Important Sections of Employees Compensation Act

This Article is authored by Rhea Banerjee, Pursuing B.A.LL.B from Indore Institute of Law

Introduction –

Industrial sector has witnessed a number of complications since the beginning of Industrialization in India especially after the increase in the use of machinery and equipments as there was no social security assured by the employers to the workmen or employees. As working with certain machines can actually be dangerous it was necessary to provide protection to the workers looking into the poverty-stricken conditions. It was thus, suggested that these workmen needed to protected against the hardships arising from the accidents in the course of their employment.

Earlier around 1884 it was noted that the workers and laborers were exposed to the hazards that were included while using advanced and sophisticated machines. The common law then recognized that the employer was responsible for the compensation only if it was found that the industrial accident was the outcome of the negligence of the employer and not otherwise. But the issue of compensating workers became serious when certain fatal and major accidents occurred in 1884. It was then that the factory and mining officials realized that the legislation Fatal Accidents Act, 1885 was not sufficient to deal with these issues.

The relevant question was examined by the Government of India and then the local governments were addressed in July 1921. The interim views of the government of India were published for general information and many of the local governments, association of employers and workers had agreed for legislation with regard to this aspect. In June 1922, a Committee was organized by the Government of India and the entire committee was unanimously in favour of this legislation and also gave in numerous recommendations for the same. Thus, on the basis of these recommendations the Workmen’s Compensation Bill was introduced in the Parliament.

The Workmen’s Compensation Act was enacted in 1923 that was issued by the Central government and was implemented by several state governments in order to render social security to workers or else the workers would have to seek legal aid from the courts in order to avail their compensation whenever any such injury or accident occurred in their employment. The Workmen’s Compensation Act was recently renamed as the Employee’s Compensation Act, 1923 with effect from 18/1/2010 as the Act included even employees in the category eligible for compensation. The Employees Compensation Act was further made applicable to the trainees and apprentices also under the Apprentice Act with minor modifications in the Schedule of the Apprentice act.

Aspect of the Act –

The Act was framed on two main aspects, firstly the theory should be of least cost and the production cost should be inclusive of the cost of blood of the workmen. The main idea behind this act was that when the management has put aside finances for the repair and maintenance of the machinery and equipments then the same care and attention should be given to the workers as well, because they do undertake the risk of working with the hazardous machines in the course of their work. Compensation is a kind of social security that ensures that in case a worker is disabled or injured due to the accident occurred in his employment, then he will be paid the compensatory amount to recover from his injuries. It is relief that is ensured and measured as per the provisions of the Act.

The act has segregated the amount of the compensation as per the gravity of the injury caused and this makes the employer aware as well as responsible towards his labour that he will be liable to pay the compensation if any accident occurs. The Workmen’s Act is recognized all over India and applies to all workers, casual labours working in factories, mines, plantations, railways, ships, construction places and any other potentially dangerous occupations mentioned under Schedule II of the Act, but the Act excludes the Armed Forces.

Object and Reason –

The major objective of the Act was to provide compensation to the workers in case of any industrial accident. The Act was also enacted to make the employers responsible towards the workers especially under such unexpected fatal incidents. It is the primary duty of the employer to ensure the welfare of workers post any such injuries caused during the course of employment.

A major change has been noticed since the enactment of the Act that by increasing the responsibilities of employer towards their workers and employees, it has led to reduction in the number of accidents among the workmen. Further, the employers providing medical facilities to their workmen should also lessen the effects of such accidents. With assured compensation and medical facilities more people are drawn towards the labour world and even the efficiency of the workers has considerably increased post the enactment of the Act. Thus, the Act aims for sustainable working conditions for the workmen after any such employment related accident.

Let’s go through certain important sections of the Workmen’s Compensation Act, 1923.

Important Sections of the Act –

The part, which states the main objective of the Act, can be read under Section 3(1) of the Employee’s Compensation Act, which states that, an employer is liable to pay compensation if any sort of personal injury is caused to the employee, by accident arising out of and in the course of his employment. The other significant sections of the Act are as follows-

• Section 3 (Employer’s Liability for compensation)

This section mentions the responsibility and liability of the employer in case the employee is infected to any occupational diseases or personal injuries in course of employment or in the prescribed manner as mentioned in the act where the compensation has to be paid to the workmen. All the occupational diseases are stated in the Part A of Schedule III, Part B of Schedule III and Part C of the Schedule III. The employer is also liable to pay compensation for any personal injury or accident that is arising out of employment and in course of employment.

Under certain conditions the employer is not liable when the disablement caused is not for more than 3 days or the accident took place as the employee was under the influence was drinks, drugs or disobeyed any orders or disregarded the necessary safe guards which were already prescribed for that working condition.

• Occupational diseases

When the workers or employees are employed in certain hazardous occupations, it might be possible that they are exposed to certain diseases which are innate in those particular occupations. Some of the common occupation diseases are-

• Infections due to contamination
• Infra-red radiations from the machinery
• Skin disease (in chemical and leather processing units)
• Hearing impairment due to loud noise made by machines
• Lung cancer is also possible due to asbestos dust
• Other diseases due to working in extreme hot or cold climate within the industrial plants

• Section 12 (Contracting)

This section covers employer’s liability when a contractor is involved for doing any part of employer’s work or business on behalf of the employer. This is an important section with regard to extension of the employer’s liability. The contractor appointed by the employer has to execute the work with the support of the workers that are assigned for the particular work. But in case where a contractor is appointed, the employer will be liable to pay compensation only when-

1. The contractor is engaged in a work which is part of trade and business of the employer
   1. The workmen were involved in the course and purpose of his trade or business
   1. The accident took place in or about the premises on which the employer had undertaken or undertakes to complete his work.

However, this provision also gives liberty to the workmen to recover their damages from the contractor instead of employer and the amount of compensation is calculated with reference to the wages of workers under the employer by whom he is immediately employed. 

• Doctrine of Notional Extension

This is one of the most common doctrine with reference to the expression “in the course of employment” indicates not only actual work but also any other engagements which are natural and essential extended to the workhours as well as work place.

However, the theory of notional extension is subject to the premises of employer that what all areas are to be included which the workmen passes and re passes while going and leaving for the actual place of work. There is a reasonable extension given in both time and place and the workman can be still considered in the course of his employment even if he/she didn’t reach or left the employer’s premises. This doctrine was based a on a common sense rule and could not be made same for all the employers, it was matter with regard to when and where and to what extent this doctrine can be applied in a particular employment

• Section 4 (Amount of compensation)

This section is all about compensation payable to the workmen depending upon the nature of the injury caused to him by the accident, the monthly wages of the workman concerned and specifying the relevant factor for working out lump sum equivalent of compensation amount as mentioned in the Schedule IV. One thing should be noted, there is no distinction made between an adult and minor worker when it comes to payment of compensation.

There are different conditions under which the compensation is awarded.

1. Where death of workman results from the injury- an amount equal to his 50% of the monthly wages of the deceased workman multiplied by the relevant factor or an amount of Rs 1,20,000/- whichever is more.
2. When there is permanent disablement from the injury- an amount equal to 60% of the monthly wages of injured worker multiplied by the relevant factor or an amount of Rs 1,40,000/- whichever is more. 
3. When there is permanent partial disablement-
   1. in case of injury mentioned in the part II of the Schedule I, the amount of compensation shall be such percentage of compensation which would have been payable is equivalent to the percentage of loss of earning capacity that has been caused due to the injury
      1. in case the injury is not specified in Schedule I, then such percentage of compensation is payable which is proportionate to the loss of earning capacity (as examined by the medical practitioner) that is permanently damaged due to the injury
4. When there is temporary Disablement (total or partial)- the amount of compensation shall be half monthly payment of the sum equivalent to 25% of the monthly wages of the worker to be paid in accordance to the provisions. The half monthly payment would be made on the 16^th day from the date of disablement and in certain cases where the temporary disablement lasts for 28 days or more, compensation has to be paid on the date of disablement and in other relevant cases, after the expiry of waiting period of 3 days from date of disablement.

Recently there were a few amendments made in the Section 4 of the Workmen’s Compensation Act by changing the ceiling limit of compensation for all different cases and raising them as per the current medical needs.

1. The minimum ceiling limit of compensation for death caused due to injury was Rs 80,000 but now it was raised to Rs 1,20,000/-
2. The minimum ceiling limit of compensation for permanent total disablement was also revised from Rs 90,000/- to Rs 1,40,000/-.
3. Sec 4(2A) was also added after sub section (2) which entitles the employee to get a reimbursement of his actual medical expenditure that has been incurred by him for all the injuries that were caused in the course of employment.

• Section 4A (Compensation to be paid when due and penalty for default)

In certain cases where the employer has defaulted in payment of compensation due under this Act within a period of month from the date it fell due, the Commissioner shall

1. Direct the employer to pay an additional amount of arrears and pay simple interest there at rate of 12% per annum or even on higher rates
2. If the default is unjustifiable by the employer then the Commissioner also has the power to order payment of a further sum of compensation but it should not be exceeding 50% of the amount by way of its penalty
3. The commissioner also has the power to enforce penalties and the interest on the compensation amount claimed as per the provision of the Act. 

• Section 5 (Calculation of Wages)

This section gives a view of how the compensation is calculated in form of wages. The monthly wages of the worker shall be one-twelfth of the total wages which fall due to him by the employer as in the last 12 months of that period.

Where the whole continuous period of service receding the accident occurred during which the workman was perfectly in service of the employer, he is liable to pay the compensation was less than one month, the monthly wages of the workman shall be average monthly amount during the previous 12 months before the accident was being earned by the worker employed on the same work by the same employer or if there was no workman so employed, by a workman employed on similar work in the same locality.

In cases where it is not possible for want of information to calculate the monthly wages under clause (b), the monthly wages shall be 30 times to the total wages earned with respect to the last continuous period of service immediately prior to the accident from the employer, who is liable to pay compensation divided by the number of days comprising such period.

• Section 8 (Distribution of compensation)

This section speaks about all those workmen, who can avail the facility of compensation in case of any unfortunate accident occurs in the course of their employment. The compensation payable for death of worker or to a woman or person of disability shall be made through the Commissioner only. This would ensure that the compensation money is in safe hands and it can be relied that the employer will diligently pay the damages as he has to pay it to the commissioner itself.

The employer can also make advance payment directly to the dependents of the deceased person equivalent to the 3 months salary of the worker. The employer is exonerated and discharged from his liabilities if he deposits the compensation amount with the Commissioner within the specified time period.

The commissioner shall call all dependents of the deceased workman and fix the method for distribution of compensation among them and whichever is suitable for them. In case, there are no dependants of the deceased worker then the amount would be returned to the employer. On request of the employer, the Commissioner can give in the details of the distribution of the payment to be done.

• Section 10 (Notice and Claim)

The worker can claim his compensation via this section. In order to claim his compensation,

• The claimant shall provide a notice of the accident to the employer or by making any entry in the notice book within the reasonable time duration.
• Every notice shall contain the information regarding the name and address of the injured workman, the cause of the injury and the date on which the accident took place
• Then submit the application to the commissioner within 2 years from the date of accident
• And in case of occupational diseases the accident is believed to have occurred on the first day of disease.
• In certain conditions if any notice or not giving notice or delayed application by the employee/workman will not bar him from claiming the compensation.
• Section 20 (Commissioner)

Under this section, the State government may by a notification in the official gazette may appoint any person to be a Commissioner for Workmen’s Compensation any such specified area as is mentioned in the notification. The Commissioner may for deciding his matter referred to him under the Act can choose one or more persons having special knowledge of any matter relevant to the matter which is being inquired about to assist him for that particular inquiry. Every Commissioner shall be deemed to be a public servant within the meaning of the Indian Penal Code, 1860.

• Section 30 (Appeal)

1) The appeal for these matters shall lie in the High Court from the following orders of a Commissioner-

1. An order which is awarding as compensation a lump sum whether by way of redemption of a half-monthly payment or otherwise or disallowing a claim in full or in part for a lump sum
   1. An order awarding interest or penalty under section 4A
2. An order refusing to allow redemption of a half-monthly payment
3. An order providing for the distribution of compensation among the dependents of a deceased workman or disallowing any claim of a person alleging himself to be such dependent
4. An order allowing or disallowing any claim for the amount of an indemnity under the provision of sub-section (2) of Section 12

• the period of limitation for an appeal to file an appeal is 60 days
• the provision of Section 5 of the Limitation’s Act 1963 shall be applicable to appeals under this section

Landmark Judgments

Some of the landmark judgments with regard to the Workmen’s Compensation Act are-

• In the case State of Kerala v. Khadeeja Beevi 1988, it was held that even a government servant who was employed as “Mahout” in the forest department was to be treated as an employee under this act even if he was covered by additional facilities like family pension, GPF and family benefits schemes granted by the government.

• In case of New India Insurance co. Ltd v. Mohan Kumar Sahu 2004, spoke about the definition of “employee” where it was held by the Court that person engaged to drive the vehicle of employer for even one day is also an employee as per this Act. The owner has definite control over the person and the person was driving the vehicle on the direction of the owner of the vehicle, thus his one day of engagement into something else will not discard him from the definition of “employee” stated u/s 2(n) of the Act.

• In case of GSRTC v. Ashok Kumar Parekh, 1999, it talked about the Section 16 of the Apprentices Act 1961 where an apprentice or trainee has the right to claim compensation under the Workmen’s Compensation Act from the employer if any personal injury has been caused to him/her arising out of any accident within the course of his training.

• In case of Devidayal Ralyaram v. Secretary of State of AIR 1937, this case relied on the doctrine of Added Peril where it was specified that if a workman while performing his duties does something out of his designated work which was not required to be done by the workman, and get injured in the process as it involves extra danger then the employer won’t be liable to pay damages to that workman if any injury is caused while doing that work.
  
  Thus, we would have got a basic idea regarding the whole act and the purpose of implementing it in order to provide security to the workmen from losses or any sort of injury that is caused due to an accident arising in and out of the course of employment. The Act was also executed to make the employers value their human employees and take responsibility, if any such unexpected accident occurs.

Refer – Employees Compensation Act, 1963

Also Read – Important Sections of IPC