Employer's Liability for Compensation | Labour and Industrial Law - CLAT PG PDF Download

Compensation under Agreement

A compensation agreement guarantees that an individual will receive payment for the services they provide to a company as an employee.

The Question of Compensation and Negligence of Employee
The issue of compensation and employee negligence is addressed in the context of contributory negligence. When both the employer and employee are negligent, the employer is liable to pay compensation only to the extent of their negligence. In cases where the employee is at fault, they will receive only a partial compensation amount.

Alternative Remedy under Section 3(5)

• An employee cannot claim the right to compensation for injuries if they have filed a suit for damages in a civil court against their employer regarding the same injury.
• No suit for damages can be maintained by an employee in any court of law.

Liability of Insurance Company

• If a claim is due to the insurance company, the company cannot escape liability arising from the claim simply because notice was not issued to them.
• For example, if a notice is issued to the owner of the vehicle, it is sufficient to hold the insurance company liable.
• In the case of Ram Karan v. Vijayanand, Ram Karan filed a petition under section 482 of the code of criminal procedure because he was illegally deprived of the benefits of premature release. This was considered a violation of Articles 14, 19, and 21 of the Constitution of India. The court held that he was entitled to be released according to the rules.

Liability of Insurance Company or Owner of Vehicle

• The question arises whether the insurance coverage is applicable to the insured employer-owners.
• Owners of motor vehicles, in relation to their liabilities under the Employment Compensation Act for motor accident injuries caused to their employees, would include additional statutory liability imposed on the insured employers under Section 40 of the Compensation Act.

Amount of Compensation Section 4

• Where death results from the injury- In case the employee dies, an amount equal to fifty percent of the monthly wages multiplied by a factor as per given in the Schedule 4 of the act or rupees eighty thousand is given whichever is more.
• Where permanent total disablement results from the injury- In case the employee has total disablement the amount given is sixty percent or rupees ninety thousand whichever is more.
• Where permanent partial disablement results from injury- In the case of permanent partial disablement, the compensation provided is equal to disability as sixty percent or rupees ninety thousand.

Compensation to be Paid When Due and Penalty for Default Section 4-A

• When the employer does not accept liability for compensation to the extent claimed, he shall be bound to make a payment may be provisional and such payment shall be deposited to the employee or the commissioner.
• The commissioner can direct the employer to pay interest in addition to the amount at the rate of twelve percent per annum.
• The rate of interest can also increase which may be specified by the Central Government.

Method of Calculating Wages Section 5

• The basis for the calculation of compensation is the monthly wage system, which refers to the amount of wages deemed payable for a month.
• Zubeda Bano v. Maharashtra Road Transport Corporation, 1990: In this case, it was established that batta does not constitute wages for computing compensation. Batta is paid to the workman per day to cover special expenses incurred due to the nature of the work.
• New India Assurance Co. Ltd., Hyderabad v. Kotam Appa Rao, 1995: In this case, when an employee has been serving the employer continuously for not less than twelve months preceding the accident, and the employer is liable to pay compensation, the employee will be entitled to one-twelfth of the total wages. The employer is required to pay the compensation due for employees in the last twelve months of that period.

Review Section 6

1. Any half monthly payment can be reviewed by the commissioner under this act if there is an agreement between the parties or if there is an order given by the commissioner.
2. A certificate of a qualified medical practitioner will be accompanied that there is a change in the condition of the employee subject to the rules and regulations under the Act.

Communication of Payments Section 7

1. Commutation of half-monthly payments: Any right to receive half-monthly payment agreement between the parties is commutation of payments.
2. If the parties do not agree and the payment continues for not less than six months then on the application of either party, the Commissioner will redeem the payment of a lump sum amount which was agreed by the parties.

Distribution of Compensation Section 8

• Rights of heirs of dependents
• Compensation will not be provided to the employee whose injury has resulted in death and lump sum payment will also be not provided who is under a legal disability.
• The compensation may be deposited to the commissioner and a direct payment will not be allowed by the employer to the employee.
• In the case of a deceased employee, an employer can make payment to any dependant advances.
• The compensation will amount to equal to three months' wages of the employee and the amount shall not exceed the compensation payable to the dependant.
• If the amount exceeds, it may be deducted by the commissioner from the compensation and repaid to the employer.
• An amount not less than ten rupees which is payable may be deposited with the commissioner on behalf of that person.
• The receipt of the commissioner will be sufficient discharge of the amount if any compensation is deposited with him.
• When any compensation is deposited with the commissioner and he is payable to any person, he may if the person to whom the compensation is to be payable is not a woman or a person with a legal disability then he may pay the money to the person who is entitled to get the compensation.
• When any lump sum amount is deposited with the commissioner and he is payable to a woman or a person who is legally disabled, such amount can be invested for the benefit of any other woman or a person with a disability. The commissioner may direct the amount in such cases.

Compensation Not to be Assigned, Attached or Charged Section 9

• Compensation not to be assigned, attached or charged, save as provided by this Act, no lump sum or half- monthly payment payable under this Act shall in any way be capable of being assigned or charged or be liable to attachment or pass to any person other than the workman by operation of law, nor shall any claim be set off against the same.

Notice and Claims of the Accident Section 10

• A claim for compensation cannot be entertained by a commissioner unless the notice of the accident is given in a certain manner. 

Power to Acquire Statements from Employers Regarding Fatal Accidents Section 10A

• When a commissioner receives information about the death of an employee due to an accident arising out of or in the course of employment, he can send a registered post or a notice to the employer of the employee.
• The employer is required to submit a notice within thirty days of service, detailing the circumstances of the employee's death and whether the employer is liable to deposit compensation.

Reports of Fatal Accidents and Serious Bodily Injuries Section 10B

• A notice must be given to the relevant authority when any accident occurs on the employer's premises resulting in the death of an employee or serious bodily injury.
• The person on behalf of the employer is required to send a report to the commissioner within seven days of the death or serious bodily injury, providing details of the incident.
• This requirement is applicable only when specified by the state government that the report is sent to a different authority instead of the commissioner.
• "Serious bodily injury" refers to injury to a limb, permanent loss of sight or hearing, fracture of limbs, or absence from work for more than twenty days.

Medical Examination Section 11

• When an employee reports an accident within three days, they will be examined free of charge by a qualified medical practitioner.
• If the employee refuses or obstructs the examination, their right to compensation will be suspended.
• If the employee leaves without being examined, their right to compensation will be suspended until they return for the examination.

Assessment of Loss of Earning Capacity

• The inclusion of "assessment of loss of earning capacity by the qualified medical practitioner" in Section 4(l)(c)(ii) is purposeful and not ambiguous.
• In the case where the Commissioner overlooks the medical practitioner's report, they cannot disregard it unless a second report from the Medical Board is requested, as seen in the case of New Asian nation Assurance Co. Ltd. v. Sreedharan, 1995.

Contracting Section 12

• Liability of Principal: When a principal contracts with a contractor for work execution, the principal is liable to pay compensation to the employee.Indemnification by Contractor: If the principal is liable to pay, they will be indemnified by the contractor or other parties from whom the employee can claim compensation.
• Agreement Settlement: The commissioner will settle the agreement between the principal and contractor regarding indemnity and compensation amounts.
• Accident Location: If the accident occurs at a location other than the workplace premises, the employee cannot claim compensation from the employer. In such cases, employees can recover compensation from the contractor instead of the principal.

Remedies of Employer Against a Stranger Section 13

• When an employee receives compensation for an injury caused by a third party, the third party becomes liable to indemnify the person who paid the compensation.

Insolvency of Employer Section 14

• When an employer has a contract with an insurer for employee liability, and the employer becomes insolvent or makes arrangements with creditors, the employee can recover compensation if the company is winding up due to insolvency.
• If the employer's contract with the insurer is void or voidable due to the employer's non-compliance, the insurer may prove in the liquidation proceedings for the amount owed to the employee.
• If the insurer's liability to the employee is less than the employer's liability, the employee can claim the balance amount in the insolvency proceedings or during liquidation.
• In the case of half-monthly compensation payments, the amount due will be treated as a lump sum. If redeemable, it will be proof of half-monthly payment.
• The insolvency of the employer does not apply in cases of voluntary winding up for company reconstruction or amalgamation with another company.

Compensation to be First Charge on Assets Transferred by Employer Section 14-A

• When an employer transfers assets or property before any compensation amount is due, the liability accrued before the date in law is the first charge on the transferred assets or property, especially if it consists of immovable property.

Special Provisions Relating to Masters and Seamen Section 15

• When a master of a ship is injured in an accident that occurs on the ship, there is no requirement for the seaman to provide notice of the accident in order to claim compensation for the injuries sustained.
• In cases of death of the seaman or the master, claims for compensation can be made within one year without the need for notice, starting from the date the claimant receives news of the death. If the ship is considered lost, claims can be made within eighteen months from the date of loss or deemed loss of the ship.

Special Provisions Relating to Captains and Other Members of the Crew of Aircrafts Section 15-A

• In the event of an accident involving the captain of an aircraft who is also the employer, there is no requirement for any crew member to provide notice of the accident.
• In cases of death of the captain or any crew member, claims for compensation can be made within one year without notice, starting from the date the claimant receives news of the death. If the aircraft is deemed lost, claims can be made within eighteen months from the date of loss or deemed loss of the aircraft.
• When an injured captain or crew member of an aircraft or ship is discharged from any position or when the testimony of a witness is taken by a judge or magistrate, the central or state government may initiate proceedings based on the admissibility of the evidence.
• The deposition or testimony of a witness is considered admissible if authenticated by the signature of the judge, magistrate, or consular officer before it is made, and if the accused or defendant had the opportunity to cross-examine the witness.
• If the deposition or testimony was made during a criminal proceeding in the presence of the accused, it is also admissible.

Special Provisions Relating to Employees Abroad of Companies and Motor Vehicles Section 15-B

• Special provisions regarding employees abroad and motor vehicles apply to individuals recruited by companies registered in India and under the Motor Vehicles Act, 1998.
• Notices of accidents and claims for compensation may be served on the company's agent, local agent, or owner of the motor vehicle in the country where the accident occurred.
• In case of the employee's death, the provisions of Section 15-B apply. Claims for compensation can be made within one year after the news of the claimant's death is received.
• The commissioner shall entertain claims for compensation, even if not preferred within the specified time.

Returns as to Compensation Section 16

• The state government can direct employers of specified classes to report the number of injuries and compensation amounts paid during the previous year.
• Employers may be required to submit returns regarding compensation to the state government.

Contracting Out Section 17

• If an employee enters into a contract or agreement to waive their right to compensation from the employer, it is considered null and void.
• The employee cannot seek compensation for personal injury arising out of employment, and the liability of any person entitled to pay compensation under the Act is reduced.

Penalties Section 18-A

• Penalties are imposed on individuals who fail to maintain required books under Section 10, make necessary reports under Section 10B, or inform employees of their rights under Section 17A.
• Penalties may include fines ranging from fifty thousand rupees to one lakh rupees.
• Prosecution under this section is not permitted.