The Employees Compensation Act, 1923 | Labour and Industrial Law - CLAT PG PDF Download

Introduction

Every employee desires job security and expects to be reimbursed for expenses incurred. This is a fundamental requirement that companies, whether large or small, must fulfill. After all, a company's success hinges on its employees. Therefore, prioritizing the protection and safety of employees is crucial for any organization. 
This article delves into the intricacies of the Employees' Compensation Act, covering aspects such as the amount of compensation, eligibility criteria, and the conditions under which compensation is awarded.

Characteristic Features of the Act

• The Employees Compensation Act, 1923 mandates employers to compensate employees for injuries sustained in accidents during the course of employment. Originally known as the Workmen Compensation Act, it emphasizes the protection of employees' rights and well-being.
• Employers are not liable to pay compensation if:
  • The injury does not result in total or partial disablement for more than three days.
  • The injury, not leading to death or permanent total disablement, is caused by an accident directly attributable to:
    • The employee being under the influence of alcohol or drugs at the time of the accident.
    • Willful disobedience of safety rules by the employee.
    • Willful removal of safety devices by the employee.

Nature of Liability

• When the principle of vicarious liability is applied, the employer is responsible for compensating employees regardless of negligence. This concept ensures that employees receive relief in case of injuries sustained during the course of employment.
• Employers are liable when employees suffer injuries due to accidents or unavoidable circumstances at work. Part-time workers are also covered under this principle.

Who May Get the Compensation? To What Extent Are Employers Liable?

• To be eligible for benefits under the Employees' Compensation Act, certain criteria must be met:
• Individuals must be employees of the Company or Organization.
• Injuries must occur at the workplace or as a result of job-related activities.

Doctrine of Added Peril

• The doctrine of added peril states that if an employee engages in an activity outside of their required duties that involves extra risk, the employer is not liable for injuries sustained during that activity.
• In the case of Devidayal Ralyaram v. Secretary of State, the doctrine was successfully used as a defense, absolving the employer from compensation liability.

Adjudication of Compensation

• Adjudication of compensation is the process of determining the amount of compensation due to an employee who has suffered an injury or accident. This process is carried out by a commissioner who is responsible for calculating the quantum of compensation.
• The quantum of compensation is calculated from the date of the accident, taking into account various factors such as the nature and severity of the injury, the impact on the employee's ability to work, and other relevant considerations.

Self-Inflicted Injury

• A self-inflicted injury occurs when a worker causes harm to themselves, either intentionally or accidentally. In such cases, the employer is not held responsible for the injury.
• Certain jobs carry a higher risk of self-inflicted injuries, including:
  • Law enforcement
  • Medical professionals
  • Agricultural workers
  • Teachers
  • Salespeople

Contributory Negligence

• Employees have a duty to perform their work with reasonable care to avoid accidents and injuries. While employers are vicariously liable for their employees' negligence, they can seek contribution or indemnity from the negligent employee in certain situations.
• If both the employee and employer are negligent, the employer's liability for compensation is limited to their own negligence, not the employee's. This means that the compensation amount may be reduced because the employer is not responsible for the employee's negligence.

Employer's Liability for Compensation Section 3

• Certain occupations expose employees to specific diseases that are inherent to the job. Examples of such diseases include:
  • Infra-red radiations Exposure to infra-red radiations can lead to various health issues, including skin and eye problems.
  • Skin diseases due to chemical or leather processing units Workers in chemical or leather processing industries are at risk of developing skin diseases due to constant exposure to hazardous substances.
  • Hearing impairment caused by noise Prolonged exposure to loud noise can result in hearing impairment or loss.
  • Lung cancer caused by asbestos dust Workers exposed to asbestos dust are at a higher risk of developing lung cancer and other respiratory diseases.
  • Diseases due to extreme climatic conditions Employees working in extreme climatic conditions may develop various health issues related to temperature extremes. For example, miners are at risk of developing a disease called silicosis due to prolonged exposure to silica dust. Miners may also develop lung diseases caused by exposure to dust. Similarly, workers in agricultural lands may develop diseases due to the spraying of pesticides, which are toxic in nature and pose health hazards.
• Employers shall not be liable in the following cases:
  • If any injury does not result in total or partial disablement of the employee for a period exceeding three days.
  • If any injury does not result in death or permanent total disablement caused by an accident which is directly attributable to:
  • The employee being under the influence of drink or drugs at the time of the accident.
  • The willful disobedience of the employee to an order expressly given for the purpose of securing the safety of employees.
  • The willful removal by the employee of any safety guard or device provided for the purpose of securing the safety of employees.

Part A of Schedule III

• If an employee contracts a disease listed in occupational diseases or has been employed for a continuous period of six months (excluding service period), the employer is not liable to pay compensation. 
• The disease is considered an injury and deemed to arise out of the course of employment.

Part B of Schedule III

• Diseases caused by exposure to toxic substances such as phosphorus, mercury, benzene, or nitro and amino toxic substances are considered occupational diseases. 
• These diseases are deemed to occur out of the course of employment, and therefore the employer is not liable to pay compensation.

Part C of Schedule III
Occupational Diseases

• Occupational diseases are conditions contracted by an employee due to specific job-related factors during a continuous period shorter than specified in Schedule III. 
• Such diseases are considered to arise out of and in the course of employment, equating to an injury by accident under this Section.
• Pneumoconiosis, caused by sclerogenic mineral dust (e.g., silicosis, anthracosilicosis, asbestosis) and silico-tuberculosis, is deemed an occupational disease if it significantly contributes to incapacity or death.

Example Scenario

• In the case of KLM Consultant, after relocating to a new office with freshly applied wallpaper, paint, and carpet, employee Rahul Sharma developed a skin allergy within a month. Contributing factors included lack of windows in his cubicle, proximity to a photocopy machine, persistent unpleasant odors, excessive tiredness, and irritation in his eyes, nose, and throat. Despite complaints, certain items like paint boxes were not removed, and increased noise and distractions added to his discomfort.
• Rahul’s allergic reaction worsened, necessitating medical attention and incurring expenses for doctor visits and medications. Seeking compensation, he approached his employer.
• KLM Consultant, holding a workplace compensation insurance policy, classified Rahul’s condition as an occupational disease and contacted the insurance company to cover its legal liability and compensate Rahul.
• The insurer, after reviewing Rahul's documentation, acknowledged the claim as an occupational disease and agreed to settle, covering medical expenses incurred by Rahul for his treatment.

Section 3(3) and Section 3(4)

• Section 3(3): The Central or State Government can specify diseases as occupational under the Act.
• Section 3(4): Compensation is only payable if the disease is directly linked to a specific injury arising from employment.

Employment

• A person working under an employer according to the terms set by the employer is considered an employee.

Personal Injury

• Compensation for personal injury is only applicable under certain conditions. The injury sustained by the employee must be a physical injury. In the case of Richmond Adult Community College v McDougall (2008), M experienced mental injuries and psychological disorders after being offered a job as a database assistant at a college. However, when the college discovered M's medical history and psychological disability, they retracted the job offer. M filed a disability discrimination claim against the college. The tribunal acknowledged M's mental impairment but determined that she did not meet the criteria for disability under Section I of the Disability Discrimination Act, 1995.

Accident

• Compensation is granted to employees and their dependants only if the injuries from the accident include occupational diseases. The accident must occur in the course of employment. The Act also applies to railway servants and others employed in capacities specified in Schedule 2 of the Employees Compensation Act. Individuals working in factories, mines, plantations, vehicles, construction sites, and certain other hazardous occupations fall under Schedule II.
• A fatal accident is one that results in the death or a significant risk of loss of life for the employee. In such cases, the employee may die or suffer severe disabilities and injuries. Conversely, non-fatal accidents are those that do not carry a high likelihood of death. In the case of non-fatal accidents, the employee or worker may experience disabilities or any form of personal injury.
• Both fatal and non-fatal accidents are covered by the Employees Compensation Policy, provided they lead to the contingencies outlined in the Act. Fatal accidents are classified as those resulting in death, permanent total disablement, permanent partial disablement, or fatal injuries. If any of these scenarios occur, the employees' compensation policy will cover the claim faced by the company. In the case of non-fatal accidents, the covered contingencies may not materialize. The employee or worker might not experience any form of disablement or injury from such accidents. If the employee or worker suffers from a disablement that lasts less than three days, the claim will not be paid. Consequently, many employees' compensation policies do not typically cover non-fatal accidents unless they cause a disablement lasting more than three days.
• In the case of Lister v Romford Ice and Cold Storage Company Limited, the House of Lords upheld the Court of Appeal's decision that an employee had a contractual duty to exercise reasonable care when using a vehicle at work. If the employer was liable for damages due to the employee's negligence, the employer could seek to recover that loss from the employee.

Arising out of and in the course of employment

• Three factors determine whether an act arises out of or in the course of employment:
• Engagement in Employer's Business: The employee must be engaged in the employer's business at the time of the injury, and not doing something for personal benefit.
• Location of Accident: The accident must occur at a location where the employee is performing their duties for the employer.
• Risk Incidental to Duties: The injury must result from a risk incidental to the duties of the work or services, or from inherent nature or condition of the employment.

Notional Extension of Employer's Premises

• Compensation is payable for disability or death of a person according to the Employees Compensation Act when there is a causal connection between the accident and the place of work. This is known as the Doctrine of Notional Extension of the workplace.
• The theory of this doctrine has been applied in various cases, such as Moondra & Co. v Mst. Bhawani. In this case, a truck driver was instructed by his employer to drive a petrol tanker. Upon discovering a leak in the tank, the driver sought permission from the employer to investigate the source of the leakage. While searching for the source, he lit a matchstick, causing the tank to catch fire. The driver sustained burn injuries and subsequently died.
• The court held that the family members of the deceased driver were entitled to compensation because the accident occurred at the workplace and in the course of employment.

Willful Disobedience of Orders or Safety Devices

• If an employee willfully disobeys explicit orders or refuses to comply with safety rules established for the protection of workers, an accident may occur. This applies when the employee disregards safety guards or other devices provided for their security. If the employee is aware of the safety measures in place and chooses to ignore them, it is considered a willful act.