important facets of labour laws -...

Important Facets of Labour Laws

By

Sri B.C. Prabhakar

&

Sri C.K Devappa Gowda

Advocates

# 54, II Floor, Nama Aurore Complex, Nagasandra Circle,

Basavanagudi,Bangalore-560 004.

080-26761877 / 26761733 : 9844033348

E-mail : [email protected]

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Need for Compliance

Multiplicity of Labour laws and their complexity underscore the need for proper compliance

Labour Laws compliance involves process of complying with statutory rules and prescribed procedure.

Reporting of compliance under the labour laws would be an effective tool for sound corporate governance in industry.

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Benefits of compliance

The Compliance of labour laws would benefit employees in terms of increased social security and congenial atmosphere

The compliance will bring about transparency in operation so essential to industrial peace.

Compliance is economical and non-compliance may prove costly.

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Employment Legislation in India may be broadly classified into five categories.

1. Norms and Standard Legislation.

2. Legislation regulating the terms and conditions of the service.

3. Social Security Legislation

4. Contract Legislation.

5. Training and Development Legislation

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Approach to Compliance

Prepare a checklist for all the applicable legislation to the Factory or the establishment as the case may be.

Preparation of checklist should be with reference to relevant statutory provisions and require thorough study and identification of checklist for compliance.

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1. NORMS AND STANDARD LEGISLATION

A. Factories Act, 1948

The object of Factories Act is to secure health, safety, welfare, proper working hours, leave and other benefits for the workers employed in the Factories and should be strictly implemented. Non compliance of the statutory provision will attract penal provision as prescribed under the Act.

The Act contains detail provisions relating to approval, licensing and registration of factories. Before the Factory commences production, clearance from the Pollution Control Board is to be obtained.

The Act mandates detailed provision regarding health and safety of the workmen, which includes special provisions relating to hazardous process.

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The Welfare Measures provided under the Act :

Provision of canteen where more than 250 workers are ordinarily employed. Facilities for washing ,storing & drying clothing , sitting , shelter and rest room. First Aid Appliances Provision of crèches where 30 or more women workers

are ordinarily employed. Lunch Room to be provided if there are more than 150 workers. Welfare Office with Ambulance room where there are 500 or more workers. Qualified safety Officers to be appointed if there are more

than 1,000 workers. A qualified Labour Welfare Officer to be appointed, if there are more than 500 workers.

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Working Hours: 48 hours in a week and 8 hours per day. A worker will be entitled double the rate of wages if he is engage to work beyond 9 hours per day and over 48 hours a week. A worker may be engaged on over time work maximum of 50 hours in a quarter.

The Act prohibits Employment of young persons less than 15 years of age.

The Act provides for allowing annual leave with wages @ 1 day for every 20 days of work.

Details provisions of contained regarding obligations of the employers and the penal consequences arising out of non-implementations of the provisions of the Act.

The Act provides for detailed provisions regarding enforcing and implementing the provision of the Act. The powers and functions of such enforcement officials are laid down.

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B. Shops and Commercial Establishments Act

This is a State enactment and each state has its own Act.

The Act provides for regulation of conditions of work of employment in shops and commercial establishments.

The Act contains detailed provisions relating to registration of establishments, hours of work, annual leave with wages provisions relating to prohibition of employment of children, prohibition of employment of women, young persons during night shifts.

Enforcement machinery and penalties for violation of the provisions of the Act are provided.

The control/management which is associated with person falling under the definition of ‘employer’ is the general management/control of the said establishment. It is a kind of overall management/control and not management /control of sections or departments or sub-sections or sub-divisions that functions under the establishment.

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C.The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959

The Act provides that the employer in every establishment

before filling up any vacancy in any employment shall notify that vacancy to such employment exchanges which may be prescribed & the vacancy is required to be filled up shall be notified to the employment exchange atleast 15 days before the date on which it is intended to fill up the vacancy or to hold written test/interview for selection.

The Act does not impose any obligation on the employer to recruit the persons refer to by the employment exchange to fill up any vacancy merely because that vacancy was notified to the employment exchange concern.

The Act also does not apply to employment domestic service and the employment the duration of which is less than 3 months and to any employment to do unskilled office work.

The Act casts obligation to submit returns as prescribed under the Act.

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D. The Contract Labour (Regulation & Abolition) Act:

Object of the Act: To regulate the employment of contract labour in certain establishments and to provide for its abolition in certain circumstances ad for matters connected therewith. Applicability : Every establishment in which 20 or more

workmen are employed or were employed on any day of the preceding 12 month as contract labour. Every contractor who employs or who employed on any day of the preceding twelve months 20 or more workmen.

Registration of Establishment: Principal employer employing 20 or more workers through the Contractor or the Contractor(s) on deposit of required fee in Form-1

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Revocation of Registration: When obtained by mis-representation or suppression of material facts, etc., after opportunity to the Principal Employer.

Prohibition of Employment of Contract Labour: The appropriate Government through issue of notification after consultation with the Board (and not Courts) has power to order the prohibition of employment of Contact Labour in any process, operation or other work in any Establishment. The employment of contract labour under the act is permissible in a different process/operation in the Industry unless it is prohibited in accordance with the procedure laid down under the Act.

Licensing of Contractors : Engaging 20 or more than 20 workers and on deposit of required fee in Form- IV and Valid for specified period.

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Revocation or Suspension & Amendment of Licences; When obtained by mis-representation or suppression of

material facts. Failure of the Contractor to comply with the conditions or

contravention of Act or the Rules. Welfare measures to be taken by the Contractor: The Act makes it mandatory on the part of the contractor

to provide certain welfare facilities. If the contractor fails to provide the same it shall be provided by the principle employer and he is entitled to recover the same from the contractor out of the bills payable.

Responsibility of Contractor for Payment of Wages: To pay timely and to ensure the disbursement of

wages in the presence of the authorized representative of the Principal Employer.

Rate of wages not less than the rates as fixed or prevailing such employment as fixed by agreement.

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2. Legislation regulating the terms and conditions of the service

Industrial Employment (Standing Orders) Act

The Act mandates employers in Industrial Establishments to formally define with sufficient precisions the conditions of employment under them and to make the said conditions known to workmen employed by them.

The Act applies to every industrial establishment wherein 100 or more workmen are employed or were employed on any day of presiding 12 months. ( 50 or more workmen for Karnataka)

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The Act stipulates that within six months from the date on which Act becomes applicable to an Industrial Establishment, the employer shall submit to the certifying officer, the five copies of the draft standing order proposed by him for adoption in the Establishment.

The draft shall make provision for every matter setout in the schedule to the Act which may be applicable to the Industrial Establishment.

The Act also provides the model standing orders and lays down that until certified standing orders are applicable, the model standing order will be applicable to the Industrial Establishment.

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The Payment of Wages Act

The Act guarantees payment of wages in time and without

any deduction except those authorized under the Act.

The Act also provides for responsibility for payment of wages, fixation of wage period, time and mode of payment of wages.

The Act does not apply to the persons whose wage is Rs.18,000/- or more per month.

The Act also provides that the worker cannot contract out of any right conferred upon him under the Act.

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The Minimum Wages Act.

The Act will be applicable to the scheduled employment and fixation of wages where the Government fixes the minimum rate of wages every year for scheduled employment and the same is revised every year.

The employer in the scheduled employment shall have to pay minimum wages fixed. Failure to do so will not only make him liable for prosecution but he shall also liable to pay penalty to the workmen concerned equal to 10 times the minimum wages payable.

The Supreme Court of India has held that an industry which cannot pay minimum wages has no right to exist. 17

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The Equal Remuneration Act

The Act provide for Payment of equal remuneration for men and women for similar type of jobs and for prevention of discrimination on the ground of sex against women in the matter of employment etc.

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The Maternity Benefit Act

The Act applies to the Factory, where 10 or more employees are employed or were employed on any day during preceding 12 months. To claim the benefit under the Act, a female employee should have worked not less than 80 days in 12 months immediately preceding the date of delivery. Total period of Maternity Leave available is 12 weeks i.e., 6 weeks prior to confinement and 6 weeks post delivery.

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The Payment of Bonus Act

The Act applies to every industrial establishment employing 10 or more workmen.

An employee to become eligible for Payment of Bonus under the Act should have worked for a minimum of thirty days in an accounting year.

The salary ceiling for coverage under the Act is Rs.10,000/- per month.

In case of those who are drawing salary between Rs.3,500/- and Rs.10,000/-, in their case for calculation bonus payable under the Act their salary shall deemed to be Rs.3,500/-.

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The minimum bonus payable under the Act is 8.33% of

the salary or wages, even if there is loss in the establishment.

The maximum bonus payable is 20% of the employee’s salary as Bonus in an accounting year.

The Act provides for gestation period for Payment of Bonus. For the first five accounting years, following the first accounting year in which the employer sells the goods produced or manufactured by him or rendered service, Bonus is payable only in respect of the accounting year, in which the profits are made.

After the expiry of the infancy period Payment of Bonus is a legal obligation under the Act and employer is bound ton pay at least the minimum bonus payable under the Act.

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Industrial Disputes Act

Primarily aims at regulating and harmonizing relationship between employer and the employees by method such as conciliation and adjudication. It lays down machinery for resolution of dispute between the parties.

The distinctive feature of the Act is that all Factories and

Establishments, irrespective of being registered or not under any other Act and regardless of the number of employees on the rolls will come under its purview. The Act applies to every business, trade, undertaking, service, avocation, etc., which is considered as an industry under the Act.

An individual workers can also raised an industrial dispute with regard to his discharge, dismissal, retrenchment or termination.

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The Act provides that no Employer who proposes to make any change in the condition of service applicable to any workman in certain specified matters shall do so without giving to the workmen likely to be affected by such change, a notice as to the nature of change proposed to be made or within 21 days of giving notice.

The Act provides for prohibition of strikes and lock outs

under certain circumstances and if lock out is declared or workmen resort to strike in contravention of the said stipulations, the lock out or strike as the case may be will be illegal. The appropriate Government is empowered to prohibit continuation of lock out or strike as the case may be.

Chapter V-A and V-B of the Act contained detailed procedure regarding layoff, retrenchment, transfer of undertaking, closure of undertaking, etc. There are some variations in the procedure depending upon the number of employees employed in the Establishment. 23

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Section – 33 of the Act lays down that the service conditions of the workmen shall remain unchanged during the Pendency of the Conciliation Proceedings before the Conciliation Officer or both or any proceedings before an Arbitrator or a Labour Court, or a Tribunal or National Tribunal, in respect of an Industrial Dispute. However, the Employer is at liberty to take action with regard to the matters not connected with the dispute. The Section also permits action by the Employer with the approval or permission as the case may be with regard to any disciplinary action against the workmen.

The Acts prohibits unfair labour practice on part of the

workmen as well as the Employers and the Schedule to the Act list the various Acts which could be construed as unfair labour practices on the part of the workmen as well as the Employer. 24

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A grievance redressal machinery shall be constituted in establishment having 20 or more workmen with one stage appeal.

Industrial Tribunal and Labour Court are empowered to transmit any award, order or settlement to a civil court having jurisdiction and such civil court shall execute the award, order or settlement as if it were degree passed by it.

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Trade Unions Act, 1926

The Act provides for Registration of Trade Unions and defines the Law relating to Registration of Trade Unions.

The General Scheme of the Trade Unions Act is that on compliance with certain stated conditions design to ensure that the Union is a bonafide Trade Union and that adequate safe guards are provides for the rights of its Members be entitled to Registration.

Only registered Union enjoys the rights and privileges under the Act. Minimum 7 workers of an Establishment can form a Trade Union and apply for Registration. The Employers may also form Association or Union and get it registered under the Act.

The Union and his members will there upon receive protection in certain cases in respect of both civil and criminal liability.

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The expenditure of Trade Union fund must be limited to the specified trade Union purpose.

The Act itself does not contain any provision for recognition of a Trade Union functioning in the Establishment or Industry.

In Maharashtra, there is a statute titled as “Maharashtra Recognition of Trade Union and Prevention of Unfair Labour Practices Act”, which deals with the Recognition of Trade Unions in Industry.

Recognition of Union is granted by the Managements to the Unions who satisfy the certain procedure and conditions as prescribed under Code of Discipline. The Code of Discipline is an agreed Code of Conduct between the Employers and the Workers’ Organisations at the 16th Cession of Indian Labour Conference held in 1958. 27

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3. Social Security Legislation The Employees Compensation Act – 1923

The Act provides for compensation to workmen by their employers for injury, which may be suffered by the workmen as a result of an accident during the course of employment.

The compensation is payable in case of death of a workman or suffering from permanent or partial disability on account of accident and temporary disability on account of accident in the course of and out of employment.

The Act prescribes the method for determining the payment of compensation in case of fatal accident and other accident which result in permanent/partial disability to the workman.

If the monthly wages of the workmen exceed Rs.8,000/-, his monthly wages for the purpose of calculation of compensation shall be deemed to be Rs.8,000/- only. 28

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Employees’ State Insurance – 1948.

The Act applies to Factories using power in the manufacturing process and employing 10 or more persons and non-power using factories employing 20 or more persons for wages.

The provisions of the Act are extended area wise by the State Government. In the event, there is no notification covering the particular geographical area where the Factory is situated, the Act is not applicable to the Factories situated in such uncovered area.

Any person employed for wages/salary upto Rs. 15,000/- in or in connection with the work of the establishment or factory is covered under the Act. The following shall be deemed as wages for the purpose of the Act: -

“Basic Pay, Dearness Allowance, House Rent Allowance, City Compensatory Allowance, Overtime Wages, Production Incentive when paid within two months, Night Shift Allowance, Heat, Gas and Dust Allowance, Meal and Food Allowance, Suspension Allowance, Layoff Compensation etc.”

The rate of contribution payable will be 4.5% of wages by the employers and 1.75% of wages by the employees.

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Liability to contribute would arise on the date when the establishment becomes a Factory and it is the duty of the employer to get the code number assigned and pay contribution. Application for registration shall be made within 15 days after

the Act becomes applicable. There are two contribution periods of 6 months duration in a

year in respect of each employee with the corresponding benefit period of 6 months each. The benefits available under the Act include sickness benefit,

compensation in case of accidents and maternity benefit. The non-payment of contribution by the employer would

attract not only damages but also penal action. The employer is liable to pay contribution in respect of contract

labour also in case of default by the contractor. The factories employing 10 or more persons irrespective of the

fact whether manufacturing process is being carried out with the aid of power or without the aid of power are covered. Voluntary retirement cases are also covered.

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Un-organised sector employees are also covered on account of introduction of new chapter V-A. Pechan card has been introduced for facilitating availing

medical benefit at any ESI hospital. Arrangements have been made with the multi-speciality

hospital for treatment of the insured persons and dependents.

Definition of Wages

Section 2(22) of the ESI Act defines wages. An analysis of the definition of “wages” reveals that it consists of four parts:

The first part refers to all remuneration paid or payable in cash to an employee if the terms of the Contract of Employment, express or implied are fulfilled.

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The second part of the definition of “wages” includes any payment to an employee in respect of any period of authorised leave, lock out, strike which is not illegal or layoff.

The third part of the definition includes other additional remuneration if any, paid at an interval not exceeding two months.

The Fourth part of the definition of the term “wages” does not include any Contribution paid by the Employer to any Pension fund or provident fund or under the Act, the Travelling Allowance or the value of any travelling concession or any sum paid to the person employed to defray the special expenses entailed on him by the nature of his employment or any Gratuity payable on discharge.

Note: The ESI Corporation has issued clarification with regard to the definition of wages from time to time with regard to the components of wages which shall be deemed as wages for the purpose of ESI Contribution and those which are not to be deemed as “wages” for the purpose of ESI Contributions. Some of the items which are deemed as “wages” and others not deemed as “wages” are given below:

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SL. No

To be deemed as wages

1 Basic Pay

2 Dearness allowance

3 House Rent Allowance

4 City compensatory allowance

5 Overtime wages (but not to be taken into account for determining the coverage of an employee.

6 Payment for day of rest

7 Production incentive

8 Bonus other than statutory bonus

9 Night shift allowance

10 Any travelling Allowance or the value of any travelling concession – Conveyance Allowance.

11 Heat, Gas & Dust Allowance

12 Payment for un-substituted holidays

13 Meal/Food allowance

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SL. No


14 Subsistence Allowance

15 City compensatory allowance

16 Lay off compensation

17 Children education allowance (not being reimbursement for actual tuition fee).

18 Conveyance Allowance

19 Interim Relief

20 Attendance Bonus

21 Life Insurance Premium Subsidy

22 Medical Allowance

23 Bata paid to running staff

24 Over-Time Allowance

25 Shift Allowance paid to the employees who works on shift duty in odd shift.

26 Location Allowance paid in addition to Dearness Allowance to meet high House Rent.

27 Compensatory Allowance

28 Cash handling allowance paid to Cashier.

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SL.No


29 Supervisory Allowance

30 Additional pay paid to training staff.

31 Charge Allowance

32 Steno/Typist Allowance

33 Plant Allowance

34 Canvassing Allowance

35 Photo copier /Printer Allowance

36 Personal Allowance /Special Allowance.

37 Machine Allowance, Computer Allowance

38 First-aid Allowance

39 Personal Allowance / Pay over and above Dearness Allowance for skill efficiency or past records.

40 Area Allowance given to the employee living in particular area to meet the high cost of living in that area.

41 Ex-gratia payment if made within an interval of two months.

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SL.No

Not to be deemed as wages

1 Contribution paid by the employer to any pension, provident fund or under ESI Act.

2 Sum paid to defray special expenses entailed by the nature of employment – Daily allowance paid for the period spent on tour.

3 Gratuity payable on discharge

4 Pay in lieu of notice of retrenchment compensation.

5 Benefits paid under the ESI Scheme.

6 Encashment of leave

7 Payment of Inam which does not form part of the terms of employment.

8 Washing allowance for livery

9 Incentive Bonus

10 Annual Commission

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SL.No

Not to be deemed as wages

11 Production Bonus paid at interval exceeding two months.

12 Canteen Subsidies

13 Service Charges

14 Newspaper Allowance

15 Commission paid to dealers and agents when no regular wages are paid and it is not obligatory on the part of such dealer and agent to attend to the factories / Establishments and they are paid commission only on the basis of quantum of sales.

16 Fuel and petrol allowance

17 Shoe allowance

The Employees’ Provident Funds and Miscellaneous Provisions Act

The Act came into force in 1952 to ensure compulsory Provident Fund and comprises of the following schemes: - o Employees’ Provident Fund, 1952. o Employees’ Deposit-Linked Insurance Scheme, 1976. o Employees’ Pension Scheme, 1995 (replacing the earlier

Family Pension Scheme of 1971).

The Act applies to Factories which employ 20 or more persons and are engaged in the manufacture of items specified in the schedule to the Act.

The Act would be applicable to other industries and class of establishments notified by the Central Government from time to time in the Gazette.

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The establishment not covered under the Act may also apply for coverage under the provisions of the Act on Voluntary basis.

Once, the establishment opts for coverage on Voluntary basis shall be required to comply with all the provisions of the Act at par with other covered establishment and cannot opt out of coverage on a subsequent date.

The Act applies to the those employees whose pay does not exceed Rs.6,500/- per month. Those employees whose salary exceeds the said sealing are treated as excluded employees.

The Act would cover all employees including casual, part time, daily wages and other employees except excluded employees.

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The membership of an eligible employee under the EPF Act, 1952 is compulsory from the first day of his appointment; all the eligible employees in the establishment are to be extended the benefit of the Act.

The employer is required to contribute 12% of the salary average and employee is required to contribute the equal amount.

On the coverage of establishment the employer is required to deposit the following dues in the account noted against each:

P. F. Contribution @12% plus 3.67% in Provident Fund Account No.1

Pension fund contribution @ 8.33% in Pension Account No.10.

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The administration charges (Provident Fund) @ 1.1% of the salary in Account No.2.

Insurance fund contribution @ 0.5% of the salary to be deposited in Account No.21.

Administration charges (E.D.L.I.) @ 0.01% of the salary of the

members. All the remittances are to be remitted in one challan in the State

Bank of India by a single cheque favoring SBI Account of Employees Provident Fund. The amount can also be remitted in cash.

The challan remittance along with form 12A is to be sent to RPFC

by 5th of the following month. The remittances can be made up to 15th of the following month.

The establishment is required to maintain regular record of

amount deducted from the salary of the member by providing appropriate columns in the pay sheet which is open to the employee for inspection.

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The Provident Fund Scheme has been amended in 2008 for to provide for coverage of International Workers.

An International worker may be an Indian worker or a foreign national. This means an Indian worker who has divided his/her career between India and another country with whom India has entered into a bilateral Social Security agreement or a foreign national working in India.

A ‘detached worker’ posted in an establishment in India but contributing to the social security programme of the source country in terms of the Bilateral Social Security Agreement signed between that country and India shall be an ‘excluded employee’ under these provisions.

An employee, holding or entitled to hold an Indian passport and employed by an establishment covered under the EPF and MP Act, 1952 is an Indian employee under the Special provisions in respect of International workers.

Members of the fund - a) Every International worker, other than an ‘excluded employee’ from1stNov.2008. b) Every excluded employee, on ceasing the status, - from the beginning of the month following that in which he/she losses the status.

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Withdrawals are permitted only under the following circumstances:-

On retirement from service in the establishment after attaining 58 years of age.

On retirement on account of permanent and total incapacity to work due to bodily or mental infirmity as certified by the prescribed medical officer / registered practitioner.

On suffering from tuberculosis, leprosy or cancer, even if contracted after leaving the service on the grounds of illness but before payment has been authorised.

Upon satisfying the conditions specified in the Social Security Agreement (SSA) entered into between the Government of India and the other country in respect of a member covered under such agreement.

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Principles and Tests (S.C.C.B)

Whether industrial establishments owned by the same management constitute one establishment or separate and independent units must be decided on the facts of each case.

Wenger & Co. Vs. Their Workmen, 1963 (6) FLR 303 (S.C.C.B) “This question has been considered by this court on several occasions. Several factors are relevant in deciding this question. But it is important to bear in mind that the significance or importance of these relevant factors would not be the same in each case; whether or not the two units constitute one establishment or really two separate and independent units, must be decided on the facts of each case……… “……. The test of functional integrality or the test whether one unit can exist without the other, though important in some cases, cannot be stressed in every case without having regard to the relevant facts of that case, and so, we are not prepared to accede to the argument that the absence of the functional integrality and the fact that the two units can exist one without the other necessarily show that where they exist they are necessarily separate units and do not amount to one establishment………..” 44

Establishments held-Separate (S.C.2J)

In the absence of supervisory, financial or managerial control, two units cannot be treated as one merely on the basis of common ownership.

RPFC Vs. Dharamsi Morarji Chemicals Co. Ltd., 1998 I LLJ 1060: 1998 (80) FLR 561 : 1998 III LLN 932 : 1998 II CLR 151 : 1998 SCC (L & S) 584 : 1998 (2) SCC 446 (S.C.2J)

“………….So far as this contention finding reached by the High Court, as extracted earlier, clearly shows that there was no evidence to indicate any such interconnection between the two factories in the matter of supervisory, financial or managerial control. Nothing could be pointed out to us to contradict this finding. Therefore, the net result is that the only connecting link which could be effectively pressed in service by the learned counsel for the appellant for culling out interconnection between Ambarnath factory and Roha factory was that both of them were owned by a common owner, namely, the respondent-Company and the Board of Directors were common. That by itself cannot be sufficient unless there is clear evidence to show that there was interconnection between these two units and there was common supervisory, financial or managerial control. As there is no such evidence in the present case on the peculiar facts of this case, it is not possible to agree with the learned counsel for the appellant that Roha factory was a part and parcel of Ambarnath factory or it was an adjunct of the main parent establishmnet functioning at Ambarnath since 1921.”

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Analysis of wages for the purpose of either inclusion in or exclusion from basic wages under EPF Act

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SL.No Wage Components Coverage Basis

1 Basic wages or basic pay

Included Sec.2(b)

2 Special pay or Special allowance

Included if it is in the nature of basic pay but excluded if it is DA

Gordon Woodroffe Ltd Vs. Regional Commissioner, Employees Provident Fund 2002, II LLJ 653 (Mad.HC)

3 Dearness allowance Excluded from basic wage (since included only under sec.6)

Sec.2(b) (i)

4 Wages during leave Included Being contract of employment

5 Wages during rest or holiday

Included Being contract of employment

6 Cash value of food concession

Excluded (from basic wage)

Sec.2(b)(i)

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7 Free-food / Tiffin allowance

Excluded (from Basic wage)

8 HRA Excluded Sec.2(b)(ii)

9 Travel Concessions allowance

Excluded

10 City compensatory Excluded

11 Retaining allowance, retention allowance

Excluded (since included only u/s.6)

12 Subsistence Allowance

Included Analogy of ESIC case rendered in popular automobiles is adopted(1997 AIR(SC)3956)

13 Project allowance Excluded

14 Night Shift allowance or night allowance

Excluded

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15 Overtime allowance Excluded Sec.2(b)(ii)

16 Leave Encashment Excluded Manipal Academy of Higher Education Vs. Provident Fund Commissioner, 2008 II LLJ 666(S.C2J)

17 Bonus Excluded Sec.2(b) (ii)

18 Production or incentive bonus

Excluded T.I Cycles of India, Ambattur, Chennai Vs. M.K Gurumani & Ors., 2001 II LLJ 1068 (SC 2J)

19 Contract bonus Excluded

20 Service charges collected from customers and paid to employer

Excluded The Rambagh Palace Hotel, Jaipur Vs. The Rajasthan Hotel Workers Union, Jaipur, 1977(34) FLR 12 (SC 3J)

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21 Contribution to PF pension or for any benefit under any law

Not connected

22 Gratuity on discharge Not Connected

23 Retrenchment Compensation

Not Connected

24 Closure Compensation Not connected

25 Lay off Compensation Included if paid for illegal lay off

P.V Joseph Vs. Official Liquidator & Others 2001 II LLJ 1217(Ker.HC)

26 Inam Excluded Greysham & Company Vs. RPFC, 1978 II LLJ 95 (Del.HC)

27 Medical / Sickness allowance

Excluded

28 Maternity Benefit Included Since wages on leave included

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29 Good work reward Included DCM Shriram Consolidatsed Ltd Vs. The Regional Provident Fund Commissionder, 2004 III LLJ 396(Raj. HC)

30 Ex-gratia adhoc payment

Excluded Gurukripa Beedi Industry (Pvt) Ltd Bantwal, Dakshina Kannada Vs, Assist Provident Fund Organization Mangalore & Anr 2010 I LLN 228(Karn. HC)

31 Special Allowance (as per Settlement) in the nature of incentive

Excluded Gurukripa Beedi Industry (Pvt) Ltd Bantwal, Dakshina Kannada Vs, Assist Provident Fund Organization Mangalore & Anr 2010 I LLN 228(Karn. HC)

32 Educational allowance

Excluded

33 Notice pay in lieu of termination

Excluded India United Mills ltd Vs. RPFC, 1959 II LLJ 733 (Bom. HC)

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34 One month wage under sec. 33(2)(b) of Industrial Disputes Act

Excluded Dinesh Khare Vs. Industrial Tribunal 1982 II LLJ 17 (Raj.HC)

35 Back wages Excluded Swastik Textile Engineers Pvt.Ltd Vs. Virjibhai Mavijibhai Rathod & Anr. 2008 II LLJ 533(Guj HC)

36 Canteen subsidy Excluded Regional Provident Fund Commissioner, Tamilnadu & Pondicherry, State Employees Provident Fund Organisaiton, Chennai Vs. Wipro Ltd. (represented by Export Business Manager Vellancheri & Anr. 2009 IV LLJ 513(Mad. DB)

37 Annual Increment Excluded If it is in the nature of basic wage

Before the Authority under Section 14B of EPF Act

The imposition of damages under section 14B are quasi – penal in nature. The object of imposing damages is to correct the defaulting Employer who has been in the habit of making deliberate delay in remitting the Contribution. The main object of imposing damages is only to see that the default is not repeated. Therefore, the Authority is required to ensure before ordering for imposing the damages, whether there is a deliberate delay on the part of the Employer in remitting the P.F. Contribution. In other words, there must be a mens-rea on the part of the Employer in not remitting the contribution within the stipulated period. Only in such an event, the Statutory Authority has to exercise power under Section 14-B of EPF & MP Act, 1952.

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It is well settled that imposing of damages should not be automatic and hence the same cannot be imposed as a matter of course. The Authority under section 14B is a Quasi-Judicial Authority. As a Quasi Judicial Authority, the Authority has to exercise his power judiciously. It is expected of the 14-B Authority to examine the genuine grounds for not remitting the Contribution within the period prescribed under the Act. Therefore, the discretionary power is cast upon the Authority to appreciate the bonafide reasons.

Hon’ble Supreme Court in the case of Regional P.F. Commissioner Vs. S.D. College & Others, reported in 1997 II LLJ 55 held that the Regional P.F. Commissioner has a discretion to reduce the percentage of damages.

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In the case of M/s Hindustan Steel Ltd., vs. The State of Orissa (AIR 1970 S.C. 253), the Hon’ble Supreme Court of India held as follows:

“…. An Order imposing penalty for failure to carry out a statutory obligation is the result of a quasi – criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter fo discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose the penalty, when there is a technical or venial breach of the provisions of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute…”

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In Organo Chemical Industries and another vs. Union of India and Others, reported in 1979 (II) LLJ 416, it has been held that the power of the Regional P.F. Commissioner to impose damages under S.14B is a quasi- judicial function. It must be exercised after notice to the defaulter and after giving him a reasonable opportunity of being heard. The discretion to award damages could be exercised within the limits fixed by the statute. Having regard to the punitive nature of the power exercisable under S. 14B and the consequences that ensue therefrom, an order under S. 14B must be a speaking order containing the reasons in support of it. The guidelines are provided in the Act and its various provisions, particularly in the word “damages” the liability for which in S. 14B arises on the “making of default”. While fixing the amount of damages, the Regional P.F. Commissioner should take into consideration various factors viz., the number of defaults, the period of delay, the frequency of defaults and the amounts involved. The word “damages” in S. 14B lays down sufficient guidelines for him to levy damages.

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In the case of Cable Corporation of India vs. Union of India & Anr, 2007 (1) LLJ 300, it has been held that the Supreme Court in its decision in Organo Chemical Industries that that the power under Section 14-B is quasi-judicial in nature and one of the safeguards against an arbitrary exercise of powers is the recording of reasons which would establish the basis or foundation of the determination.

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In the case of Bhuvaneshwar City Distribution Division vs. Union of India reported in 1998 (2) LLJ 1044, it has been held that the delayed payment of contribution does not ipso facto invite levy of damages. If the employer furnishes sufficient cause for the delay, the authority may not levy damages in a given case. However, on the facts and circumstances fo the case and keeping in view that the Act is a beneficial legislatin for the employees in factories and establishments and to avoid further litigation between the parties levy of damages was restricted to 17% per annum on the arrears of contribution. It was further observed that if the recalculation results in refund of damages already recovered from the employer the damages were directed to be refunded with interest, as per the order to be passed by the Provident Fund Commissioner as required under Para 60 of the Employees’ Provident Funds Scheme, 1952.

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Division Bench of Hon’ble High court of Kerala in the case of Employees Provident Fund Organization vs Sreekamakshy Agencies Pvt. Ltd., 2013 LLR 833 has held as under;

“Before the learned Single Judge, the 1st respondent/writ petitioner relied on the decisions in ESI Corporation v. Premanandan [2007 (2) KLT 666], Employees State Insurance corporation v. HMT Limited and another[(2008) 3 SCC 35] and Harrisons Malayalam Limited (M/s.) v. Regional Provident Fund Commissioner and Others [2012 (1) KHC 243], to advance their case, while the Standing Counsel for the Organization relied on the decision in Indian Telephone Industries Limited v. Asst. P.F. Commissioner and Others [2006(3) KLJ 698] to canvass for the position that financial problems cannot be a ground to reduce or waive damages. It was also argued by the learned counsel for the Organization that the damages levied being compensatory in nature, the learned Single Judge erred in reducing the quantum, especially since no discretion is cast on the authority to reduce the quantum.

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Payment of Gratuity Act, 1972

The Act provides for a scheme for payment of Gratuity to employees engaged in factories, mines, oil fields, plantations, ports, railway companies, shops or other establishments.

Gratuity shall be payable to an employee on termination of his employment after he has rendered continuous service for not less than 5 years.

o On his superannuation

o On his retirement and resignation

o On his death or disablement due to accident or disease.

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Legal Heirs or nominees of the diseased employee will be entitled to receive gratuity, even if the employee had not completed 5 years of service.

The amount of gratuity payable is 15 days wages for every completed year of service but, the wages for the month will be calculated as if the month comprises 26 days only.

The maximum amount of gratuity payable to an employee is Rs.10,00,000/-.

There is no salary ceiling for coverage under the Act. Gratuity can be forfeited, if the services of the employee are terminated on account of misconduct resulting in damage or loss or destruction of property of the employer.

Loss is deducted from the amount of gratuity payable to the employee.

If the services of the employee is terminated for proven misconduct of (a) Riotous or disorderedly conduct, (b) any other act of violence committed by the employee or (c) an offence involving in moral turpitude committed by the employee during the course of employment, gratuity may be wholly or partly forfeited. 60

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5. Training and Development Legislation:

The Apprentices Act:

The Act imposes statutory obligation on every establishment to train apprentices in the trade as specified by the regional/state apprentice adviser, in their establishment.

The employer has an obligation to provide apprentices with the training in his Establishment in accordance with the provisions of the apprentices act and the rules made there under.

The employer shall ensure that a person who possess the prescribed qualification is placed in charge of training of apprentice and carry out the obligation under the contract of apprenticeship.

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National & Festival Holiday 1963

An Act to provide for the grant of National & Festival Holidays to persons employed in Industrial Establishments .

Every employee should be allowed 3 national and 7 festive holidays in a year

Employee who works on Holiday to be paid twice the rate of Ordinary wages

Statement of National and Festival Holidays to be sent to the Labour Inspector and copy of the same to be displayed on the notice board.

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BOCW Act

REGISTRATION OF ESTABLISHMENT

The Act applies to every establishment which employs or had employed on any day of preceding 12 months, 10 or more building workers in any building or other construction works.

While arriving at the above number of workmen, the building workers employed in different relies in a day either by an employer or by the contractor shall be taken into account in computing the number of building works employed in the establishment.

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Every employer to whom the Act applies should obtain registration of the office of establishment by submitting application to the specified authority.

The Rule 15 prescribes form in which the application for Registration of the establishment is to be made.

The certificate of Registration is non-transferable.

The number of workmen employed as building workers in an establishment shall not on any day exceed the number specified in the certificate of Registration

The fees paid in Registration is not refundable.

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On completion of the construction work, the employer shall submit written notice to the inspector having jurisdiction intimating the actual date of commencement or completion of the building or other construction work.

The schedule of fee payable for Registration is on the basis of the number of construction workers employed.

i. Upto 100 it is - Rs. 1,000/-

ii. Upto 100 but does not exceed 500 - Rs. 2,500/-

iii. Exceeding 500 - Rs. 5,000/-

For each amendment 10% of the above fees shall be deposited.

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Cigarettes and Other Tobacco Products , (Prohibition of Advertisement and Regulation of Trade and Commerce , Production , Supply and Distribution) Act, 2003

DISPLAY OF BOARD The Board shall be displayed as

specified in schedule 2 of the rules.

The Board shall contain the warning “ NO SMOKING AREA – SMOKING HERE IS AN OFFENCE.

It shall be in ENGLISH or one Indian language as applicable.

The Board shall be of a minimum size of 60cms X 30cms of white back ground. 66

NO SMOKING AREA

“SMOKING HERE IS

AN OFFENCE”

BCP

http://www.inmagine.com/wses042/wses042368-photo

Cont…

The Board shall contain a circle of not less than 15 cms outer diameter with a red perimeter of not less than 3 cms wide with a picture, in the centre, of a cigarette or beedi with black smoke and crossed by a red band.

The width of the red band across the cigarette shall equal the width of the red perimeter.

The penalty is Rs. 200/- which may increase to Rs. 1000/- depending upon the seriousness of the offence.

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http://www.quitsmoking.com/signs/hyko/nosmokingredblackongrayd20.htm

A specimen Checklists Minimum Wages Act: Check whether employment included in the Schedule as per Act

and / or notification. Whether paid minimum rates of wages as fixed by government

including cost of living allowance/DA. Whether maintained Register of wages in the prescribed form. Whether wage slips issued to employees. Whether signature/thumb impression obtained on register of

wages/wage slip. Whether muster roll maintained at the work spot for recording

attendance of employees. Whether maintained registers of fines, deductions for damage or

loss caused to employer.

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A specimen Checklists Payment of Wages Act:

Whether displayed notice containing abstract of the Act and Rules

Whether wages paid with in the stipulated time.

In case of termination whether wages paid with in 2 days of termination.

Whether wages of a deceased person paid to his nominee.

Whether deductions are made as authorized by or under the Act and Rules

Whether deductions for loss or damage caused to the employer made and recorded in the register.

Whether separate register of fines imposed kept and amount credited to a separate account to be remitted to welfare fund or to be used for the benefit of the employees. 69

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A specimen Checklists Payment of Bonus Act:

Check whether the Act is applicable to the establishment.

Check whether it is a new establishment or an establishment in public sector.

Check whether bonus is paid to all employees drawing salary or wage not exceeding Rs. 10,000/- per month.

Employer to maintain : -

o Register in Form A showing allocable surplus.

o Register in Form B showing set-on and set-off allocable surplus.

o Register in Form C showing Bonus paid, deductions made in respect of the employees for each accounting year.

To submit annual return in Form – D within 30 days of the expiry of time limit for payment of bonus. 70

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Thank You

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important facets of labour laws -...

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