Labour Law II: Complete Notes

Meaning of Social Security

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A worker may grow old, fall sick, get injured at work, lose the job or die, and a woman worker may have a baby; in each case the family income stops. Social security is the help society gives at such times so that the family does not fall into poverty – a safety net under the worker.

Statutory definition: Section 2(78), Code on Social Security, 2020

• Two aims: income security and access to health care.
• Risks covered: old age, unemployment, sickness, invalidity, work injury, maternity, loss of a breadwinner.

Two methods of providing social security

Social insurance	Social assistance
Workers and employers pay contributions.	The Government pays from taxes.
Examples: provident fund, ESI.	Example: old-age pensions for the poor.

Labour Welfare and How It Differs from Social Security

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Labour welfare means the facilities given to workers to make their work and life better, such as drinking water, a canteen, a rest room, a crèche (a day-care centre for small children), medical help, housing and education.

Kinds of labour welfare

1. Statutory welfare: given because the law requires it. For example, Chapter VI of the OSH Code, and the crèche under Section 67 of the Code on Social Security.
2. Voluntary welfare: given by the employer by choice, for example scholarships.
3. Mutual welfare: arranged by the workers themselves through their unions.

Social security and labour welfare distinguished

Basis	Social security	Labour welfare
Purpose	Gives money and health cover in a crisis.	Improves the daily conditions of work.
Nature	A legal right.	Facilities that make work and life better (canteen, crèche, rest room and the like).
In simple words	A cushion for the crisis.	Daily comfort.

Historical Evolution of Social Security and Labour Welfare

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Traditional India and industrialisation

In old India, the family and the village looked after people. When factories came, workers faced accidents and low pay, and nobody helped them.

Before independence

• Workmen's Compensation Act, 1923: made employers pay for work injuries. It is the first social security law in India.
• Provincial maternity laws: some provinces passed early maternity laws, for example Bombay in 1929.
• Royal Commission on Labour (1929–1931): recommended welfare and insurance measures.

After independence

• Constitution of India, 1950: placed welfare in the Directive Principles of State Policy.
• Employees' State Insurance Act, 1948.
• Provident Fund Act, 1952.
• Maternity Benefit Act, 1961.
• Payment of Gratuity Act, 1972.
• Building Workers' Acts of 1996.
• Unorganised Workers' Social Security Act, 2008.

National Commissions on Labour

• First National Commission on Labour, 1969.
• Second National Commission on Labour, 2002: recommended simpler, grouped laws and cover for unorganised workers.

The Labour Codes

Finally, Parliament passed four Codes in 2019 and 2020, made effective from 21 November 2025.

Need for Codification of Labour Laws

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Codification means putting many scattered laws into a few organised books. It was needed for the following reasons:

1. Too many laws: there were 29 central laws and many State laws.
2. Different definitions of the same word: "wages" and "employee" meant different things in different Acts, causing anomalies (odd results) and litigation (court cases). The syllabus calls this divergent wage definitions.
3. Low coverage: the Minimum Wages Act covered only scheduled employments (jobs listed in its schedule), and the Payment of Wages Act had a wage ceiling, so most unorganised workers stayed outside.
4. Heavy compliance burden: many registrations, licences and returns.
5. No law for gig and platform work.
6. Recommendation of the Second National Commission on Labour to group the laws.

The aim of codification is therefore ease of doing business and wider protection together.

Fundamental Rights Relevant to Labour: Articles 14, 19, 21, 23 and 24

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Part III of the Constitution contains five Fundamental Rights that matter for workers.

Article 14: Equality before the law

It means equal treatment and equal wages for equal work. Section 3 of the Code on Wages (equal pay) rests on it.

Article 19: Freedoms

• Article 19(1)(c): the right to form unions.
• Article 19(1)(g): the right to carry on business, which is the employer's freedom. It is subject to reasonable restrictions under Article 19(6), and minimum wage and bonus laws are such reasonable restrictions.

Article 21: Right to life

The right to life means life with dignity. It includes health, livelihood and humane working conditions, and it is the base of social security and safety laws.

Article 23: Prohibition of traffic in human beings and forced labour

Article 23 prohibits traffic in human beings, begar (forced work without pay) and other forced labour. In People's Union for Democratic Rights v. Union of India, the Supreme Court held that paying less than the minimum wage is forced labour, because the poor worker accepts it out of need. (The case is studied in detail under minimum wages below.)

Article 24: Prohibition of child employment

Article 24 forbids employing a child below fourteen in a factory, mine or other hazardous work. The same PUDR case held that construction work is hazardous.

Directive Principles Relevant to Labour: Articles 38, 39, 41, 42, 43, 43A and 47

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The Directive Principles in Part IV are the State's promises to workers. Under Article 37, courts cannot force the State to obey them, but they guide every labour law and are read together with the Fundamental Rights.

Article	Content
Article 38	A social order of justice and reduction of inequality.
Article 39(a)	Adequate means of livelihood.
Article 39(d)	Equal pay for equal work for men and women.
Article 39(e)	Protection of the health and strength of workers and the tender age of children.
Article 41	Right to work, to education and to public assistance in unemployment, old age, sickness and disablement, within the State's economic capacity.
Article 42	Just and humane conditions of work and maternity relief.
Article 43	A living wage for workers.
Article 43A	Workers' participation in management (added in 1976).
Article 47	Duty of the State to raise the level of nutrition, the standard of living and public health.

Linking the Directive Principles with the laws

• Article 39(d) → equal wages.
• Article 41 → pensions.
• Article 42 → maternity benefit.
• Article 43 → minimum and floor wages.

Legislative Competence and Constitutional Validity of the Labour Codes

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Source of power: the Concurrent List (List III)

• Entry 22: trade unions; industrial and labour disputes.
• Entry 23: social security and social insurance; employment and unemployment.
• Entry 24: welfare of labour, including conditions of work, provident funds, employers' liability, workmen's compensation, invalidity and old-age pensions, and maternity benefits.

Both Parliament and the State Legislatures can legislate on these subjects under Article 246. In the Union List, Entry 55 covers labour and safety in mines and oilfields.

Repugnancy: Article 254

• Article 254(1): if a State law clashes with a Central law on a concurrent subject, the Central law prevails.
• Article 254(2): the Central law does not prevail if the State law has received the President's assent.

"Appropriate Government"

The Codes use the expression appropriate Government: the Central Government for railways, mines, oilfields, major ports and similar sectors, and the State Government for the rest.

The Codes are therefore valid, and courts begin with a presumption of constitutionality (an assumption that a law is valid until proved otherwise).

The ILO Framework: C.102, C.121, C.183, C.202, C.67 and C.130

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The International Labour Organization (ILO) is the United Nations body for labour. India has been a founding member since 1919. The ILO makes Conventions, which are treaties that a country may ratify (formally accept), and Recommendations, which are only guidance.

Conventions

• Convention 102 – Social Security (Minimum Standards) Convention, 1952: the base standard. It covers nine branches: medical care, sickness, unemployment, old age, employment injury, family, maternity, invalidity and survivors' benefits. A country must accept at least three branches.
• Convention 121 (1964): employment injury benefits.
• Convention 130 (1969): medical care and sickness benefits.
• Convention 183 – Maternity Protection Convention, 2000: requires at least fourteen weeks of maternity leave, a cash benefit of at least two-thirds of earlier earnings, protection from dismissal, and nursing breaks.

Recommendations (listed in the syllabus as "C.67" and "C.202")

• Recommendation 67 – Income Security Recommendation, 1944.
• Recommendation 202 – Social Protection Floors Recommendation, 2012: every person should get a national floor of basic health care and basic income security.

India's position

India has not ratified Conventions 102, 121, 130 and 183, but Indian laws follow many of their ideas. Article 51(c) asks the State to respect international law.

The Four Labour Codes: Overview, Objectives, Scheme and Structure

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Parliament consolidated 29 central laws into four Codes, all made effective on 21 November 2025:

1. the Code on Wages, 2019;
2. the Industrial Relations Code, 2020;
3. the Code on Social Security, 2020;
4. the Occupational Safety, Health and Working Conditions Code, 2020 (the OSH Code).

Scheme and structure

Code	Act number	Laws subsumed	Structure
Code on Wages, 2019	Act 29 of 2019	4: Payment of Wages Act, Minimum Wages Act, Bonus Act, Equal Remuneration Act	9 chapters, 69 sections
Industrial Relations Code, 2020	–	3: Trade Unions Act, Standing Orders Act, Industrial Disputes Act	–
Code on Social Security, 2020	Act 36 of 2020	9	14 chapters, 164 sections
OSH Code, 2020	Act 37 of 2020	13	14 chapters, 143 sections

Objectives

• to simplify the law;
• to give minimum wage and timely payment to all;
• to extend social security to unorganised, gig and platform workers;
• to ensure safe workplaces and equal pay;
• to provide one registration, one licence and one electronic return, with an Inspector-cum-Facilitator (an officer who guides as well as inspects).

The legislative power for the Codes comes from Entries 22, 23 and 24 of the Concurrent List.

Scope and Applicability of the Code on Wages, 2019

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The Code on Wages is the law on pay: how much minimum pay an employee must get, when and how wages are paid, what can be deducted, how bonus is paid, and how claims are decided.

Applicability

1. Extent (Section 1): the Code extends to the whole of India and comes into force on the date the Central Government notifies.
2. Minimum wages for all: the most important change is that the minimum wage law now applies to all employees in all establishments, organised or unorganised. There is no longer any such limit as under the old laws:
   • under the Minimum Wages Act, 1948, only scheduled employments were covered;
   • under the Payment of Wages Act, 1936, only employees earning up to ₹24,000 a month, in factories, railways and similar places, were covered.
3. Chapter III (payment of wages): applies to all employees, but under Section 25 it does not apply to Government establishments unless the Government notifies them.
4. Chapter IV (bonus): applies to establishments where twenty or more persons are, or were, employed on any day of the accounting year.
5. Equal pay (Section 3): applies to all establishments.

Appropriate Government: Section 2(d)

• Central Government: railways, mines, oil fields, major ports, air transport, telecommunication, banking and insurance, central public sector companies and similar bodies.
• State Government: all other establishments.

Machinery under the Code

• Advisory Boards – Section 42;
• Claims authorities – Section 45;
• Inspector-cum-Facilitator – Section 51.

Definitions: Employee and Worker

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Employee: Section 2(k)

Express terms are written or spoken terms; implied terms are terms understood from the conduct of the parties.

Important points:

• It includes a person declared to be an employee by the appropriate Government.
• It excludes apprentices and members of the Armed Forces.
• There is no wage limit, so even a manager or a supervisor is an employee.

The old Minimum Wages Act covered only workers in scheduled employments, and the Payment of Wages Act only employed persons up to a wage ceiling; the Code gives one wide definition.

Worker: Section 2(z)

Inclusions:

• working journalists;
• sales promotion employees;
• for the purposes of an industrial dispute, a person who was dismissed, discharged or retrenched because of that dispute.

Exclusions:

• persons subject to the Air Force Act, the Army Act or the Navy Act;
• police and prison staff;
• a person employed mainly in a managerial or administrative capacity;
• a person in a supervisory capacity drawing wages above ₹15,000 a month, or such amount as the Central Government notifies.

Employee and worker distinguished

Definitions: Employer, Establishment and Factory

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Employer: Section 2(l)

The employer is the person responsible for paying wages; the definition ensures that somebody real is always responsible.

• Establishment run by a Government department: the authority named by the head of the department; if none is named, the head of the department.
• Establishment run by a local authority: its chief executive.

The definition further includes:

1. in a factory, the occupier (the person who has ultimate control of the factory) and the manager named under the law;
2. in any other establishment, the person or authority having ultimate control, and the manager or managing director if the affairs are entrusted to one;
3. a contractor;
4. the legal representative of a deceased employer.

The reason: an employer should not escape the duty to pay wages by using a contractor.

Establishment: Section 2(m)

Establishment means any place where any industry, trade, business, manufacture or occupation is carried on, and it includes a Government establishment. The definition is very wide and has no minimum size. Only for bonus are twenty or more persons required.

Factory: Section 2(n)

The Code on Wages does not have its own definition. It says that factory means a factory as defined in the Factories Act, 1948. The Factories Act has now been merged into the OSH Code, which has its own definition in Section 2(w).

Basis	Factories Act, 1948 (old)	OSH Code, Section 2(w) (new)
With power	10 or more workers	20 or more workers
Without power	20 or more workers	40 or more workers

Definition of Wages: Inclusions, Exclusions and the Fifty Per Cent Rule

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The definition in Section 2(y) is crucial because wages form the base for minimum wage, overtime and bonus, and, under the Code on Social Security, for provident fund and gratuity.

Definition

Inclusions

1. Basic pay;
2. Dearness allowance – extra pay for the rise in prices;
3. Retaining allowance – a payment to keep a worker available for work.

Exclusions (eleven)

1. bonus payable under any law, which does not form part of the terms of pay;
2. the value of house accommodation, light, water, medical attendance or other amenity;
3. the employer's contribution to any pension or provident fund, and the interest on it;
4. conveyance allowance or travel concession;
5. any sum paid to meet special expenses of the job;
6. house rent allowance;
7. remuneration under an award, a settlement or a court order;
8. overtime allowance;
9. commission;
10. gratuity;
11. retrenchment compensation, retirement benefit or an ex gratia (voluntary) payment on termination.

The fifty per cent rule (first proviso)

This safeguard is the heart of the definition. If the payments under the first nine exclusions exceed one-half (50%) of the total remuneration, the excess is added back to wages.

Reason: earlier, some employers showed a very low basic pay and very high allowances, so that wages – and therefore provident fund, gratuity and bonus – remained low. The rule stops this practice.

Second proviso

For equal wages to all genders and for payment of wages, conveyance allowance, house rent allowance, award payments and overtime allowance are counted as wages.

Explanation: the fifteen per cent rule

Remuneration in kind, up to 15% of the total wages, is treated as part of wages.

Floor Wage, National Floor Wage and Minimum Wages

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Floor wage: Section 9

A floor wage is a national bottom level of wage below which no State can fix its minimum wage. Earlier, each State fixed its own minimum wage, so pay differed widely, and the Minimum Wages Act, 1948 had no national floor wage.

• The Central Government shall fix the floor wage, taking into account the minimum living standards of a worker.
• The Centre may fix different floor wages for different geographical areas.
• Before fixing it, the Centre may take the advice of the Central Advisory Board and consult the State Governments.

Relationship between floor wage and State minimum wage

• The minimum wage fixed by the appropriate Government must not be less than the floor wage.
• If a State's minimum wage is already higher than the floor wage, it cannot be reduced.
• If it is lower, it must be raised to the floor wage.

Minimum wages: Sections 5 and 6

Minimum wage is the lowest pay that an employer may legally give.

• Section 5: no employer shall pay any employee wages less than the notified minimum rate. This applies to all employees.
• Section 6: the appropriate Government fixes the minimum rates, subject to the floor wage and the procedure in Section 8.

Manner of fixation under Section 6:

• rates may be fixed for time work or piece work;
• by the hour, day or month;
• they may differ by skill – unskilled, semi-skilled, skilled and highly skilled – and by geographical area;
• the Government may also consider arduous work, for example work in great heat or humidity, hazardous work or underground work;
• the rates must be reviewed at intervals not exceeding five years.

Three levels of wages

The courts speak of three levels of wages:

Level	Meaning
Minimum wage	The bare level for survival and for the worker's efficiency.
Fair wage	Lies between the minimum wage and the living wage.
Living wage	Gives a comfortable life.

The Code fixes only the minimum wage.

Case Laws on Minimum Wage: Crown Aluminium, Reptakos Brett and PUDR

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Components of Minimum Wages and the Manganese Ore Case

Components of minimum wages: Section 7

A minimum wage may be built in any of three ways:

1. Basic rate plus cost of living allowance: the cost of living allowance varies with the cost of living index and is calculated by the authority appointed by the Government.
2. Basic rate, with or without cost of living allowance, plus the cash value of concessions: for example, essential goods supplied at concession rates.
3. All-inclusive rate: covering the basic rate, the cost of living allowance and the cash value of concessions.

The Government may choose the form, but the worker's real minimum must be protected.

Fixing and Revising Minimum Wages, and Advisory Boards

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Procedure for fixing and revising minimum wages: Section 8

The Government must follow a fair process, adopting either of two methods:

1. Committee method: it appoints committees, with an equal number of employers' and employees' representatives, and independent persons not exceeding one-third, to hold enquiries and advise; or
2. Notification method: it publishes its proposals in the Gazette and allows at least two months for objections.

After considering the advice or the objections, the Government notifies the rates, which normally take effect after three months. For a revision, the appropriate Advisory Board must also be consulted. The result must never fall below the floor wage.

The old Minimum Wages Act had a similar committee and notice procedure, but only for scheduled employments.

Advisory Boards: Section 42

Advisory Boards are tripartite (three-sided) bodies that advise the Government on wages and on women's employment.

Central Advisory Board

Constituted by the Central Government. Its composition:

• representatives of employers;
• an equal number of representatives of employees;
• independent persons, not exceeding one-third of the total members;
• five representatives of State Governments.

One-third of the members must be women. The Chairperson is an independent member appointed by the Central Government.

State Advisory Boards

Each State Government constitutes its own State Advisory Board on similar lines.

Functions

• to advise on fixing and revising minimum wages;
• to advise on increasing employment opportunities for women;
• to advise on other matters under the Code.

Piece-Rate Wages and Minimum Time-Rate Wages

Piece-rate means payment for each piece made, for example, one rupee for every hundred incense sticks. The danger is that the worker may earn very little, so the Code on Wages protects him.

• Section 6: the Government may fix minimum wages for time work or piece work. For piece work, the rate is set so that the worker earns at least what a time-rate worker would earn.
• Section 12: where a person is on piece work and a minimum time rate, but no minimum piece rate, has been fixed, the employer must pay at least the minimum time rate.

Overtime and Special Provisions on Hours of Work

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Overtime: Section 14

Overtime means work beyond the normal working hours. Under Section 14, where an employee works more than the hours of a normal working day, the employer must pay for every hour, or part of an hour, at a rate not less than twice the normal rate of wages.

Under the old Minimum Wages Act, the overtime rate was the rate fixed under the law, whichever was higher. The Code states the double rate clearly.

Special Provisions

• Section 13: the appropriate Government may fix the hours of a normal working day, and provide for a day of rest, with pay, and extra pay for work on the rest day.
• Section 10: if an employee is required to work for less than a normal day because the employer did not give him work, he gets a full day's wages, except where he himself refuses to work.
• Section 11: if an employee does two or more classes of work with different minimum rates, the employer must pay at least the minimum rate for each class.
• Section 12: piece workers get at least the minimum time rate.

Payment of Wages: Wage Period, Time and Mode of Payment

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Payment of wages is dealt with in Chapter III of the Code on Wages.

1. Wage Period: Section 16

The employer must fix a wage period of a day, a week, a fortnight or a month. No wage period can be longer than one month.

2. Time of Payment: Section 17

Wage period	Wages must be paid
Daily	At the end of the shift
Weekly	On the last working day of the week, that is, before the weekly holiday
Fortnightly	Before the end of the second day after the fortnight ends
Monthly	Before the expiry of the seventh day of the next month
Employee removed, dismissed, retrenched, or who resigns	Within two working days

The Government may also fix other reasonable times.

3. Mode of Payment: Section 15

Wages may be paid:

• in coin or currency notes; or
• by cheque; or
• by crediting the wages to the employee's bank account; or
• by electronic mode.

The appropriate Government may direct that certain establishments pay only by cheque or bank credit. This is called the digitisation mandate. The reason is that a bank record prevents cheating and helps in claims. Under the old Act, cheque or bank payment at first needed the employee's written authorisation, but after the 2017 amendment wages could be paid by cheque or bank credit without it, and the Government could direct certain establishments to pay only in that way.

Wages During the COVID-19 Lockdown

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The syllabus lists these two cases under fixing of minimum wages, but they are really about payment of wages.

Background: the order of the Ministry of Home Affairs dated 29 March 2020, issued under Section 10(2)(l) of the Disaster Management Act, 2005, told private employers to pay full wages to all workers for the lockdown period.

Authorised Deductions from Wages

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A deduction is money cut from wages.

General Rule: Section 18

• No deduction may be made from the wages of an employee except those authorised by the Code.
• The total deductions in a wage period cannot exceed 50 per cent of the wages. If more is deducted, the excess can be recovered as prescribed.

Permitted Deductions

• Fines;
• deduction for absence from duty;
• deduction for damage to, or loss of, goods entrusted to the employee;
• house accommodation and amenities supplied by the employer;
• recovery of advances and loans, including house-building loans with interest;
• income tax and other statutory levies;
• contributions to social security funds;
• trade union fees, with written authorisation;
• contributions to the Prime Minister's National Relief Fund, with authorisation.

If the employer fails to deposit the amount deducted, the employee is not responsible.

Special Rules

Fines: Section 19

• A fine can be imposed only for acts listed in a notice approved by the Government.
• The employee must get a chance to show cause.
• The fine cannot exceed 3 per cent of the wages for that wage period.
• No fine can be imposed on an employee below 15 years.
• It must be recovered within 90 days.
• Fines must be used only for purposes that benefit the employees.

Absence: Section 20

A deduction for absence must be in proportion to the period of absence. But if 10 or more employees are absent without notice, up to 8 days' wages may be deducted.

Damage or Loss: Section 21

A deduction for damage or loss cannot exceed the loss caused by the employee's neglect or default, and the employee must first get a chance to show cause.

Services, Advances and Loans: Sections 22, 23 and 24

Sections 22, 23 and 24 deal with deductions for services, advances and loans.

Bonus: Applicability, Establishment and Eligibility

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Bonus is dealt with in Chapter IV of the Code on Wages.

Applicability and Exemptions

• Section 41: the Chapter applies to establishments where 20 or more persons are, or were, employed on any day of the accounting year.
• Some are exempted, for example, the Life Insurance Corporation, seamen, dock workers, Government employees, certain educational and charitable institutions, and the Reserve Bank.
• Section 40: public sector establishments are covered only when they sell goods or services in competition with the private sector and the income from it is at least 20 per cent of their gross income.

Eligibility: Section 26

Every employee who draws wages up to the notified ceiling (21,000 rupees a month under the old Act), and who has worked at least 30 days in the accounting year, is eligible.

Establishment: Section 30

Departments, undertakings and branches of one business are parts of the same establishment.

Bonus Formula: Prior Charges, Available Surplus and Allocable Surplus

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Bonus is not a random amount; the law gives a formula. Start with the profit, subtract certain fixed costs, and the balance is shared. The part that goes to the workers is called the allocable surplus.

1. Gross profit (Section 32): the profit of the accounting year, calculated as the Central Government prescribes.
2. Prior charges (Section 34): the sums deducted first, namely:
   • depreciation (the fall in the value of machines), as allowed under the Income-tax Act;
   • the direct tax which the employer must pay for the year, calculated under Section 35;
   • further sums which the Central Government may prescribe.
3. Available surplus (Section 33): gross profit minus prior charges.
4. Allocable surplus (Section 31): 67 per cent of the available surplus, and 60 per cent for a banking company. Bonus is paid out of the allocable surplus.

Calculation for Certain Employees

For an employee whose wages are above the ceiling, the bonus is calculated on the ceiling wage which the Government fixes. Under the old Act, it was 7,000 rupees, or the minimum wage, whichever is higher.

Minimum Bonus, Maximum Bonus and Bonus for New Establishments

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The law protects the worker in two ways: even if the company has no profit, a small minimum bonus must be paid; and if the profit is big, the bonus grows, but stops at a maximum.

Minimum and Maximum: Section 26

• Minimum bonus: 8⅓ per cent of the wages earned, or 100 rupees, whichever is higher. It is payable whether or not there is any allocable surplus.
• Maximum bonus: if the allocable surplus is more than the minimum bonus payable, the employer pays bonus in proportion to the wages earned, up to a maximum of 20 per cent of such wages.

Proportionate Reduction: Section 27

If an employee did not work on all the working days, the minimum bonus is reduced in proportion, where it is higher than 8⅓ per cent of the wages of the days he worked.

Days Counted as Days Worked: Section 28

• Lay-off under an agreement or standing orders;
• leave with wages;
• absence due to temporary disablement caused by an employment accident;
• maternity leave with wages.

New Establishments: Section 26(6)

A new business usually earns no profit in its early years. So, in the first five accounting years after the year in which the employer first sells goods or renders services, bonus is payable only in the year in which the employer derives profit. The rule of minimum bonus even when there is no profit does not apply in those years. After five years, the normal rules apply.

Set-On and Set-Off of Allocable Surplus

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Some years are good and some are poor. The law lets the employer carry a good year's extra surplus forward and use it in a poor year, which evens out the bonus over time. This is done under Section 36 (Section 15 of the old Act).

Point	Set-on	Set-off
When	Allocable surplus in a year is more than the maximum bonus payable	Allocable surplus in a year is less than the minimum bonus payable
What is carried forward	The excess	The deficiency
Period	To the next year, and so on, up to 4 accounting years	In the same way, up to 4 years; adjusted against future surplus
Limit	20 per cent of the total wages of the employees in the establishment	—
In simple words	Saving for later	Spending from the savings

Where both apply, the amount carried forward from the earliest year is taken into account first.

Disqualification, Deduction for Misconduct, Customary Bonus and Time Limit

1. Disqualification: Section 29

An employee is disqualified from bonus if he is dismissed from service for:

• fraud; or
• riotous or violent behaviour while on the premises of the establishment; or
• theft, misappropriation or sabotage (deliberate damage) of any property of the establishment; or
• conviction for sexual harassment.

2. Deduction for Misconduct: Section 38

If an employee is found guilty of misconduct which causes financial loss to the employer, the employer may deduct the amount of that loss from the bonus payable for that accounting year. The misconduct must be proved, and the deduction cannot be more than the loss.

3. Customary or Interim Bonus: Section 37

If the employer has already paid a puja bonus or other customary bonus, or paid part of the bonus before the due date, he may deduct that amount from the bonus payable.

4. Time Limit: Section 39

• All bonus must be paid by crediting the employee's bank account within 8 months from the close of the accounting year.
• The Government may extend this, for sufficient cause, up to two years in all.
• Where a bonus dispute is pending, the bonus is payable within one month of the award or settlement becoming enforceable, but the minimum bonus must still be paid within 8 months.

Under Section 46, bonus disputes are treated as industrial disputes.

Claims, Appeals, Limitation and Offences under the Code on Wages

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If an employer does not pay wages, minimum wage or bonus, the employee can make a claim before an officer. If either side is unhappy, there is an appeal. Both must be filed within a fixed time, which is the limitation (the last date for going to an authority or court).

• Section 43: every employer must pay all amounts due under the Code; if the employer defaults, the proprietor is responsible.
• Section 44: if an employee dies, the unpaid dues are paid to his nominee, or deposited with the prescribed authority, and the employer is discharged.
• Section 45: the appropriate Government appoints authorities to hear claims.
  • An application may be made by the employee, a registered trade union, or the Inspector-cum-Facilitator.
  • It must be made within three years from the date the claim arose, with extension for sufficient cause.
  • The authority has the powers of a civil court.
  • It can order payment of the claim and, in addition, compensation up to ten times the amount claimed.
  • It should decide within three months.
• Section 49: an appeal lies within 90 days to an appellate authority, which should decide within three months.

Law	Period for filing a claim
Minimum Wages Act (old)	Six months
Payment of Wages Act (old)	Twelve months
Code on Wages	Three years

Offences

• Section 52: a court takes cognizance only on a complaint by the Government, an authorised officer, the employee, a registered union or the Inspector-cum-Facilitator.
• Section 54: paying less than what is due can bring a fine up to 50,000 rupees for the first offence. A repeat offence within five years can bring imprisonment up to three months, or a fine up to one lakh rupees, or both.

Gender Pay Gap and Equal Wages

▶ Watch this part of the lecture (1:27:17)

The gender pay gap is the difference between what men, women and persons of other genders get for the same work. The Code says that an employer cannot pay differently for the same work only because of gender.

Section 3: No Gender Discrimination

• Section 3(1): there shall be no discrimination in an establishment among employees on the ground of gender, in matters relating to wages, for the same work or work of a similar nature.
• An employer cannot reduce anyone's wages to comply with this rule.
• The employer must not discriminate on the ground of gender in recruitment for the same or similar work, or in conditions of service, such as promotion, training or transfer, except where the law prohibits or restricts the employment of women in that work.

Section 4: Disputes

If there is a dispute whether the work is the same or similar, it is decided by an authority which the appropriate Government notifies.

Connected Points

• In the definition of wages, the second proviso counts conveyance allowance, house rent allowance, award payments and overtime allowance as wages for equal wages to all genders.
• The Advisory Boards must have one-third women members, and the State Advisory Boards advise on women's employment opportunities.
• The constitutional base is Article 14, Article 39(d) and Article 42.
• Under the old law, the Equal Remuneration Act, 1976 dealt with this; it is now merged into the Code.

Employee's Compensation: Meaning, Scope and Applicability

▶ Watch this part of the lecture (1:28:49)

Module III deals with employee's compensation, which is Chapter VII of the Code on Social Security, Sections 73 to 99. It replaces the Employees' Compensation Act, 1923.

Scope

• Chapter VII is a social security law. It gives quick, no-fault money help for work injury, occupational disease and death.
• It applies to those employers and employees to whom the ESI Chapter (Chapter IV) does not apply. If a worker is covered by ESI, he gets ESI benefits; if not, he gets compensation under Chapter VII.
• The word employee has a special meaning for this Chapter. Only the persons listed in the Second Schedule are covered, for example, workers in railways, factories using power, mines, ships, ports, building and road construction, electric and telephone lines, and pipelines. The Government may add others.

Machinery

• A competent authority decides the claims under Section 90, and civil courts have no jurisdiction.
• An appeal lies to the High Court, on a substantial question of law, under Section 99.

New Features in the Code

• An accident while commuting to or from work is covered, if there is a nexus (a real link) with the employment.
• Funeral expenses of at least 15,000 rupees are payable.
• Medical expenses are reimbursed.
• Accidents outside India are covered.

Definitions: Dependant, Employee, Employer, Wages and Managing Agent

1. Dependant: Section 2(24)

A dependant is a relative of the dead employee who is entitled to the compensation. The Code has three groups.

Group	Condition	Who
First	Dependants automatically	A widow; a minor legitimate or adopted son; an unmarried legitimate or adopted daughter; a widowed mother
Second	Only if wholly dependent on the earnings of the employee	A legitimate or adopted son or daughter who is 18 years or more but infirm
Third	Only if wholly or partly dependent	A widower; a parent other than a widowed mother; a minor illegitimate son; an unmarried illegitimate daughter; a daughter who is married and a minor, or widowed and a minor; a minor brother; an unmarried sister, or a widowed sister who is a minor; a widowed daughter-in-law; a minor child of a pre-deceased son; a minor child of a pre-deceased daughter where no parent of the child is alive; a grandparent if no parent of the employee is alive

For ESI purposes, the age of 18 becomes 25 in some clauses.

2. Employee: Section 2(26)

Any person, except an apprentice, employed on wages by an establishment, directly or through a contractor, for any work. For Chapter VII, the third proviso says that only persons in the Second Schedule are employees.

3. Employer: Section 2(27)

It includes:

• the occupier of a factory;
• in a mine, the owner, agent or manager;
• in any other establishment, the person with ultimate control and the manager or managing director;
• a contractor;
• the legal representative of a dead employer.

Under Section 85, a principal employer is liable for a contractor's workers.

4. Wages: Section 2(88)

It has the same structure as in the Code on Wages, with the 50 per cent rule. For compensation, Section 78 also gives the meaning of monthly wages.

5. Managing Agent

Under the old Employees' Compensation Act, an employer included the managing agent, a person managing the business on behalf of the owner. The Code has no separate clause, but covers the same idea through the word "agent" in Section 2(1), and through the manager or managing director in the definition of employer.

Disablement: Partial, Total and Temporary

▶ Watch this part of the lecture (1:33:59)

Disablement means loss of ability to work. It is of three kinds, and the amount of compensation depends on the kind.

• Permanent partial disablement (Section 2(55)): permanent disablement that reduces the earning capacity of the employee in every employment which he was capable of undertaking at the time of the accident. The worker can still work, but earns less. Every injury listed in Part II of the Fourth Schedule (for example, loss of a finger) is deemed to be permanent partial disablement.
• Permanent total disablement (Section 2(56)): permanent disablement which incapacitates the employee for all work he could do at the time of the accident. Injuries in Part I of the Fourth Schedule (for example, loss of both hands or both eyes) are deemed to be permanent total disablement. A combination of Part II injuries is also deemed total if the total percentage of loss of earning capacity reaches 100 per cent.
• Temporary disablement (Section 2(83)): a condition resulting from an employment injury, which requires medical treatment, and which makes the employee temporarily incapable of doing the work he was doing before. The Code pays for temporary disablement, whether total or partial.

Kind	Provision	Effect on earning capacity	Deemed injuries
Permanent partial	Section 2(55)	Permanently reduced in every employment he could undertake at the time of the accident	Part II of the Fourth Schedule (e.g., loss of a finger)
Permanent total	Section 2(56)	Permanently incapacitated for all work he could do at the time of the accident	Part I of the Fourth Schedule (e.g., loss of both hands or both eyes); or Part II injuries totalling 100 per cent
Temporary	Section 2(83)	Temporarily incapable of doing his earlier work; needs medical treatment	—

Employer's Liability for Personal Injury: Section 74

▶ Watch this part of the lecture (1:36:10)

Employer's liability is the heart of the Chapter. The old law was in Section 3 of the Employees' Compensation Act.

Elements

1. Personal injury includes death.
2. Arising out of means there must be a cause-and-effect link between the job and the accident.
3. In the course of means the accident must happen during the employment, at a place and in circumstances connected with the job, that is, time, place and circumstances.

Both "arising out of" and "in the course of" must be present.

Special Rules

• Section 74(2): an accident is still in the course of employment even if the employee was acting against a law or an order, or without instructions, if it would otherwise have been in the course of employment, and the act was done for the purpose of the employer's business.
• Section 74(4) (new): an accident while commuting is deemed to arise out of and in the course of employment, if a nexus is established between the circumstances, time and place of the accident and the employment.
• Section 74(6): otherwise, the accident or disease must be directly attributable to the employment.

Notional Extension of the Employer's Premises

▶ Watch this part of the lecture (1:37:46)

Notional means treated as if it were so. The general rule is that a worker's employment starts when he reaches the workplace and ends when he leaves it. Travel to and from work is normally outside employment. In some cases, however, the law treats the employer's premises as stretching a little in time and place, so that the worker is still in the course of employment.

When the doctrine applies

Courts have applied notional extension while the worker is:

• entering or leaving the premises;
• passing through the approach to the workplace;
• using the employer's transport; or
• doing something incidental to the job.

Limits of the doctrine

It does not cover a worker who is simply a member of the public on a public road or a public ferry.

• Saurashtra Salt: workers crossing a creek by a public boat were not covered.
• Francis De Costa: a worker cycling on a public road one kilometre away was not covered.
• BEST v. Agnes: a bus driver going home in his employer's bus, as a right, was covered.

These cases are discussed in detail under the leading cases on employment injury (Module IV) below.

Position under the Code

• Under Section 74(4) of the Code, and Section 34(3) for ESI, an accident while commuting is deemed to be in the course of employment if a nexus with the employment is shown.
• Under Section 34(2), an accident while taking steps in an emergency to rescue people or protect property at the premises is covered.

Defences Available to the Employer

▶ Watch this part of the lecture (1:39:26)

Even under a no-fault law, the employer has a few defences, that is, reasons why he need not pay. They are meant to stop carelessness and misuse.

Defences under the provisos to Section 74(1)

The employer is not liable:

1. for an injury which does not result in total or partial disablement for more than three days;
2. where the accident is directly attributable to the employee being under the influence of drink or drugs;
3. where it is directly attributable to the wilful disobedience of an order expressly given, or of a rule expressly framed, for securing safety;
4. where it is directly attributable to the wilful removal or disregard of a safety guard or other device which the employee knew was provided for safety.

Further situations where no compensation is payable

• Section 74(6): no compensation unless the injury is directly attributable to a specific accident or disease from employment.
• Section 74(7): no right to compensation if the employee has already filed a civil suit for damages.
• Section 84: if the employee refuses medical examination, his right is suspended for that period.

Occupational Diseases and Alternate Remedies

Occupational diseases

▶ Watch this part of the lecture (1:41:21)

Some diseases come slowly from a job, such as a lung disease from dust, or lead poisoning.

• Section 74(3): if an employee in a job listed in the Second Schedule contracts a Third Schedule disease peculiar to that job, while in the service of one employer for a continuous period of at least six months, the disease is deemed to be an injury by accident. Unless the contrary is proved, it is treated as arising out of and in the course of employment.
• Section 74(5): the Government may add employments or diseases after giving three months' notice.

Special dates under Section 82

• For such a disease, the accident is treated as happening on the first day of continuous absence from work.
• If there is partial disablement without absence, the two-year period runs from the day the employee gives notice of disablement.
• If symptoms appear within two years after he leaves the job, the accident is treated as happening on the day the symptoms were first detected.

Alternate remedies

A worker injured at work may have more than one way to get money, but he cannot take all of them.

• Section 74(7): there is no right to compensation if he has filed a civil suit for damages; and no suit is allowed if he has claimed compensation before the competent authority, or made an agreement for compensation under the Chapter.
• Section 41(7): a person eligible for dependants' or disablement benefit under the ESI Chapter cannot claim employee's compensation.
• Section 85(3): the worker may claim from the principal employer or from the contractor.
• Section 86: if a stranger is legally liable for damages, the employer who paid compensation can be indemnified by the stranger.

Amount of Compensation: Death, Permanent Total and Permanent Partial Disablement

▶ Watch this part of the lecture (1:43:38)

The amount of compensation is governed by Section 76. This is one of the most important topics for calculation questions.

Death: Section 76(1)(a)

Compensation is 50% of the monthly wages of the deceased employee multiplied by the relevant factor, or an amount notified by the Central Government, whichever is more.

The relevant factor is a number in the Sixth Schedule, decided by the completed years of age of the employee on his last birthday. A younger worker has a higher factor, because more working years were lost.

Funeral expenses, Section 76(7): in addition, the employer must deposit not less than ₹15,000 for the funeral, for the eldest surviving dependant, or the person who actually paid.

Permanent total disablement: Section 76(1)(b)

Compensation is 60% of the monthly wages multiplied by the relevant factor, or the notified amount, whichever is more.

Permanent partial disablement: Section 76(1)(c)

• Where the injury is listed in Part II of the Fourth Schedule, compensation is the percentage of loss of earning capacity shown in the Schedule, applied to the compensation for permanent total disablement.
• Where the injury is not listed, it is the percentage of loss of earning capacity assessed by a medical practitioner, applied in the same way.
• If there are several injuries in one accident, the amounts are added, but the total cannot exceed the amount for permanent total disablement.

Minimum amounts: old Act and the Code

Old Act	Code
Minimum of ₹1,20,000 for death and ₹1,40,000 for permanent total disablement.	Amounts as notified by the Central Government, which can enhance them.

Compensation for Temporary Disablement and Accident Outside India

Temporary disablement

Here the worker gets regular payments, not a lump sum, while he recovers.

• Section 76(1)(d): a half-monthly payment of 25% of the monthly wages.
• Section 76(4): the payment is made on the sixteenth day from the date of disablement, if the disablement lasts 28 days or more. If it lasts less than 28 days, it is made on the sixteenth day after a waiting period of three days from the date of disablement.
• It continues as long as the disablement lasts, or for five years, whichever is shorter.
• Payments already made by the employer are deducted.
• A half-monthly payment cannot be more than the difference between half of the wages before the accident and half of the wages after it.
• Section 76(5): the employer must also reimburse the actual medical expenses.
• If the disablement ends before a payment falls due, a proportionate sum is paid.

Accident outside India

• Section 2, clause (28): for this Chapter, an accident or disease within or outside India is an employment injury.
• Section 76(2): the competent authority must reduce the amount by any compensation already awarded under the law of the foreign country.
• Section 83: special rules apply to masters and seamen of ships, the captain and crew of aircraft, persons recruited by Indian companies to work abroad, and persons sent abroad with Indian-registered vehicles.
• Notice and claim can be served on the master, the captain or the local agent.
• In case of death, the claim is to be made within one year after the news of death reaches the claimant; if a ship or aircraft is lost with all hands, within eighteen months.

Calculation of Compensation: Factors and Monthly Wages

The four factors

1. Kind of injury, which decides the percentage: 50% for death, 60% for permanent total disablement, 25% half-monthly for temporary disablement, and a share of the total for partial disablement.
2. Monthly wages.
3. Relevant factor from the Sixth Schedule, decided by age.
4. Percentage of loss of earning capacity, from the Fourth Schedule or from a medical assessment.

Monthly wages: Section 78

Length of continuous service	How monthly wages are found
At least twelve months with the same employer before the accident	One-twelfth of the total wages for the last twelve months.
Less than one month	Average monthly amount earned in the last twelve months by a similar employee doing the same work for the same employer, or in the same locality.
Other cases	Thirty times the total wages earned in the last continuous period of service, divided by the number of days in that period.

• Continuous means not broken by an absence of more than fourteen days.
• Under Section 76(3), the Central Government may notify a ceiling on monthly wages for the calculation.

Payment of Compensation, Penalty for Default and Distribution among Dependants

▶ Watch this part of the lecture (1:49:45)

Payment

• Section 77(1): compensation must be paid as soon as it falls due.
• Section 77(2): if the employer does not accept the whole liability claimed, he must make a provisional payment of the amount he accepts, without harming the employee's right to claim more.

Penalty for default

• Section 77(3): if the employer is in default for more than one month from the due date, the competent authority orders interest at the prescribed rate. If there was no justification for the delay, it can order a further sum, as damages, up to 50% of the arrears, after giving the employer a chance to show cause.
• Section 77(4): this interest and damages go to the employee or the dependant.
• Section 133: failing to pay compensation is an offence punishable with a fine up to ₹50,000; repeat offences are punished more heavily under Section 134.
• The old law was Section 4A, with interest and a penalty up to 50%.

Distribution: Section 81

• Death compensation, and any lump sum for a woman or a person under a legal disability, must be deposited with the competent authority.
• A direct payment by the employer is not treated as compensation.
• The employer may give an advance to a dependant up to three months' wages, which is later deducted.
• The authority may call the dependants by notice; if no dependant exists, the balance goes back to the employer.
• The authority divides the amount among the dependants in such proportion as it thinks fit, or gives all to one, but only after hearing them and recording reasons.

Notice, Claim and the Exceptions to the General Rule

▶ Watch this part of the lecture (1:52:00)

Notice and claim are governed by Section 82. The employer should be told about the accident soon, and the claim must be filed within two years. These rules avoid stale claims.

General rule: Section 82(1)

• No claim is entertained unless notice of the accident has been given as soon as practicable, and the claim is made within two years of the accident, or, in a death case, within two years of the death.
• The notice must give the name and address of the injured person, the cause of the injury and the date of the accident.
• It is served on the employer, or on any one of several employers, or on the person responsible for managing the branch.
• The old law was Section 10 of the Employees' Compensation Act.

Exceptions: Section 82(2)

A defect or absence of notice is no bar in two cases:

1. where the claim is for the death of an employee from an accident on the employer's premises, or at a place where he was working under the employer's control, and he died there, or without leaving the vicinity;
2. where the employer, or a manager, had knowledge of the accident from another source at about the time it happened.

Contracting Out and the Case of Roshan Deen

Contracting out means an agreement in which the worker gives up his right to compensation.

• Under Section 17 of the old Employees' Compensation Act, any such contract, in so far as it removes or reduces the employer's liability, is null and void. The worker cannot sign away a right which the law gives him.
• Under the old Act, an agreed lump sum, or any settlement with a woman or a person under disability, had to be registered with the Commissioner.
• Under the Code, Section 89 keeps this protection. The memorandum of the agreement is sent to the competent authority, who may refuse to record it if the sum is inadequate, or if the agreement was obtained by fraud, undue influence or other improper means. A registered agreement is enforceable.
• Chapter VII of the Code does not appear to contain a separate section on contracting out, but similar protection comes from Section 161, which gives the Code effect over any inconsistent agreement or contract of service (more favourable terms are saved), together with the scrutiny of agreements under Section 89.

Employees' State Insurance: Applicability, Employer, Employee and Insured Person

▶ Watch this part of the lecture (1:56:03)

Employees' State Insurance (ESI) is Chapter IV of the Code on Social Security, Sections 24 to 52. ESI is a health and cash-benefit insurance for workers and their families. It pays for sickness, maternity, work injury and death.

Applicability

• Under the First Schedule, the Chapter applies to every establishment in which ten or more persons are employed, other than a seasonal factory.
• It also applies to an establishment carrying on a hazardous or life-threatening occupation notified by the Central Government, even if only one employee is employed.
• A plantation employer may opt in, if the ESI benefits are better than what he gives.
• Section 1(7): the Director General of the Corporation may extend the Chapter if the employer and the majority of employees agree.
• Section 1(8): once applied, it continues even if the number of employees later falls below ten.
• It covers employees drawing wages up to the wage ceiling notified by the Centre, at present ₹21,000 a month. For counting the employees, those above the ceiling are also counted.
• The old ESI Act, Sections 1 and 2, covered factories and notified establishments.

Definitions

• Employer, Section 2(27): pays both the employer's and the employee's contributions for every employee, including those brought by a contractor, and may recover from the contractor.
• Employee, Section 2(26): a person employed on wages directly or through a contractor; for this Chapter, one who draws wages up to the ceiling.
• Section 28: every employee in a covered establishment shall be insured.

ESI Authorities, the ESI Fund and Contributions

Authorities

• The Employees' State Insurance Corporation is constituted by the Central Government under Section 5. It has representatives of the Government, the States, employers, employees and the medical profession.
• A Standing Committee, chosen from the Corporation, runs the day-to-day work.
• The Director General is the principal officer, under Section 24.
• Medical Boards and the Medical Appeal Tribunal decide the disablement question, under Section 37.
• Employees' Insurance Courts decide disputes, under Section 48.

The ESI Fund: Sections 25 and 26

• The Fund is a common pot. All contributions and other money received by the Corporation are paid into it.
• The Corporation may also accept grants, donations, CSR funds and gifts.
• The Fund is used only for listed purposes, such as benefits and medical treatment, hospitals and dispensaries, the cost of Employees' Insurance Courts, and rehabilitation of disabled workers.
• Section 47: dues to the Corporation are a charge on the assets of the establishment and are paid in priority in accordance with the Insolvency and Bankruptcy Code, 2016.

Contributions: Sections 29 and 31

▶ Watch this part of the lecture (1:59:32)

• The employer's contribution and the employee's contribution are paid to the Corporation at rates prescribed by the Central Government. At present, the employer pays 3.25% and the employee 0.75% of wages.
• They are due on the last day of the wage period.
• The employer pays both shares, but he can recover only the employee's share, and only by deduction from wages, for that period. He cannot deduct the employer's share.
• Sums deducted are treated as entrusted to the employer, and failing to pay them is an offence under Section 133.

The new provisions expanding coverage are: hazardous units with even one worker, optional coverage of plantations, and voluntary extension.

ESI Benefits: Sickness, Maternity, Dependants', Disablement, Medical and Funeral

▶ Watch this part of the lecture (2:00:24)

Section 32 provides six benefits.

1. Sickness benefit: periodical payments to an Insured Person during sickness certified by a medical practitioner.
2. Maternity benefit: periodical payments to an insured woman for confinement, miscarriage or sickness arising out of pregnancy.
3. Disablement benefit: periodical payments to an Insured Person disabled by an employment injury. A Medical Board decides whether the disablement is permanent and the extent of loss of earning capacity.
4. Dependants' benefit: periodical payments to the dependants of an Insured Person who dies of an employment injury.
5. Medical benefit: treatment and attendance for the Insured Person; it may be extended to the family. The State Government provides it, under Section 40.
6. Funeral benefit: a payment to the eldest surviving family member, or to the person who actually paid, up to a prescribed amount (₹15,000 at present). The claim must be made within three months of death.

Rates and periods are fixed by the Central Government. At present:

Benefit	Present rate and period
Sickness benefit	About 70% of the average daily wage, for up to about 91 days in a year
Maternity benefit	Full wage for 26 weeks
Disablement benefit	About 90% of the average daily wage
Dependants' benefit	About 90% of the average daily wage
Funeral benefit	Up to ₹15,000

• Section 41(1): disablement benefit cannot be exchanged for a lump sum.

Two further rules

• Section 41(4): no Insured Person can get sickness and maternity benefit, or sickness and temporary disablement benefit, or maternity and temporary disablement benefit, for the same period; but he can choose.
• Section 41(2): there is no cash benefit for a day on which he works, is on paid leave, or is on strike.

The old provisions are in the ESI Act, Sections 46 to 50, and Sections 51A, 55, 56 and 57.

"Arising Out Of" and "In the Course Of" Employment, and Presumptions

▶ Watch this part of the lecture (2:03:00)

ESI pays injury benefits only when there is an employment injury.

Arising out of	In the course of
A causal link between the job and the accident.	The time, place and circumstances of the accident.

The general rule is that employment begins when the employee reaches the place of work and ends when he leaves it, except where notional extension applies.

Help given by the Code

A presumption (an assumption the law allows) shifts the burden of proof to the other side.

• Section 34(1): an accident arising in the course of employment is presumed, in the absence of evidence to the contrary, to have arisen out of that employment.
• Section 34(2): an accident while rescuing people in an emergency at the premises is covered.
• Section 34(3): an accident while commuting is covered if a nexus with the employment is established.
• Section 34(4): travel as a passenger in a vehicle provided or arranged by the employer is covered.
• Section 35: acting in breach of law or orders is covered if done for the employer's business.
• Section 36: an occupational disease in Part A, Part B or Part C of the Third Schedule is deemed an employment injury, unless the contrary is proved; in Part B, six months of continuous service are needed.

The old presumption was Section 51A of the ESI Act.

Leading Cases on Employment Injury

▶ Watch this part of the lecture (2:04:44)

Bar on Receipt of Benefits, A. Trehan's Case and Employees' Insurance Courts

Bar on receipt of benefits

An insured worker cannot collect twice for the same injury.

• Section 41(7)(a): a person eligible for dependants' benefit or disablement benefit under the ESI Chapter cannot claim employee's compensation from the employer under Chapter VII.
• Section 41(7)(b): a woman eligible for ESI maternity benefit cannot claim maternity benefit under Chapter VI.
• Section 41(8): anyone who got a benefit he was not entitled to must repay it.
• The old rule was Section 53 of the ESI Act.

Employees' Insurance Courts: Sections 48 to 52

• The State Government constitutes them.
• A person who is or was a judicial officer, or a legal practitioner of five years' standing, can be a Judge.
• They decide questions such as whether a person is an employee, the rate of wages or contribution, who is the employer, the right to a benefit, and recovery of contributions.
• An employer cannot raise a dispute about dues unless he deposits 50% of the amount claimed, though the Court may waive or reduce it.
• Civil courts have no jurisdiction.
• The limitation period is three years.
• An appeal lies to the High Court, only on a substantial question of law, within sixty days.

Gratuity: Chapter V of the Code on Social Security

▶ Watch this part of the lecture (2:10:26)

Gratuity is dealt with in Chapter V, Sections 53 to 58 of the Code on Social Security. Gratuity (a thank-you payment for long service) is a lump sum which the employer pays when a long-serving employee leaves the job.

Applicability

Under the First Schedule, the gratuity provisions apply to:

• every factory, mine, oilfield, plantation, port and railway company; and
• every shop or establishment with ten or more employees on any day of the preceding twelve months.

When gratuity is payable: Section 53(1)

Gratuity is payable on termination of employment after continuous service of at least five years:

• on superannuation;
• on retirement or resignation;
• on death or disablement due to accident or disease; or
• on the end of a fixed-term contract.

Exceptions and related rules

• Five years of service are not needed on death, disablement or expiry of a fixed term.
• For working journalists, the period is three years.
• On death, gratuity goes to the nominee, or to the heirs; a minor's share is invested until majority.
• Government employees governed by their own gratuity rules are excluded.
• Better terms under a contract or award are protected.

Continuous service: Section 54

A completed year of service means continuous service for twelve months.

Continuous service means uninterrupted service, including interruptions due to sickness, accident, leave, lay-off, strike, lock-out, or absence without leave that the standing orders do not treat as a break.

Deemed continuous service where service is not continuous

Period	Ordinary establishment	Work below ground in a mine, or establishment working less than six days a week
One year	Actually worked at least 240 days in the preceding twelve months	190 days
Six months	120 days	95 days

• Days of lay-off, paid leave, temporary disablement and maternity leave up to 26 weeks are counted.
• For seasonal establishments, the requirement is seventy-five per cent of the operating days.
• Section 54 replaces Section 2A of the old Payment of Gratuity Act.

Calculation of Gratuity, Ceiling and Forfeiture

▶ Watch this part of the lecture (2:12:33)

Rate of gratuity: Section 53(2)

The employer pays fifteen days' wages for every completed year of service, or part in excess of six months, based on the last drawn wages.

• Monthly-rated employee: fifteen days' wages = monthly wages ÷ 26 × 15.
• Piece-rated employee: daily wages are the average of the last three months' wages, without overtime.
• Seasonal establishment: seven days' wages for each season.
• Fixed-term or dead employee: the payment is pro rata.

Ceiling: Section 53(3)

The ceiling is the amount notified by the Central Government. Under the old Act it was 20 lakh rupees since 2018, and 10 lakh rupees before that.

Forfeiture: Section 53(6)

Forfeiture means loss of a right as punishment.

• If service is terminated for an act, wilful omission or negligence causing damage or loss to the employer's property, gratuity is forfeited to the extent of the damage or loss.
• Gratuity may be forfeited wholly or partly if service is terminated for riotous or disorderly conduct or violence, or for an offence involving moral turpitude (a serious wrong) committed in the course of employment.

Compulsory insurance: Section 57

From a notified date, every employer, except the Government, must insure his gratuity liability with an insurer regulated by the insurance regulator, or run an approved gratuity fund. An employer with 500 or more persons may be exempted.

Determination of the amount: Section 56

• The employer determines the amount, informs the person and the competent authority, and pays within thirty days, with simple interest for delay.
• In a dispute, the employer deposits the admitted amount, and the competent authority decides.
• An appeal lies within sixty days.

Offence

Failing to pay gratuity is an offence under Section 133, punishable with imprisonment up to one year, or a fine up to 50,000 rupees, or both.

Under the old Payment of Gratuity Act, payment of gratuity was governed by Section 4.

Provident Fund: Chapter III

▶ Watch this part of the lecture (2:15:17)

The Provident Fund is dealt with in Chapter III, Sections 14 to 23. It is a retirement savings scheme to which both the employee and the employer contribute.

Applicability

• Under the First Schedule, it applies to every establishment where twenty or more employees are employed.
• Under Section 1(5), the Provident Fund Commissioner may extend it to an establishment if the employer and the majority of employees agree.
• Under Section 20, it does not apply to some establishments, for example small co-operative societies, and Government establishments with their own provident fund or pension.

Schemes: Section 15

The Central Government may frame:

• the Employees' Provident Fund Scheme;
• the Employees' Pension Scheme;
• the Employees' Deposit Linked Insurance Scheme; and
• other schemes for self-employed workers or any class of persons.

Meaning of employee: Section 2(26)

For Chapter III, "employee" means an employee drawing wages up to the wage ceiling, except in the case of the Provident Fund Scheme, where the ceiling does not limit membership. Employees above the ceiling are still counted for deciding coverage.

Contributions: Section 16

• The employer pays ten per cent of wages, and twelve per cent for notified classes; the employee pays an equal amount.
• The employee may pay more, but the employer need not match it.
• From the employer's share, up to eight and one-third per cent of wages goes to the Pension Fund.
• The employer also pays up to one per cent of wages to the Insurance Fund.

Under Section 17, the employer may recover the amounts from a contractor, and the contractor may recover only the employee's share from the worker's wages. The corresponding provision of the old law was Section 6 of the EPF Act, 1952.

Employees' Pension Scheme and EDLI

Under Section 15(1)(b), the Employees' Pension Scheme provides:

• superannuation pension;
• retiring pension;
• permanent total disablement pension;
• widow or widower's pension;
• children pension and orphan pension; and
• nominee pension.

Under Section 15(1)(c), the Employees' Deposit Linked Insurance Scheme (EDLI) gives a life insurance benefit to the family of a deceased employee.

The existing Schemes of 1995 and 1976 continue for a period under the repeal clause.

Transfer of accounts: Section 22

When an employee leaves one establishment and joins another (covered or not), or joins a covered establishment from an uncovered one, his accumulated provident fund and pension amounts are transferred as the Scheme provides. The money follows the worker.

Other schemes and appeals

• Under Section 15(1)(d), the Central Government may frame other schemes to give social security to self-employed workers or any class of persons through the same machinery.
• Under Section 23, an appeal against assessment of dues and damages lies to the Tribunal, and the employer must deposit the required amount.

Provident Fund and Pension Case Laws

▶ Watch this part of the lecture (2:18:43)

Building and Other Construction Workers

▶ Watch this part of the lecture (2:20:29)

Building and construction workers are covered by Chapter VIII, Sections 100 to 108. Construction workers move from site to site and have no steady employer, so the law charges a cess (a special tax) on the cost of construction.

Cess: Section 100

• The cess is not more than two per cent and not less than one per cent of the cost of construction, excluding the cost of land and compensation.
• It is collected from every employer.
• It is collected in advance through the local authority, or deducted at source for Government and public sector work.

Registration as beneficiary: Sections 106 and 107

• Every building worker aged eighteen to sixty who has worked at least ninety days in the preceding twelve months is registered as a beneficiary.
• He ceases to be a beneficiary at sixty, or if he works fewer than ninety days in a year, ignoring absence due to work injury.

Welfare Fund: Section 108

Each State Building Workers' Welfare Board keeps the Welfare Fund, made up of the cess, grants and loans. Administrative expenses cannot exceed five per cent.

The old laws were the Cess Act of 1996 and the welfare parts of the Building Workers Act.

Beedi and cigar workers and cine workers

• The Beedi and Cigar Workers Act, 1966 is merged into the OSH Code, Chapter XI, Part V; beedi premises need a licence under Section 74.
• The Cine-Workers Welfare Fund Act, 1981 is repealed by the Code on Social Security, and audio-visual workers need a registered written agreement under the OSH Code.

Maternity Benefit: Chapter VI

▶ Watch this part of the lecture (2:22:31)

Module V deals with maternity and women's benefits. It is Chapter VI of the Code on Social Security, Sections 59 to 72, and it replaces the Maternity Benefit Act, 1961, as amended in 2017. Maternity benefit is a woman's right to leave and pay around childbirth.

Applicability

Under the First Schedule, it applies to:

• factories, mines and plantations, including Government ones;
• shops and establishments with ten or more employees; and
• others notified.

Under Section 60(2), the woman must have actually worked at least eighty days in the twelve months before the expected delivery; days of lay-off and paid holidays count. If ESI covers her, she gets ESI maternity benefit and cannot claim it again from the employer.

Prohibition of employment before and after delivery: Section 59

• The employer shall not knowingly employ a woman for six weeks immediately after her delivery, miscarriage or medical termination of pregnancy, and the woman also shall not work in that period.
• On her request, a pregnant woman cannot be made to do arduous work, work needing long hours of standing, or work likely to interfere with pregnancy, for one month before the six weeks preceding delivery, and for any part of those six weeks for which she does not take leave.
• Under Section 69, her wages cannot be reduced for this lighter work.

Maternity Entitlements, Procedure, Medical Bonus and Additional Leave

▶ Watch this part of the lecture (2:24:58)

Rate of benefit: Section 60(1)

Every woman is entitled to maternity benefit at the rate of the average daily wage for the period of her actual absence. The average daily wage is the average of the wages for the days worked in the three calendar months before she stopped work, subject to the minimum wage under the Code on Wages.

Duration: Section 60(3) and 60(4)

Category	Maximum period	Before expected delivery
Woman with fewer than two surviving children	26 weeks	Not more than 8 weeks
Woman with two or more surviving children	12 weeks	Not more than 6 weeks
Woman legally adopting a child below three months, and a commissioning mother	12 weeks	From the date the child is handed over

A commissioning mother is a biological mother who uses her egg to create an embryo carried by another woman. A stillborn child counts as a child.

Notice and payment: Section 62

• The woman gives written notice of her absence, not earlier than eight weeks before expected delivery; if she gave none, she may give it soon after delivery.
• The amount for the period before delivery is paid in advance, and the balance within forty-eight hours of proof of delivery.
• Failure to give notice does not take away the benefit, and the Inspector-cum-Facilitator can order payment.

Payment on death, medical bonus and forfeiture

• Section 63: on her death, the benefit goes to her nominee.
• Section 64: she gets a medical bonus of 3,500 rupees, or the notified amount, if the employer gives no free pre-natal and post-natal care.
• Section 70: a woman who works for pay during the leave is not entitled to the benefit for that period.

Additional leave: Section 65

This is the "additional leave" of the syllabus.

Situation	Leave with wages (at the rate of maternity benefit)
Miscarriage or medical termination of pregnancy	Six weeks
Tubectomy operation (an operation to prevent pregnancy)	Two weeks
Illness arising out of pregnancy, delivery, premature birth, miscarriage or medical termination	In addition, up to one month

Crèche: Section 67

• Every covered establishment with fifty or more employees must have a crèche (a day-care centre) within the prescribed distance, either separately or with common facilities run by the Government, an NGO or a group of establishments.
• The mother is allowed four visits a day, including her rest intervals.
• Every woman must be told of all benefits, in writing and electronically, at her first appointment.

Nursing breaks: Section 66

She gets two nursing breaks a day until the child is fifteen months old.

Work from home: Section 60(5)

If her work can be done from home, the employer may allow her to work from home after the maternity benefit period, on terms agreed by both.

Dismissal during Maternity, Enforcement and Penalties

▶ Watch this part of the lecture (2:27:04)

Dismissal during absence: Section 68

When a woman is absent as the Chapter allows, it is unlawful for the employer:

• to discharge or dismiss her because of the absence;
• to give notice of discharge that expires during the absence; or
• to change her service conditions to her disadvantage.

Dismissal during pregnancy does not deprive her of maternity benefit or medical bonus. The only exception is dismissal for gross misconduct as prescribed, where the employer, by a written order, may deprive her of the benefit. She may appeal within sixty days to the competent authority, whose decision is final. The corresponding old provision was Section 12.

Enforcement: Section 72

A woman whose benefit is withheld, or who is dismissed during leave, can complain to the Inspector-cum-Facilitator, who inquires and orders payment or passes just orders. An appeal lies within thirty days.

Penalties: Sections 133 and 134

• Failing to give maternity benefit, or wrongly dismissing a woman, is punishable with imprisonment up to six months, or a fine up to 50,000 rupees, or both.
• For a repeat offence of not paying maternity benefit: two to three years' imprisonment and a fine of three lakh rupees.

Maternity Benefit Case Laws

▶ Watch this part of the lecture (2:28:22)

Child Care Leave

▶ Watch this part of the lecture (2:29:48)

Child care leave is leave, mostly for Government employees, to care for young children. It comes from service rules and not from the Code. For Central Government employees it is up to 730 days in the whole service, for children below eighteen.

Unorganised Worker, Gig Worker, Platform Worker and Aggregator

▶ Watch this part of the lecture (2:31:00)

Module VI deals with vulnerable workers. The old law on unorganised workers was the Unorganised Workers' Social Security Act, 2008.

Unorganised worker: Section 2(86)

An unorganised worker means a home-based worker, a self-employed worker or a wage worker in the unorganised sector, and includes a worker in the organised sector who is not covered by the Industrial Disputes Act or by Chapters III to VII of the Code.

• Unorganised sector (Section 2(85)): an enterprise owned by individuals or self-employed workers, employing fewer than ten workers.
• Home-based worker: produces goods or services for an employer at home.
• Self-employed worker: is not employed by an employer, and works in the unorganised sector within a notified earning limit.
• Wage worker: is employed for remuneration in the unorganised sector, directly or through a contractor, and includes casual, migrant and domestic workers.

Gig worker: Section 2(35)

A gig worker is a person who performs work or participates in a work arrangement and earns from such activities outside a traditional employer-employee relationship.

Platform work and platform worker: Section 2(60) and 2(61)

Platform work is a work arrangement outside a traditional employer-employee relationship in which organisations or individuals use an online platform to access other organisations or individuals to provide specific services, in exchange for payment. A platform worker is a person doing such work.

Aggregator: Section 2(2)

An aggregator means a digital intermediary or a marketplace for a buyer or user of a service to connect with the seller or service provider. The Seventh Schedule lists categories such as ride-sharing, food and grocery delivery, logistics, e-marketplaces, professional services, healthcare, travel and hospitality, and content and media.

Social Security Schemes, Aggregator Contribution and Registration

▶ Watch this part of the lecture (2:33:07)

Schemes for unorganised workers: Sections 109 to 112

Central Government schemes	State Government schemes
Life and disability cover, health and maternity benefits, old age protection and education	Provident fund, employment injury benefit, housing, education of children, skill upgradation, funeral assistance and old age homes

• Funding: by the Centre; by the Centre and State; by contributions of beneficiaries or employers; or by CSR funds.
• The National Social Security Board and the State Unorganised Workers' Boards advise the Governments.
• A toll-free helpline and facilitation centres help workers to register.
• The old Act had only such boards, and it was not properly implemented.

Gig and platform workers: Section 114

The Central Government may frame schemes on life and disability cover, accident insurance, health and maternity benefits, old age protection and crèche.

Aggregators must contribute at a rate of one to two per cent of their annual turnover, as notified, but not more than five per cent of the amount paid or payable to gig and platform workers. The money goes to the Social Security Fund under Section 141.

Registration: Section 113

• Every unorganised, gig or platform worker must be registered.
• He must be at least sixteen years of age, give a self-declaration, and apply with documents including the Aadhaar number.
• He gets a distinguishable number, that is, a unique ID; self-registration is allowed.
• Records are kept electronically, with continuous numbers, to avoid duplication.
• A registered worker can claim benefits even if he changes job or city. This is portability.
• The old Act had only voluntary registration.

Contract Labour under the OSH Code

▶ Watch this part of the lecture (2:35:30)

Contract labour is dealt with under the OSH Code, Chapter XI, Part I, Sections 45 to 58.

Definitions

Contract labour means a worker hired in or in connection with the work of an establishment by or through a contractor, with or without the knowledge of the principal employer, and includes an inter-State migrant worker. It excludes a worker, other than a part-time worker, who is regularly employed by the contractor under mutually accepted standards, with permanent employment, increments and social security.

Principal employer (Section 2, clause (zz)) is:

• for a Government office, its head;
• for a factory, the owner or occupier;
• for a mine, the owner or agent; and
• for any other establishment, the person responsible for supervision and control.

Contractor (clause (n)) is a person who undertakes to produce a given result for the establishment, other than a mere supply of goods, through contract labour, or who supplies contract labour as mere human resource, and includes a sub-contractor.

Applicability: Section 45

• It applies to every establishment with fifty or more contract labour on any day of the preceding twelve months, and every manpower supply contractor with fifty or more.
• It does not apply where the work is only intermittent or casual. Work is not intermittent if it is done for more than 120 days in the year, or more than sixty days if seasonal.
• The old Contract Labour Act (Sections 1 to 3) applied at twenty workmen, so the Code has raised the threshold.

Registration and licensing

• Section 3: every covered employer applies electronically within sixty days for registration of the establishment; if the officer does not act in time, it is deemed registered. This replaces the old registration of principal employers.
• Section 47: no contractor may supply or engage contract labour except under a licence, which states the number of workers and the security deposit; a work-specific licence is possible.
• Section 48: the licence is valid for five years.
• Section 49: the contractor cannot charge any fee from workers.
• Licences can be revoked, and an appeal lies within thirty days.
• Section 33: registers and records of work, hours, rest days, wages, leave, overtime and attendance; notices, wage slips and electronic returns.

Liability of the principal employer

• Section 53: the principal employer must provide the welfare facilities of Sections 23 and 24 to contract labour.
• Section 55: the contractor is responsible for wages, paid by bank transfer; but if he fails or short-pays, the principal employer must pay and recover the amount from the contractor.
• Section 54: employing labour through an unlicensed contractor is a contravention.
• Under the old Act, these matters were in Sections 20 and 21.

Contract Labour Case Laws

▶ Watch this part of the lecture (2:37:23)

Prohibition of Contract Labour in Core Activities

▶ Watch this part of the lecture (2:38:15)

Under Section 57, contract labour is prohibited in core activities. A core activity, under Section 2, clause (p), is any activity for which the establishment is set up, and any activity essential or necessary to it.

The following are not core activities: sanitation, security, canteen, loading and unloading, and support services like hospitals, guest houses and courier services.

Exceptions: contract labour allowed even in core activity

1. where the activity is ordinarily done through a contractor;
2. where it does not need full-time workers for the major part of the day; and
3. where there is a sudden increase of work to be done in a specified time.

A designated authority advises, and the Government decides. Under the old Act, Section 10, the Government banned contract labour job by job after consulting the Advisory Board.

Under Section 45(2) of the Code, the Government consults the National or State Advisory Board on whether work is intermittent or casual.

Penalties

Section 97 provides a penalty of 50,000 to one lakh rupees, and for a repeat offence, imprisonment up to three months or a fine up to two lakh rupees, or both.

Inter-State Migrant Workers

▶ Watch this part of the lecture (2:39:26)

Module VII deals with inter-State migrant workers under the OSH Code, Chapter XI, Part II, Sections 59 to 65, replacing the Inter-State Migrant Workmen Act, 1979.

Definition: Section 2, clause (zf)

An inter-State migrant worker is a person employed in an establishment who:

• has been recruited directly by the employer, or through a contractor, in one State for employment in another State; or
• has come on his own from one State and obtained employment in another State,

under an agreement or arrangement, and who draws wages not exceeding 18,000 rupees a month, or a higher amount notified.

Applicability, registration and licensing

• Under Section 59, the Part applies to every establishment in which ten or more inter-State migrant workers are employed, or were employed on any day of the preceding twelve months. The old Act applied at five, so the threshold is higher.
• Registration of the establishment under Section 3, and the licence of the contractor under Sections 47 and 48, must give details of migrant workers.

Inter-State Migrant Workers: Benefits and Duties

Benefits to inter-State migrant workers

• Journey allowance (Section 61): the employer must pay every inter-State migrant worker, in a year, a lump sum amount of fare for the to-and-fro journey to his native place. This is the journey allowance, or return fare.
• Displacement allowance (old Act only): under the old Act, a displacement allowance was payable on recruitment, at 50% of monthly wages or 75 rupees, whichever was higher. The Code has no separate displacement allowance.
• Helpline (Section 63): the appropriate Government may provide a toll-free helpline.
• Debts extinguished (Section 65): debts of the worker to the contractor or principal employer are extinguished when the employment ends.

Duties of contractors and employers (Section 60)

Every contractor or employer must:

1. Ensure suitable conditions of work, keeping in mind that the worker works in a State different from his own.
2. In case of a fatal accident or serious bodily injury, report to the authorities of both States and to the next of kin.
3. Extend to the worker all benefits available to other workers of the establishment, including ESI, provident fund and a medical check-up.

Further, under the contract labour provisions of the Code (not Section 60):

• The contractor takes no fee (Section 49).
• Wages are paid through the bank (Section 55(2)).
• The principal employer pays if the contractor fails (Section 55(3)).

Portability of Benefits and Social Mapping of Migrant Workers

▶ Watch this part of the lecture (2:42:18)

Portability of benefits (Section 62)

The Government must make schemes so that:

• a migrant worker can choose to take ration benefits under the public distribution system either in his native State or in the destination State; and
• a migrant building worker can get the benefits of the construction cess fund in the destination State.

Statistics, portal and study

• Section 21: the Government collects statistics and maintains a portal for inter-State migrant workers.
• Section 64: the Government may arrange a study of inter-State migrant workers.

Social mapping

COVID-19 as an Illustration

In the lockdown of March 2020, many migrant workers lost work, wages, food and transport, and many walked long distances home.

Why the old Act failed

• Few establishments and contractors were registered or licensed.
• There were no reliable records.
• Benefits were not portable.
• Enforcement was weak.
• Workers who migrated on their own were left out.

How the Code responds

• A wider definition.
• Registration with migrant details.
• A portal.
• Journey fare.
• A helpline.
• Portable ration.
• The principal employer's liability.