4, the amount of
‘any payment or allowance received from the employer towards compensation should be appropriated
from the lump sum compensation or from the half monthly payments. The employee, who received
‘compensation under clause (4) of sub-section 1 of Section 4for the period during which he could not attend
to his duties due to temporary disablement as a result of the injury, is not debarred from claiming
‘compensation for permanent partial disablement under Clauses (c) or (b) of Section 4(1) and the
‘compensation payable under the above two heads are entirely different and distinct.
Compensation payable under the Act
Section 4 of the Act prescribes the amount of compensation payable under the provisions of the Act.
Amount of compensation payable to a workman depends on:
1) The nature of the injury caused by accident.
2) _‘Themonthly wages ofthe workman concerned, and
3) The relevant factor for working out lump-sum equivalent of compensation amount as specified in
Schedule IV
‘There isno distinction between an adult and a minor worker with respect to the amount of compensation for:
1) Death;
2) Permanent total disablement;
3) Permanent partial disablement; and
4) Temporary disablement ~ total or partial
1) Compensation for Death Sec 4(1)(a): Where death results from an injury, the amount of compensation
shall be equal to 50 percent of the monthly wages ofthe deceased workman multiplied by the relevant
factor, or Rs. 1,20,000 whichever is more.
2) Compensation for Permanent Total Disablement Sec 4(1)(b): Where permanent total disablement results
from an injury, the amount of compensation payable shall be equal to 60 percent of the monthly wages of
the injured workman multiplied by the relevant factor, or Rs. 1.40,000, whichever is more.
7 ‘of compensation payable in case of permanent total disablement. ii) In the case of an injury not specified in
Schedule I such percentage of the compensation payable in the case of permanent total disablement asis
proportionate to the oss of earning capacity (as assessed by the qualified medical practitioner) permanently
caused by the injury.
4) Compensation for Temporary Disablement Sec 4(1)(d): A half monthly payment of the sum whether
total or partial results equivalent to 25% of monthly wages of the from the injury workman to be paid in
the manner prescribed.
5) Compensation to be paid when due and Penalty for Default: Section 4A provides for the payment of
‘compensation and the penalty for default. It provides that compensation shall be paid as soon asit falls due.
Section 4 mandates employer to pay compensation amount as soon as it falls due to victim or his or her
legal heirs. However, where the employer does not accept the liability for compensation to the extent