Every employee dreams of a secured job. Therefore,
there is a necessity for the company or industry to ensure their employees with
sufficient protection. The act of 1923 was the first legislative measure for
social security undertaken in India. The act employees compensation act, 1923
protects the employees whose monthly income is Rs. 500.
Employees compensation act aims to protect employees from:
- Loss of income
- Provide injured staff with sufficient medical treatment
- To reduce work-related mishaps
- To reduce lawsuits pending in court
The employees who are not eligible to claim employees' state insurance act, 1948
are entitled to be compensated under the employees compensation act, 1923.
In a recent case named S. Palanivel v. Deputy Commissioner of Labour
31 July 2020, the Madras high court held that employees with wages exceeding the
ceiling limit as per employees' state insurance act, 1948 are not eligible to
the Employees state insurance act, 194, such employees are entitled to claim
compensation under Employees compensation act, 1923.
In a case where an injured employee and has filed a civil suit, he is not
entitled to confer any rights to compensation. The Employees compensation act
consists of 36 sections and four schedules.
History Of Employees Compensation Act, 1923:
In the late nineteenth century, a Prussian chancellor
named Otto von Bismarck enacted the sickness and accident laws.
The Employer's liability act, 1871, gave protection to workers in certain
factories, quarries, railroads, and mines.
Worker's accident insurance, 1884, created a modern workers compensation system.
Public insurance is provided for a non-work related illness.
The act was originally amended as Workmen's compensation act, 1923. Workmen's
compensation (amendment) act, 2009 was enacted on 18th of January, 2010. The
amendment of 2009 brought the replacement of word Workmen's to Employees, in
order to protect dignity.
Originally, the act passed was of limited scope so necessary amendments were
made. The major amendment was made when the report was submitted by the Royal
Commission of Labour in the year 1931 in chapter sixteen of the Royal commission
problems in compensation were stated. Mahatma Gandhi and others stated that the
cause of the poverty in India was due to social and industrial problems. Due to
the recommendations made by the Royal Commission of Labour, the act was amended
in the year 1933, leading to the modification of the amount of compensation,
scope of act and dependants entitled to claim compensation on employees death.
The meaning of compensation in the Black law
dictionary is the reparation of loss caused to another. In general terms, it
is a reward given to a person by making up for his loss or injury suffered by an
employee by providing him an appropriate benefit. Compensation is the money that
is paid to a person with an intention to replace or exchange something that has
been lost or damaged or for a problem.
Law elucidates compensation in the employees compensation act, 1923. The short
title of the act states as the provision of the payment by certain classes of
the employers to their employees for a compensation of injury by accident.
To Whom Is Compensation Provided?
Every employee, including the
contract, i.e., the employee employed through a contractor, who is engaged in
the works of the employer's company or the business suffers an injury or an
accident in the course of employment or arising out of employment, shall be
entitled to receive compensation.
An employee is defined under section 2 sub-clause n of the Employees
compensation act, 1923 as:
Any person (other than a person who is employed casually and has been employed
for the purpose of the employers business):
- A railway employee defined in section 2 clause 34 of the Railways Act,
1989, and not employed in capacity as specified under Schedule 2 of the act:
- A master, a seaman, the other members of the crew of a ship
- A captain or other members of the crew of an aircraft,
- A person recruited as driver, helper, Cleaner, any other position
connected with a vehicle,
- A person recruited to work abroad by a company and who is employed
outside India or in any capacity as specified under schedule 2 of the act,
- According to the capacity as under schedule 2 of the act and whether the
contract was made before the enactment of the act and the contract was
expressed or implied, also it does not include any employee working in the
capacity of armed forces.
The provisions have been extended to the cooks employed in hotels,
restaurants which used liquefied petroleum gas in the process of cooking.
On behalf of the deceased who are entitled to receive compensation?
As provided in the act, the compensation in case of injury or death of an
employee is to be given either to the employee or their dependents.
Following is the list of dependents entitled to receive compensation:
- A widow
- A minor who is the legitimate son or an unmarried daughter, widowed
- In a case where the family is wholly dependent on the deceased, then
compensation is given to the child who has attained 18 years of age,
- A parent other than widowed mother,
- A widower,
- A widowed daughter in law,
- A minor child of a pre-deceased son,
- A paternal grandparent, in case if no parent of the employee is alive,
- A minor child of a pre-deceased daughter is entitled, who does not have
any of the parents.
Liability To Pay Compensation:
In the Employees compensation act, 1923, section 3 deals with the liability
on the part of the employer. In the case of a contract employee, the owner is
liable to pay compensation. The employee is protected from both the sides as he
can also recover the compensation from principal employer.
The act of 1923 states that an employee is entitled to be compensated by an
employer when there is a personal injury to the employee or an accident arising
out of and in the course of employment.
That may result in to:
- Permanent total disablement
- Permanent partial disablement within
Disablement is the loss of capacity to work.
In the above sentence, in the course of employment means that when an employee:
- Is within the period of employment i.e., at the working hours
- Is at a place where he has been sent by the employer as a part of
- Is fulfilling his duties
In course of employment suggests the points out of place and the circumstances
under which the accident occurred.
Out of a course of employment means an injury caused by employment-related risk.
It suggests the cause of accident.
For example: if a person works in an asbestos industry, he is more likely to
suffer from asbestosis, not only occupational disease but also any other harm
which establishes a causal connection between the employment and the injury or
accident so caused.
Occupational diseases: section 3 sub-clause 2
- In State of Rajasthan v. Ram Prasad and Another (2001) 1 LLJ 177 (SC)
The employee died due to natural lightning while
working at the site, the Supreme Court held that there must be a causal
connection with the employment, in this case the injury may be due to natural
lightning but the employee was working out of course of employment. So, the
employer was held liable to pay the compensation.
- In Divisional Manager, United India Insurance Co. Ltd. v. Shanmuga Mudliar
T. and others (2003) 1 LLJ. 776 (Mad.)
A person employed as a bus driver died due to heart failure where he
stopped out to have refreshment. His wife claimed for compensation and was
awarded by the commissioner and not by the insurance company. The court held
that both insurance company along the employer are liable to pay compensation.
Employees who work in specific
industries and are exposed to harmful conditions may suffer occupational
Occupational diseases may include asbestosis, silicosis, Black lung disease,
skin infections, hearing impairment.
the act provides compensation to only those accidents,
which includes occupational diseases. A railway servant is entitled to be
compensated under schedule 2 of the act. Similarly, an employee employed in a
factory, mines, who deals with hazardous work is entitled to compensation under
schedule 2 of the act.
injury may be discrimination on the basis of:
- Maternity leave
In the case of Metropolitan Transport corporation Vs. K. Ravichandran
The appellant was the employer of the respondent. The employee was removed from
his duty to drive heavy vehicles due to disablement because of a spinal problem.
At the time of proceedings, the learned counsel submitted that the injury did
not incur in the course of the employment and argued that the injury suffered by
the respondent does not come under the definition of section 3 of the employee's
compensation act, 1923. Rather it is well defined by section 47 of the Persons
with Disabilities (Equal Opportunities, Protection of Rights and Full
Participation) Act, 1995.
The case was dismissed.
In the case of Richmond adult college Vs. Mc Dougall
The respondent i.e., Mc Dougall, was selected as a database assistant by the
employer of adult college. Later, the employer learned the medical history of
the employee that he had suffered from mental injuries and also psychological
disorders and withdrew the offer. The respondent then filed a suit against the
college on the ground of disability discrimination.
The court held that the
disability discrimination was not faced by her as this does not come within the
meaning of section 1 of the disability discrimination act, 1995.
Doctrine of added peril:
- The employer is bound to pay the compensation as soon as it falls due.
If he does not accept the liability for compensation to the extent claimed,
he is bound, under pain of penalty, to make provisional payment to the
extent of the liability which he accepts, without prejudice to the right of
the workman to make any further claim against him. All claims relating to
compensation payable under the Act are to be decided by a commissioner
appointed under the Act of 1923.
- The employer is bound to pay the compensation as soon as the accident is
certified. as held by the court in case of Superintending Engineer KEB Hubli v.
Kadapa MaYappa (1984) 1 LLJ 179 (Kara.).
- The employer is liable to pay an interest as soon as the injury is
caused to the workman as held by the court in case of Madan Mohan Verma v. Mohan Lai
(1983) Π LLJ 322 (All)
- If the commissioner finds an employer with unjustified delay can impose
a penality of 50 % not exceeding the amount of compensation.
When an employee performs a work which is not
required to be done by him and is found to be hazardous then the employer is not
liable to pay compensation. The particular doctrine was held by the court in the
case of Lancashire and Yorkshire Railway Co. v. Highley
(1917) AC 352.
Amount Of Compensation:
According to section 4 of the employee's
compensation act, 1923, the amount of compensation awarded to an employee in
National insurance company Vs. Dheeraj Singh And Another
- In a case where employee dies:
The compensation amount is 50 percent of the
monthly wage of the deceased employee. The maximum ceiling limit of the monthly
wage is eight thousand i.e., 8000 multiplied by a relevant factor or a sum of
rupees 1,40,000 whichever is higher.
- In case of permanent total disablement caused to an employee in work
The compensation in permanent total
disablement caused by an injury is 60 percent of the monthly wages multiplied by
the relevant factor of the employee or a sum of 1,20,000 whichever is higher.
- In case of permanent partial disablement:
The compensation awarded in this case is
based on pro-rata. Some cases are also on the basis of assessment qualified
by the medical practitioner.
- In case of temporary disablement:
The compensation awarded in both the cases
where it is partial or permanent temporary is half monthly payment i.e., 25
percent of the monthly wages on the 16 th day of the disablement.
on 7 August,
2020, the High court of Jammu and Kashmir held that an employee can claim
compensation under section 4(1) (b) of the employee compensation act, 1923 even
if the cause of the disablement incurred is not in scheduled injury, but the
injury resulted comes into the definition of total disablement.
How Are The Wages Calculated?
The calculation of wages is based upon a monthly wage
system. Monthly wages are the wages payable on the amount of work done by the
employee as mentioned under section 5 of the employees compensation act, 1923.
According to section 11 of the employees compensation act, 1923 a medical
examination is mandatory in a case of accident in work place. When the employee
provides a notice of accident, he shall offer himself for medical examination
within 3 days from the date of notice.
The right to claim compensation will be suspended legally when:
- If the employee refuses to submit himself for medical examination
- If the employee obstructs to examine
- If an employee voluntarily leaves the place of medical examination
If the employee whose, right to claim compensation has been suspended dies, then
the commissioner of the employees compensation if he thinks fit can direct the
payment of the compensation to the dependants of the deceased employee.
In New India Assurance Co. Ltd. vs Sreedharan
on 12 January, 1995
The court issued new guidelines to the commissioner in
case of the assessment by the medical practitioner. The court held that the
employee injured is reported to be in a condition where he cannot work assessed
by a qualified medical practitioner cannot be rejected by the commissioner. It
means that the loss of earning capacity certified by a qualified medical
practitioner cannot be rejected by the commissioner.
According to the section 18 A of the act, a person is punishable with fine
which may extend to Rupees 5000, whoever:
- Fails to maintain a notebook as required to Maintain
- Fails to inform commissioner
- Fails to send a report to commissioner
- Fails to make a return when asked to do so.
It is also mentioned that no court can take cognizance in any offence mentioned
under section 18 A of the act. An exception to this statement is that if the
complaint is made within 6 months of the commission of offence.
The act provides social security to the employees and also the dependants of
the employee. It also aims that the injured employee to have a sustainable
life. The act provides advantage to employer as well as an employee working in
hazardous conditions. It statutorily recognizes injured employees. The act
states duties and obligations of a commissioner also the liabilities on part of
employer and employee.
Various tests and doctrines used to interpret a case in court are necessary to
The act leads to reduction of cases filed in court and also the number of
- Labour and industrial law by Avatar Singh
- Labour laws e book
- Employees compensation act, 1923
- Railways Act, 1989
- Equal Opportunities, Protection of Rights and Full Participation) Act,
- The action of making amends for a wrong one has done, by providing
payment or other assistance to those who have been wronged
- Supreme court case
- Employees Compensation Act, 1923