LABOUR LAW

MODULE 1: HISTORICAL PERSPECTIVES ON LABOUR LAW – LABOUR

JURISPRUDENCE AND INDUSTRIAL RELATIONS
Importance of Labour Law
Labour law also known as employment law is the body of laws, administrative
rulings, and precedents which address the legal rights of, and restrictions on,
working people and their organizations. As such, it mediates many aspects of
the relationship between trade unions,employers and employees. In other
words, Labour law defines the rights and obligations as workers,union
members and employers in the workplace. Generally, labour law covers:
 Industrial relations – certification of unions, labour-management
relations, collective bargaining and unfair labour practices;
 Workplace health and safety;
 Employment standards, including general holidays, annual leave,
working hours, unfair dismissals, minimum wage, layoff procedures and
severance pay.
The reasons why Labour law is important/ Need of Labour Legislation
 Improves industrial relation i.e. employee-employer relations and
minimizes industrial disputes.
 Prevents workers form exploitation by the employers or management
 Helps workers in getting fair wages
 Minimizes labour unrest
 Reduces conflicts and strikes etc.
 Ensures job security for workers
 Promotes better environment in the industrial system
 Fixes rest pauses and work hours etc.
Policies taken in consideration in making labour legislation
 Wages
 Right of workers
 Strikes, lockouts
 Industrial dispute
 Risks in factories and mines etc.
 Working condition

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  Working hours
 Women & children
Salient features/ Fundamental Principles of Labour Legislation
 Social Justice (Maternity benefits, Pensions etc.)
 Social Equity (Right to Equality; No bias/ discrimination
 International Uniformity
 National Economy
Meaning of Industrial Jurisprudence
The term “jurisprudence” denotes knowledge of law. The term ‘industrial
Jurisprudence’ primarily denotes the literature regarding Knowledge of law in
relation to labour and industry, derived from labour legislations, constitutional
frame-work and the judicial law-making in a given country.
The scope of industrial jurisprudence not only covers the protection of
interests of the employees but it also aims at securing a cordial relationship
between the employers and employees in a working unit.
1.3. From Laissez faire to welfarism and to globalization: transition from
exploitation to Protection and from contract to status: changing perspectives
on labour
 The employer— employee relationship forms the most important class
of legal relationship in the area of labour relations.
 The very first stage in the evolutionary ladder of employer and
employee relationship was the concept of “master and servant”. Under
this concept the employee was simply a servant whose services were
terminable at the will of the master. The servant was a slave and the
status of the slave governed the rights and obligations arising between
the master and servant.
 In the second stage of evolutionary development, the concept of status
of slave which had governed the rights and obligations of workers in
ancient society gradually disappeared and its place was taken by the
concept of contract of employment in common law. In the heyday of
laissez faire the state was a mere spectator of what was happening in
society unless there was breach of peace and order.
 In the third stage the emphasis shifted from laissez faire Government to
the Welfare State. Under laissez faire the activities of Government were

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 limited to collection of revenue, maintenance of peace and order and
defence against external aggression. Otherwise, it was total non-
interference in all other matters affecting society. This form of
Government led to major social problems including anarchy in industrial
relations and exploitation of labour giving rise to serious social tensions.
Consequently, for the State to survive it had to shift to a system of social
responsibility for certain minimum standard of individual and communal
welfare, which took the form of Welfare State.
 In the fourth stage, the emphasis has shifted to Globalization. In India,
the process of liberalization started in 1991. The balance of power
shifted in the favour of the employers. Apart from the pressure from the
international market, international bodies like IMF also exerted pressure
to change labour policies in India. Employers pushed for workforce
reduction, given their inability to retrench employees, they introduced
policies of voluntary retirement schemes. However, Indian state has and
is still playing an important role in the country’s industrial relations. The
basic purpose of the state intervention has been to maintain industrial
peace, but recently with the advent of globalization the policy is
changing towards a more competitive approach.
 In the field of industrial relations this was reflected in State's
interference in the terms and conditions of employment in industry
through various Statutory provisions, giving due regard to the status of
the workmen, and not leaving it to be determined by private
agreements between employer and employees. Thus, in service matters
the modern tendency is to withdraw such matters more and more from
the domain of contract into that of status by increasing state regulation
of industrial relations.
 The evolution of Central legislative measures to govern industrial
relations in India, can be traced back to the earliest piece of labour
legislation namely. Employers' and Workmen's (Disputes) Act, 1860, to
the present Industrial Disputes Act, 1947.
{{Concept of Laissez faire:
 Minimum control of govt./ state
 Free Enterprise
 Power concentrated in the hands of individual
 Law and order not counted as subject of the state.

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Drawbacks of Laissez faire
 Income inequality
 Failure to represent the interests of the entire society}}
Q. How is welfare state achieved after WW II
Ans.
 Concept of Laissez faire
 Drawbacks of Laissez faire
 Need of welfare state
 Role of industrial jurisprudence
1.4. Concept of Industrial Relations: Factors affecting industrial relations,
Importance of Industrial Relations
Principles of Industrial Jurisprudence
1. Right of workmen to form associations & unions.
2. Right of workmen to bargain collectively for the betterment of
conditions of service.
3. Shift from the doctrine of Laissez faire to a welfare State.
4. Tripartite consultation as a solution of industrial/ labour disputes
through participation of workers, employers and Govt.
5. The State must interfere as the protector of social goods.
6. Minimum standards must be guaranteed by State legislations.
Factors affecting Industrial Relations
 Institutional factors
 Economic factors – Mix of communist and capitalist economy – Demand
and supply forces.
 Technological factors – Increase in automation; Decrease in manpower
demand.
 Cultural and social factors – Religion; culture; lingo; ethnicity etc.
 Political factors – Trade Unions and Associations affiliated to political
parties.
 Govt. factors – Policies and law made by the govt.

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1.5. Growth of Industrial Relation Legislation, Constitutional Framework and
Industrial relations, Concept of collective bargaining and Tripartism.
Growth of Industrial Relation Legislation
 Industrial Relations under British Rule: India was expected to be a
colonial market for British goods. Establishment of the first cotton mill in
Mumbai in 1853 and jute mill in Kolkata. Working condition of the
workers, at that time, were harsh with very low pay. This gave rise to
various disputes between the management and employees.Disputes
between the management and employees resulted into enactment of
Factories Act, 1881 which granted certain rights to the workers.
 During 1st world war, prices of all products went up and profit soared,
but the wages of employees were still the same. Due to this, the no. of
strikes was quite high at that time. During this time, The Workmen’s
Compensation Act, 1923, The Trade Union Act, 1926 and The Trade
Disputes Act, 1927 were enacted. Due to these legislations, the workers
started getting shares in the profit but still their share and wages were
low for survival.
 The year following the world war II involved the most workers’ upheaval
and saw the establishment of the two most important labour
legislations:
 The Industrial Employment Act, 1946
 The Industrial Disputes Act, 1947
 The post-independence era saw a developing relation between industry
and labour. The legislations enacted in the post-independence era were:
 Factories Act,
 Minimum Wages Act, and
 Employees’ State Insurance Act, 1948
 In the Post-globalization (1991 onwards) era, significant changes in the
social, economic, technological and political environment of Indian
business were brought which impacted industrial relations significantly.
Constitutional framework and Industrial Relations
 Labour is in the concurrent list of the Constitution on which both the
Centre as well as the States have the power to make laws. Article 254 of
the Constitution provides that in case of any repugnancy between the
Union and the State legislation, the legislation of the Union shall prevail.

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 Articles 39, 41, 42 and 43 have a special relevance in the field of
industrial legislation and adjudication. In fact, they are the substratum of
industrial jurisprudence.
 Article 39 accentuates the basic philosophy of idealistic socialism, which
is enshrined in the Preamble of the Constitution. It provides a motivation
force to the directive principles by laying down that the State shall direct
its policy towards equal pay for both men and women.
Case no. 10: State of Haryana Vs Rajpal Sharma
According to article 39 (d) there must be equal pay for equal amount of
work. Henceforth, The supreme court held that men and women teachers
should not be discriminated and should be paid equally whether they
belong to a private school or a government school. Teachers employed in
private schools are entitles to the same salary and allowances as the
government teachers are entitled to.

 Article 41 lays down that the State shall, within the limits of its economic
capacity and development, make effective provision for securing the
right to work, to education and to public assistance in cases of
unemployment, old age, sickness and disablement, and in other cases of
undeserved want.
 Article 42 enjoins the state government to make provision for securing
just and humane conditions of work and for maternity relief.
 Article 43 makes it obligatory for the State to secure by suitable
legislation or economic organisation or in any other manner to all
workers, agricultural, industrial, or otherwise, work, a living wage,
conditions of work ensuring a decent standard of life and full enjoyment
of leisure and social and cultural opportunities.
 Article 43-A makes it obligatory on the State to take steps by suitable
legislation or otherwise to secure the participation of workers in the
management of undertakings and industrial establishments.
 Thus, social security is guaranteed in our Constitution under Articles 39,
41 and 43. The Employees’ State Insurance Act, 1948 is a pioneering
piece of legislation in the field of social insurance. The Employees’ State
Insurance Scheme provides for benefits in cash except the medical
benefit, which is in kind.
 The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
and the Maternity Benefit Act, 1961 are also social security measures to

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 help fulfil the objectives of directive principles of our Constitution. The
Provident Fund Scheme aimed at providing substantial security and
timely monetary assistance to industrial employees and their families.
The Maternity Benefit Scheme is primarily designed to provide
maternity leave with full wages and security of employment. The object
of the Payment of Gratuity Act, 1972 is to provide a scheme for the
payment of gratuity to employees employed in factories, mines, oil
fields, plantations, ports, railways, shops and establishments.
 Besides social security benefits, efforts have also been made to provide
ample opportunities for employment and for workers’ education. The
Apprentices Act, 1961 was enacted to supplement the programme of
institutional training by on-the-job training and to regulate the training
arrangements in industry. Employment exchanges play an important
role for the job seekers.
 Substantial steps have been taken to fulfil the object of Article 42 of the
Constitution. The Factories Act, 1948 provides for health, safety,
welfare, employment of young persons and women, hours of work for
adults and children, holidays and leave with wages.
 Article 43 of the Constitution provides for a living wage. To provide
social justice to the unorganised labour and to prevent exploitation, the
Minimum Wages Act, 1948 was enacted. It provides for the fixation of
minimum rates of wages by the central or state governments within a
specified period for workers employed in certain scheduled
employments. The minimum wage in any event must be paid
irrespective of the capacity of the industry to pay.
Concept of Collective Bargaining and Tripartism
Collective bargaining is a procedure by which employment related disputes are
resolved cordially, peacefully and voluntarily by settlement between labour
unions and managements.
Tripartism can be understood as policy of decision making related to industrial
relationswhere all the three key players, i.e. employers, workers and
governments play an equal and fair role. Apart from the Industrial Dispute Act
1947, various other areas of Indian industrial relations includes the elements of
tripartism. The government bodies which are responsible for policy making
related to labour welfare tries to implement tripartism in their working also.

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MODULE 2: INTERNATIONAL LABOUR ORGANISATION
Emergence of International Labour Organization (ILO)
 Tripartite body consisting of representatives of Employers, Labour and
Government.
 Established by Versailles Peace Conference as an autonomous body in
1919.
 Labour wing of the League of Nations.
 Became specialized agency of the United Nations in 1946
 India is a founding member of the ILO. Till now, 187 nations are
members of the ILO.
Aims and Objectives of ILO
1. Full employment and raising of standards of living.
2. The employment of workers on the basis of their skill and make their
contribution to the common well-being.
3. facilities for training and the transfer of labour including migration for
employment and settlement.
4. Policies in regard to wages, bonus and a minimum living wage to all
employed and in need of protection.
5. Extension of social security measures to provide a basic income to all in
need of such protection and comprehensive medical care
6. Effective recognition for the right of collective bargaining, the
cooperation of management and labour in continuous improvement of
productive efficiency and the collaboration of workers and employers in
social and economic measures
7. Adequate protection for the life and health of workers in all occupations
8. Provision for child welfare and maternity protection
9. Provision of adequate nutrition, housing and facilities for recreation and
culture

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 10.The assurance of educational and vocational opportunity
Organizational Structure of ILO
The three main organs of the ILO are:
(a) The International Labour Conference
(b) The Governing Body
(c) The International Labour Office.
International Labour Conference (ILC)
 The International Labour conference is a policy making and legislative
body.
 The session of the Conference is held yearly i.e. once a year.
 It consists of four representatives in respect of each member state.
 Two members representing the govt.
 One member representing employers.
 One member representing employees.
 Each delegate/ member may be accompanied by advisors who are not to
exceed two in number for each item on the agenda of the meeting.
When questions specifically affecting women are to be considered, at
least one of the advisors is to be woman.
Functions of the International Labour Conference (ILC)
 To direct and supervise the work of Governing Body and International
Labour Office.
 To function as the World Parliament of Labour.
 To create worldwide uniform standard of labour in the form of
conventions and recommendations.
 To fix the amount of contribution by member states.
 To decide the budget proposals containing estimates of income and
expenditure; proposed by the Director General and after vote requiring
2/3rd majority, submitted to the Governing Body.
 To make amendments to the constitution subject to the subsequent
ratification by 2/3rd member states including 5 out of 10 Industrially
Important States.
 To consider the report of the Director General giving labour problems
and assist in their solution.

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  To appoint Committees to deal with different matters during each
session.
 To select once in 3 years members of the Governing Body.
 To elect its President.
 To seek advisory opinion from the International Committee of Justice.
 To confirm the powers, functions and procedure of Regional Conference.
{{10 Industrially Important States are: Brazil, China, France, Germany, India,
Italy, Japan, Russia, UK, US}}
The Governing Body
 The Governing Body is the executive organ of the Organization. It has a
similar tripartite character as that of the Conference (ILC).
 The Governing Body consist of 56 members, 28 representing
Governments, 14 Employers and 14 Workers. Out of 28 Government
seats, 10 are non-elective held by 10 Industrially Important States. The
employer and Worker members are elected in their individual capacity.
 The Governing Body also has 66 Deputy Members – 19 representing
employers, 19 representing workers and 28 representing governments.
 Period of office of the Governing Body is three years
Functions of the Governing Body
 Required to elect, from its members, a Chairman and two Vice-Chairmen
so as to ensure representation of government, employers and workers,
each
 Procedure and the time of meetings are regulated by the Governing
Body itself, but a special meeting can be convened only on a written
request made by at least 16 representatives of the Governing Body.
 Functions under the general direction of the ILC.
 Prepares the agenda to be placed before the International Labour
Conference (ILC).
 Appoints the Director General of the International Labour Office (IL
Office).
 Supervises the functioning of the IL Office.
International Labour Office

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  The International Labour Office acts as a Secretariat and is responsible
for organizational work and to implement the decisions of the
Conference.
 The headquarters of International labour office is at Geneva.
 The Chief Exclusive Officer is the Director-General. He responsible for
the efficient working of the office and for such other duties as may be
assigned to him by the Governing Body from time to time.
 Staff of the IL Office for different Nations are appointed by the Director
General under Regulations approved by the Governing Body. Certain
percentage of such staff are to consist of women.

Functions of International Labour Office

 To provide secretarial assistance to Conference and Governing Body for
various sessions. The office also prepares the documents for such
meetings it also provides other relevant information.
 To collect and distribute information on all subjects relating to the
international adjustment of the conditions of industrial life and labour.
 Examination of subject which it proposes to bring before the Conference
with a view to conclude International Conventions.
 The conduct of such special investigations as may be ordered by the
Conference or the Governing Body.
 To prepare documents on the various items of the agenda for the
meeting of the Conference.
 To provide assistance within its power to Government at their request
with regard to the framing of laws and regulations on the basis of the
decisions of the Conference
 Improvement of administrative practices and systems of inspection;
 To edit and issue publicationsof international interest dealing with
problems of industry and unemployment
 To carryout the duties required in connection with the effective
observance of Conventions.
ILO and International Labour Standards
International Labour Standards (ILSs) are legal instruments drawn up by the
ILO’s constituents (governments, employers and workers) setting out basic
principles and rights at work. ILSs take two forms:

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  conventions, which are legally binding international treaties that may be
ratified by member states,
 recommendations, which serve as non-binding guidelines.
Two Special Categories of ILSs:
 The Core Labour Standards
 Other/ General Labour Standards
Upon release of the Declaration on Fundamental Principles and Rights at
Work in 1998, ILO member states agreed to respect, promote, and realise core
labour standards

Core Labour Standards

The Core Labour Standards out of 8 ILO Conventions are as follows:
1. Protection against forced labour
2. Abolition of slavery and child labour
3. Elimination of discrimination in employment
4. Right to form Unions
5. Right to engage in collective bargaining.
Other/ General Labour Standards
These standards are based on the recommendations.
1. Health and safety conditions at work
2. Minimum Wages
3. Govt. unemployment insurance provisions
4. Old age, survivor’s benefits and health cover
Nature of the International Labour Standards
 Universal: Whoever ratifies the Convention, will have to implement.
 Flexible: The flexibility in the conventions makes implementation and
application difficult.
 Binding once formally ratified.
 Recommendations are only guidelines to nations
 Does not incorporate all issues; addresses only those issues which reach
the conference level.
Conventions and Recommendations of ILO
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  The ILO passes many Conventions and Recommendations on different
subjects from time to time.
 The Conventions and Recommendations of the ILO relate to the subjects
on basic Human Rights of working class having a direct bearing on the
cause of social justice and everlasting universal peace which is the most
focused objective of the ILO.
Procedure of Implementation
 Conventions and Recommendations are drawn up by the
representatives of Govt., Employer and Workers
 At the ILC, there is a discussion on the issues by the members present
from various nations.
 The matters raised can only be adopted when it is passed by 2/3rd of the
delegates present at the conference
 Once it is adopted, the members are to submit it to the competent
authority in their respective nations
 After it is ratified, the ratifying country is to apply these conventions and
recommendation in their national laws
 If any of the ratifying nation violates the provision of the convention that
they ratify, then complaint procedure can be initiated against them.
The Eight Fundamental Conventions
1. Freedom of Association and Protection of the Right to Organise
Convention, 1948
2. Right to Organise and Collective Bargaining Convention, 1949
3. Forced Labour Convention, 1930
4. Abolition of Forced Labour Convention, 1957
5. Minimum Age Convention, 1973
6. Worst Forms of Child Labour Convention, 1999
7. Equal Remuneration Convention, 1951
8. Discrimination (Employment and Occupation) Convention, 1958
Conventions/Recommendations of ILO relating to Human Rights
(a) Freedom of association and protection of the right to organise
 Freedom of Association and Protection of the Right to Organise
Convention, 1948
 Right to organise and collective bargaining convention,1949
(b) Forced labour
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  Forced Labour Convention, 1930
 Abolition of Forced Labour Convention, 1957
(c) Equality of opportunity and treatment
 Equal Remuneration for Men and Women Workers for Work of
Equal Value Convention, 1951
 Discrimination in respect of Employment and Occupation
Convention, 1958.

Conventions/Recommendations of ILO relating to Social Security

In 1944, the Declaration of Philadelphia recognised the obligation of the ILO to
further programmes to extend the social security measures to provide the
basic income to all in need of such protection in addition to comprehensive
medical care.
(a) Conventions and Recommendations concerning Medical Care and
Sickness Benefit
 Sickness Insurance (Industry) Convention, 1927
 Medical Care and Sickness Benefits Convention, 1969
 Medical Care Recommendation, 1944
(b) Invalidity, Old age and Survivors’ Benefits Convention
 Old-Age Insurance (Industry) Convention, 1933
 Survivor’s Insurance (Industry) Convention, 1933
 Invalidity, Old-Age and Survivors’ Benefits Recommendation, 1967
(c) Conventions and Recommendations relating to Employment Injury
Benefit
 Workmen’s Compensation (Accidents) Convention, 1925
 Equality of Treatment (Accidents Compensation) Convention,
1925
 Employment Injury Benefits Convention, 1964
 List of Occupational Diseases Recommendation, 2002
ILO Conventions and Recommendations relating to Employment of Women
(a) Conventions and Recommendations relating to Maternity Benefits
 Maternity Protection Convention, 1919
 Maternity Protection Recommendation, 2000

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 (b) Conventions relating to Safe Working Condition and Protection of
Women Employees
 Night Work Convention, 1990
 Underground Work (Women) Convention, 1935
ILO and India
 India has been a founding member
 The ILO has played a vital role in influencing not only specific laws and
policies but also on legal ideas and institutions as they evolved in India.
 Many principles of ILO are also reflected in the Constitution of India in
the form of ‘Directive Principles’ of State Policy.
 ILO's current portfolio in India centres around child labour, preventing
family indebtedness, employment, skills, integrated approaches for local
socio-economic development and livelihoods promotion
 It also includes dealing with issues like green jobs, value-addition into
national programmes, micro and small enterprises, social security,
migration, industrial relations, dealing with the effects of globalization,
productivity and competitiveness, etc.
 Due to the impact of ILO Conventions, many labour legislations have
been enacted by India, some of which are:
 Factory Act, 1922;
 The Ports Act, 1908,
 The Employment of Children Act, 1938;
 The Mines Act, 1952;
 The Workmen’s Compensation Act, 1923;
 The Indian Railways (Amendment) Act, 1930
 The Maternity Benefit legislations etc
Ratifications of Conventions and Protocols by India
 47 Conventions and 1 Protocol
 Fundamental Conventions: 6 out of 8
 Governance Conventions (Priority): 3 out of 4
 Technical Conventions: 38 out of 178
 Out of 47 Conventions and 1 Protocol ratified by India, 39 are in force, 5
Conventions and 0 Protocol have been denounced; 4 instruments
abrogated;
 none have been ratified in the past 12 months.

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Important Conventions Ratified by India
 Fundamental Conventions
 Forced Labour Convention, 1930
 Equal Remuneration Convention, 1951
 Abolition of Forced Labour Convention, 1957
 Discrimination (Employment and Occupation) Convention, 1958
 Minimum Age Convention, 1973 Minimum age specified: 14 years
 Worst Forms of Child Labour Convention, 1999

MODULE 3: INDUSTRIAL RELATIONS UNDER THE INDUSTRIAL DISPUTES ACT,

1947
Industrial Disputes Act, 1947
 The objective of the Industrial Disputes Act is to secure industrial peace
and harmony by providing mechanism and procedure for the
investigation and settlement of industrial disputes by conciliation,
arbitration and adjudication which is provided under the statute.
 In the Industrial Disputes Act, 1947, an Industrial dispute means
“Difference between employer and employer or between employer and
workmen or between workmen and workmen, or any dispute among
these which are related to the employment or non-employment or
terms and conditions of employment of any person”.
 There are various authorities under the act such as the works
committee, conciliation officer, conciliation board, courts of inquiry,
labour court, tribunal, national tribunal.
Definition of “Industry” under the Industrial Disputes Act
Sec.2 (j) of the Industrial Disputes Act, 1947 defines ‘industry’ as “any business,
trade, undertaking, manufacture, or calling of employers and includes any
calling, service, employment, handicraft or industrial occupation or avocation
of workmen”.
An industry exists only when there is relationship between employers and
employees, the employer is engaged in business, trade, undertaking or

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manufacture and the employee is engaged in the service, employment,
handicraft or industrial occupation and avocation.
Bangalore Water Supply and Sewerage Board v. A. Rajappa (1978)
This case is a landmark judgement under Industrial Disputes Act, 1947, which
provides clarity on what the term “industry” encompasses within its scope. The
7-judge bench in Bangalore Water Supply judgement established the triple test
and the dominant nature test for the scope of the definition of “industry”,
defined under Section 2 (j) of the Act. The Court held the following:
 The Triple Test
Any activity will be industry if it fulfils the following ‘triple test’:
1. Systematic and organized activity;
2. co-operation between employer and employee;
3. production and distribution of goods and services in order to
satisfy human wants and wishes, whether or not capital has been
invested for this activity.
 Dominant nature test
Whether there is complex of activities, some of which qualify for
exemption and others not qualifying so, the test would be predominant
nature of services and integrated nature of departments. All
departments integrated with industry will also be industry.
 It is immaterial whether or not there is profit motive or whether or not
there is capital.
 If the organization is a trade or business, it does not cease to be an
industry because of philanthropy animating from the triple test. Such
organization cannot be exempted from scope of definition of industry.
 The exceptions to industry are:
 Casual activities (because they are not systematic).
 Small clubs, cooperatives, research labs, gurukuls which have an
essentially non-employee character.
 Single door lawyer taking help from clerk (because there is no
organized labour).
 Selfless charitable activities carried on through volunteers e.g. free
legal or medical service.
 Sovereign functions – strictly understood, i.e., maintenance of law
and order, legislative functions and judicial functions.
 Charitable Institutions fall into three categories –

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 (a) Those that yield profit, but the profits are not siphoned off for
altruistic purposes;
(b) Those that make no profit but hire the service of employees as in any
other business, but the goods/ services which are the output, are
made available at a low or no cost to the indigent poor; and
(c) Those that are oriented on a humane mission fulfilled by men who
work, not because they are paid wages, but because they share the
passion for the cause and derive job satisfaction.
The first two categories are industries, but not the third, on the
assumption that they all involve co-operation between employers and
employees.

Aftermath of Bangalore Water Supply case

 With the 1978 Bangalore Water Supply judgement, professions such as
attorneys, activities like clubs, educational institutions, co-operatives,
research institutes, and philanthropic enterprises were also covered in
the definition of industry. The top court also held that the absence of
profit motive or gainful objective or whether the venture is public/joint
or private or other sector is irrelevant while deciding whether an
enterprise is an industry. It also ruled that welfare economic activities
undertaken by the government or statutory bodies not being sovereign
functions are also covered by the definition.
 The interpretation of the definition of Industry by the Hon’ble Supreme
Court in Bangalore Water Supplycase brought a large ambit of activities
under the definition of Industry. A large number of institutes,
particularly, charitable institutes, universities approached the Union of
India for an amendment in the definition of Industry.
 Aggrieved by the widened definition, the government amended the
Industrial Disputes Act in 1982 which created several exceptions to the
definition. But this amendment was never brought into force (notified)
by the government and the original definition under the ID Act continues
to be the law in force.
 The extremely broad definition of industry laid down under Bangalore
Water Supply case has led to litigation in courts across the country as to
whether certain professions are an ‘industry’ or not. This is primarily
because any person who works in an industry as defined by the ID Act is

18
 entitled to the various protections under the Act. These protections
include a mandatory notice period before someone is removed from
service, maximum hours of work, leave etc.
 In recent times, these stringent labour standards have led to demands
for a restrictive reading of the word 'industry' by industry bodies and
various states in order to usher in labour reforms. The states want the
definition of 'industry' to be limited to the manufacturing sector.
 In 2005, a five-judge constitution bench referred the decision in
Bangalore Water Supply for reconsideration. The Supreme Court was of
the opinion that the majority judgment in Bangalore Water Supply was
not unanimous and had been subject to varying interpretations by the
judiciary.
 Furthermore, the focus of the ID Act was to ensure a harmonious
relationship between the employer and the employee. The worker-
oriented focus of Bangalore Water Supply has become an impediment to
a harmonious relationship according to the five-judge bench. The Court
also alluded to the helplessness of the executive and the legislature to
bring about the necessary amendments. Accordingly, it called for the
constitution of a larger bench.
 In 2017, a seven-judge bench of the Supreme Court passed an order for
the constitution of a 9-judge bench in light of the 2005 referral order.
Is University an “Industry”?
University of Delhi v. Ram Nath (1961)
 In the Delhi University case, a college closed down the amenity of
running buses as they were incurring losses. The drivers of the buses
were retrenched raising a dispute claiming retrenchment compensation.
The question was whether the University of Delhi was an “industry”.
 Universities were held to be excluded from the ambit of “industry” for
the following reasons:
 Main scheme of an educational institution is imparting education.
 Teaching is not within the purview of industry as there is no
commercial motive.
 The subordinate staff play a minor or insignificant role in the
process of imparting education.
 Due to the insignificant role of the subordinate staff it is
unreasonable to lend the colour of industry to a University.

19
  This judgmentwas criticized in Bangalore Water Supplycase. The Court in
Bangalore Water Supply observed that education is a service to the
community and hence, university is an industry. The teaching staff of the
University was not held to be “workmen” but the non-teaching staff
would come within the scope of the said term so that they are able to
take the benefits under the Act.
Is Hospital an “Industry”?
State of Bombay v. Hospital Mazdoor Sabha (1960)
The Supreme Court held the State is carrying on an ‘undertaking’ within Sec.
2(j) when it runs a group of hospitals for the purpose of giving medical relief to
the citizens and for helping to impart medical education.
The court observed as follows:
 An activity systematically or habitually undertaken for the production or
distribution of goods or for the rendering of material services to the
community at large or a part of such community with the help of
employees is an ‘undertaking’.
 It is the character of the activity in question which attracts the provisions
of Sec. 2 (j), who conducts the activity and whether it is conducted for
profit or not, do not make a material difference.
Thus, activities that have no commercial implications, such as hospitals carried
on with philanthropic motives would be covered by the expression
‘undertaking’. The mere fact that Government runs such activity is immaterial.
In case an activity is industry if carried on by a private person, it would be so,
even if carried on by the Government.
Safdarjung Hospital v. Kuldip Singh (1967)
 Safdarjung case reversed the judgment of Hospital Majdoor Sabha.
 It was held that a place of treatment of patients run as a department of
the government was not an industry because it was a part of the
functions of the government. Charitable hospitals run by Government or
even private associations cannot be included in the definition of industry
because they have not embarked upon economic activities analogous to
trade or business. If hospitals, nursing home or a dispensary is run as a
business in a commercial way, there may be elements of industry.

20
Is Municipal Corporation an “Industry?
D.N. Banerjee v. P.R. Mukherjee (1953)
 In this case, the question that was raised was whether Municipality is an
industry.
 The Supreme Court held that though municipal activity could not be
regarded as “business or trade” it would fall within the scope of the
expression “undertaking” and it is an industry. Neither investment of
capital nor profit making motive is essential to constitute an industry as
they are generally in a business. Hence, the non-profit undertakings of
the municipality were included in the concept of an industry, even if
there is no private enterprise.

Is the Law Department an “Industry”

State of Rajasthan v. Ganeshi Lal (2007)
In State of Rajasthan v. Ganeshilal, the Supreme Court held that the law
Department was not an Industry. The respondent was workingas a peon for a
Public Prosecutor as a temporary employee on a contract basis. The issue
beforethe court was with regard to his termination. But the court went on to
hold that the acceptedconcept of an industry cannot be applied to the Law
department of the Government.

Questions
 All factories are industries but all industries are not factories. Discuss
 Whether 1978 definition or 1982 definition of industry is binding?
 Whether courts are to be guided by Rajappa case or by 1982
amendment?
 What is an industry? What is not an industry? With cases

Rational Choice Theory

 Rational choice theoryis a framework for understanding and often
formally modelling social and economic behaviour.The basic premise of
rational choice theory is that aggregate social behaviour results from the
behaviour of individual actors, each of whom is making their individual

21
 decisions. The theory also focuses on the determinants of the individual
choices. Rational choice theory then assumes that an individual has
preferences among the available choice alternatives that allow them to
state which option they prefer. These preferences are assumed to be
complete (the person can always say which of two alternatives they
consider preferable or that neither is preferred to the other) and
transitive (if option A is preferred over option B and option B is preferred
over option C, then A is preferred over C).
 In simpler terms, this theory dictates that every person, even when
carrying out the most mundane of tasks, performshis own personal cost
and benefit analysis in order to determine whether the action is worth
pursuing, for the best possible outcome.And following this, a person will
choose the optimum venture in every case. This could culminate in a
student deciding on whether to attend a lecture or stay in bed or even a
voter deciding which candidate or party based on who will fulfil their
needs the best.
Unjust Enrichment
 Unjust enrichment occurs when Party A confers a benefit upon Party B
without Party A receiving the proper restitution required by law. This
typically occurs in a contractual agreement when Party A fulfils his/her
part of the agreement and Party B does not fulfil his/her part of the
agreement.
 Unjust enrichment has been defined as: "A benefit obtained from
another, not intended as a gift and not legally justifiable, for which the
beneficiary must make restitution or recompense." A claim for unjust
enrichment arises where there has been an "unjust retention of a
benefit to the loss of another or the retention of money or property of
another against the fundamental principles of justice or equity and good
conscience."
 It is a general equitable principle that a person should not profit at
another's expense and therefore should make restitution for the
reasonable value of any property, services, or other benefits that have
been unfairly received and retained.
 In India, the doctrine of unjust enrichment is codified in enactments
such as the Contract Act, 1872. The law has been further developed by
various judgments.

22
Strike and Lockout
 As per Cambridge Dictionary “Strike is to refuse to continue working
because of an argument with an employer about working conditions,
pay levels, or job losses”.
 A strike is a powerful weapon used by trade unions or other associations
or workers to put across their demands or grievances by employers or
management of industries. In another way, it is the stoppage of work
caused by the mass refusal in response to grievances. Workers put
pressure on the employers by refusal to work till fulfilment of their
demands. Strikes may be fruitful for workers’ welfare or it may cause
economic loss to the country.
 India recognized strike as statutory right under Industrial Disputes Act,
1947.
 As per Section 2 (q) of the Industrial Disputes Act, 1947 “strike” means a
cessation of work by a body of persons employed in any industry acting
in combination, or a concerted refusal, or a refusal under a common
understanding, of any number of persons who are or have been so
employed to continue to work or to accept employment.
 Components of a Strike:
 There has to be an industry.
 Work must stop.
 It must be a combined action of individuals.
 A relationship between the parties must be strictly of
employment.
 It should be a planned refusal of work.
 According to Section 2 (l) “lock-out” means the temporary closing of a
place of employment, or the suspension of work, or the refusal by an
employer to continue to employ any number of persons employed by
him.
 Components of a Lockout:
 There has to be a temporal shut down of the area of employment.
 It could also be a temporary suspension of workers or holding
back of work from the workers.
 The employer has to have a demand that leads him to initiate the
lockout.
 The lockout touches any number of workers employed with in the
industry.

23
Difference between Legal and Illegal Strikes
Section 22 of the IDA deals with strikes in industries relating to public utility
services like railways, port, post, telegraph, power, water, sanitation etc.
According to this section, no person employed in a public utility service shall go
on strike in breach of contract,without following the steps below:
 Notice of strike (with or without the date of strike) to the employer by
their employees is mandatory.
 If the date of strike by the employees is not mentioned in the notice,
such notice is valid for six weeks only.
 If the date of strike is mentioned in the notice, the date of strike should
not be before the expiry of 14 days from the date of notice of strike.
 Therefore, employees should not go on strike before the expiry of 14
days from the date of issue of notice of strike to the employer.
 Notice of strike without the date of strike is valid for six weeks only. if
employees do not go on strike within six weeks, again a fresh notice of
strike by employees is necessary if they want to go on strike.
 Employees should not go on strike during the pendency of any
conciliation proceedings before a conciliation officer and seven days
after the conclusion of such proceedings.
Thus, any strike by employees working in an industry dealing with public utility
services not following the above conditions shall be termed as an Illegal Strike.
Section 23 provides for general prohibition of strikes, according to which no
workman who is employed in any industrial establishment shall go on strike in
breach of contract:
 during the pendency of conciliation proceedings before a Board and
seven days after the conclusion of such proceedings;
 during the pendency of proceedings before a Labour Court, Tribunal or
National Tribunaland two months after the conclusion of such
proceedings;
 during the pendency of arbitration proceedings before an arbitrator and
two months after the conclusion of such proceedings, where a
notification has been issued.
 during any period in which a settlement or award is in operation, in
respect of any of the matters covered by the settlement or award.

24
Section 24 differentiates between a legal strike and an illegal strike. It states
that legal strikes are those strikes in which procedures for going on strikes as
laid down in section 22 or section 23 are followed. However, illegal strikes will
not be in conformity with sections 22 or 23.
In short, the strike is illegal, if
1. It is in breach of Contract of Employment.
2. It is in Public Utility Services.
3. Notice under Section 22(1) is not given.
4. It commenced during Award or settlement period.
5. It commenced during or within 7 days of completion of Conciliation
Proceedings.
6. It commenced during or within Two months of completion of
Adjudication Proceedings.
Q. What are the conditions for declaring a strike as legal or illegal?

Lay off, Retrenchment and Closure

Lay off
 Layoff is suspension or termination of employment (with or without
notice) by the employer or management. Layoffs are not caused by any
fault of the employees but by reasons such as lack of work, cash, or
material. Layoff is temporary. Permanent layoff is called redundancy.
 The term ‘lay-off’ has been defined under section 2 (kkk) of the
Industrial Disputes Act, 1947.
 Lay-off means the failure, refusal or inability of an employer on account
of the shortage of coal, power or raw materials or the accumulation of
stocks or the breakdown of machinery or natural calamity or for any
other unconnected reason to give employment to a workman whose
name is borne on the muster rolls of his industrial establishment and
who has not been retrenched.
 Thus, the following are the essentials of lay-off:
(i) There must be failure, refusal or inability on the part of the
employer to give employment to a workman.
(ii) The failure, refusal or inability should be on account of shortage of
coal, power or raw materials or accumulation of stocks or

25
 breakdown of machinery, or natural calamity, or any other
connected reason.
(iii) The workman’s name should be on the muster rolls of the
industrial establishment.
(iv) The workman should not have been retrenched.
Retrenchment
 The Act defines “Retrenchment” as the termination by the employer of
the services of a workman for any reason whatsoever, otherwise than as
a punishment inflicted by way of disciplinary action, but doesn't include-
(a) Voluntary retirement of the workman; or
(b) Retirement of the workman on reaching the age of
superannuation if the contract of employment between the
employer and the workman concerned contains a stipulation in
that behalf; or
(c) Termination of the service of a workman on the ground of
continued ill-health;
 Here, the key ingredient is the termination of a workman from service,
by the employer. This does not mean the employer can retrench a
worker as a punishment by way of disciplinary action. Further, this
scenario strictly does not include the above-mentioned conditions
contemplated under the subsection.
 Special Provisions: It is pertinent to note that a worker who has served
for at least a year of continuous service cannot be retrenched unless
served a notice 3 months in advance and prior permission from the
appropriate government. The said application has to be submitted by
the employer along with the reasons for such retrenchment. The said
application will be taken into consideration and scrutinized through an
inquiry. They shall provide an opportunity to be heard for both sides and
may decide on the outcome of the application for reasons recorded in
writing. If there’s no reply from the appropriate government for a period
of 60 days from the date of application, the permission shall be deemed
to have been granted. Further, it is to be noted that the said decision
could be reviewed by the said appropriate government suo-moto or on
application from any of the sides.
Closure

26
  The Act defines “Closure” as the permanent closing down of a place of
employment or part thereof. Here, the employer is constrained to close
the establishment permanently. Nonetheless, the due procedure has to
be complied with when it comes to rolling out a plan of closure. These
procedures, nonetheless, do not apply to an undertaking set up for the
construction of buildings, bridges, roads, canals, dams or for other
construction work.
 Special Provisions: The employer intending to do a closure of his
establishment has to necessarily apply at least 90 days in advance to the
appropriate government. A copy of the said application has to be given
to the representatives of the workmen as well. The said application will
be considered and a reasonable opportunity to be heard shall be given
to the employer as well as the workmen. After considering the same, the
appropriate government may or may not grant the employer to close
down. Even here, if the government does not respond within 60 days
from application, the permission will be deemed to have been granted.
A similar provision for review of the decision exists even here.
What are the rights of a workman being laid off?
 According to Section 25 C of the Industrial Disputes Act, a workman who
is laid-off is entitled to compensation equivalent to 50% of the total basic
wages and dearness allowance for the period of lay-offexcept for weekly
holidays which may intervene.
 However, Compensation can normally be claimed for not more than 45
days during any period of 12 months.Even if lay-off exceeds 45 days
during any period of 12 months, no compensation is required to be paid
for the excess period if there is an agreement to that effect between the
workman and the employer.
 This right of compensation is, however, subject to the following
conditions:
(i) He is not a badli (a person who is employed as a casual workman
who is working in place of another), or a casual workman.
(ii) His name should be borne on the muster rolls of the
establishment.
(iii) He should have completed not less than one year of continuous
service under the employer.
Penalties for Illegal Strikes & Lockouts

27
Section 26 provides for penalties for illegal strikes and lockouts
 Any workman who commences, continues or otherwise acts in
furtherance of, a strike which is illegal under this Act, shall be punishable
with imprisonment for a term which may extend to one month, or with
fine which may extend to fifty rupees, or with both.
 Any employer who commences, continues, or otherwise acts in
furtherance of a lock-out which is illegal under this Act, shall be
punishable with imprisonment for a term which may extend to one
month, or with fine which may extend to one thousand rupees, or with
both.

MODULE 4: JUSTICE SYSTEM UNDER THE LABOUR LEGISLATION

Organizations/ Institutions/ Systems for Dispute Resolution
1. Works Committee: The institution of Works Committee was introduced
in 1947 under the Industrial Disputes Act, 1947 (IDA), to promote
measures for securing good relations between employers and
employees. It is concerned with problems arising in day-to-day working
of the establishment. The decision of the Works Committee is neither
agreement nor compromise nor arbitration. Further, it is neither binding
on the parties nor enforceable under the Act.
2. Conciliation Officers: The appropriate government is empowered under
the IDA to appoint any number of Conciliation Officers, for mediating in
and promoting the settlement of disputes.
3. Board of Conciliation: This is a higher forum which is constituted for a
specific dispute. It is not a permanent institution like the Conciliation
Officer.
4. Court of Inquiry: Under the IDA, Court of Inquiry may be constituted by
the appropriate Government for inquiring about matter appearing to be
connected with or relevant to an industrial dispute.
5. Voluntary Arbitration: When Conciliation Officer or Board of Conciliation
fails to resolve conflict/ dispute, parties may go for voluntary arbitration

28
 for settling their disputes. Section 10A of the IDA provides for the
settlement of industrial disputes by voluntary reference of dispute to
arbitrators.
6. Adjudication: Unlike conciliation and voluntary arbitration, adjudication
is compulsory method of resolving conflicts. The IDA provides the
machinery for adjudication, namely:
 Labour Courts,
 Industrial Tribunals and
 National Tribunals.
7. Alternative Dispute Resolution (ADR): Section 89 of the Civil Procedure
Code (CPC) provides for settlement of disputes outside the Court.
According to this section, the Court may refer a dispute for:
 Arbitration;
 Conciliation;
 Settlement through Lok Adalat;
 Mediation.
ADR System aims at providing justice that not only resolves dispute but
also harmonizes the relation of the parties. Machineries under Industrial
disputes Act in India provides opportunity for industrial employees to
resolve their disputes through ADR in the form of conciliation and
voluntary arbitration before the disputes are referred to compulsory
adjudication through labour court and tribunals. Although ADR is not a
new concept in resolving industrial disputes, the obstacles faced in the
conciliation and arbitration proceedings lead to ineffective alternative
mechanisms. The recent growth of ADR in the form of Lok Adalats is very
relevant where justice is dispensed summarily without too much
emphasis on legal technicalities. It has been proved to be a very effective
alternative to litigation. The govt. should take appropriate measures to
establish permanent Labour Lok Adalats exclusively for the purpose of
settling labour disputes effectively and to that effect necessary
reformation should be made in the ID Act.
Constitutional Provisions relating to Establishment of Tribunals
Tribunals were added in the Constitution by Constitution (Forty-second
Amendment) Act, 1976 vide Articles 323-A and 323-B.
 Article 323-A deals with Administrative Tribunals;

29
  Article 323-B deals with tribunals for other matters like industrial and
labour disputes
In general sense, the ‘tribunals’ are not courts of normal jurisdiction, but they
have very specific and predefined work area.

MODULE 5: INDUSTRIAL RELATIONS UNDER THE TRADE UNIONS ACT, 1926

Trade Unions Act, 1926
 According to the Trade Union Act, a Trade Union means “any
combination, whether temporary or permanent, formed primarily for
the purpose of regulating the relations between workmenand
employers, orbetween workmen and workmen, between employersand
employers or for imposing restrictive conditions onthe conduct of any
trade or business.
 The object of the Act is to make provisions for theregistration of Trade
Unions formed by the workerstoprotect their legitimate rights while
fighting withemployersso that they mayacquire a legal and corporate
status.
 As soon as a trade union is registered, it is treated as anartificial person
in the eyes of law, capable of enjoyingthe rights and discharging
liabilities like a natural person.
 The Act applies not only to the Union of the Workers but also to the
association of employers.
Functions of Trade Union (TU)

30
Primary functions of a trade union areto protect andpromote the interest of
the workers and the conditionsof their employment. In India, trade unions
generallyundertake the following functions:
 To achieve higher wages and better working and livingconditions for the
members.
 To generate self confidence among the workers.
 To encourage sincerity and discipline among workers.
 To take up welfare measure for improving the moraleof the workers.
The National Commission of Labour has underscoredcertain basic functions to
which trade unions have to paygreater attention such as:
 To secure fair wages for workers
 To safeguard the security of tenure and improveconditions of services.
 To enlarge opportunities for promotion and training
 To improve working and living wages.

Important Provisions of the TU Act

Registration of Trade Union (Section 8)
The Registrar, on being satisfied that the Trade Union has complied with all the
requirements of this Act in regard to registration, shall register the Trade
Union by entering in a register, to be maintained in such form as may be
prescribed, the particulars relating to the Trade Union contained in the
statement accompanying the application for registration.
Certificate of Registration (Section 9)
The Registrar, on registering a Trade Union under section 8, shall issue a
certificate of registration in the prescribed form which shall be conclusive
evidence that the Trade Union has been duly registered under this Act
Incorporation of registered Trade Unions (Section 13)
 Every registered TU becomes a legal entity or body corporate by the
name under which it is registered.
 Every registered TU has perpetual succession and common seal with
power to acquire and hold both movable and immovable property.
 Registered TU has a power to contract

31
  Every registered TU can sue and be sued.
Certain Acts not to apply to registered Trade Unions (Section 14)
Certain Acts do not apply to the registered Trade Unions.
 The Societies Registration Act,1860.
 The Cooperative Societies Act,1912
 The Companies Act,1956
The Registration of any such union under any such Act is null and void.
Duties and Liabilities of a Registered Trade Union
1. To maintain general fund of the registered TU for the following
purposes: (Section 15)
 The payment of salaries, allowances and expensesto the Office-
bearers of the TU.
 The payment of expenses for the administration ofthe trade
union, including audit of the accounts ofthe general fund of the
TU.
 The prosecution or defence of any legal proceedingto which the
trade union or any member is a party.
 The conduct of trade disputes on behalf of thetrade union or any
member thereof.
 The compensation to members for the loss arising outof trade
disputes.
 Allowances to members or their dependents onaccount of death,
old age, sickness, accidents.
 Policies insuring members against sickness, accidentor
unemployment.
 The provision of educational, social or religiousbenefits for
members (including payment of theexpenses on funeral, religious
ceremony)
2. To maintain a separatefund for the following political purposes
(Sec.16)
 the payment of any expenses by a candidate or a prospective
candidate forelection as a member of any legislative
bodyconstituted under the Constitution or any localauthority

32
 before, during or after the election inconnection with his
candidature or election.
 the maintenance of any person who is a member of any legislative
body constituted under the Constitution or of any local authority.
 the holding of any meeting or distribution of anyliterature in
support of such candidate
 the holding of political meetings of any kind.
Criminal conspiracy in trade disputes (Section 17)
No office-bearer or member of a registered Trade Union shall be liable to
punishment under section 120B of the IPC, in respect of any agreement made
between the members for the purpose of furthering any such object of the
Trade Union as is specified in section 15, unless the agreement is an agreement
to commit an offence.
Immunity from civil suit in certain cases (Section 18)
 No suit or other legal proceeding shall be maintainable in any Civil Court
against any registered Trade Union or any office-bearer or member
thereof in respect of any act done in contemplation or furtherance of a
trade dispute to which a member of the Trade Union is a party on the
ground only that such act induces some other person to break a contract
of employment, or that it is in interference with the trade, business or
employment of some other person or with the right of some other
person to dispose of his capital or of his labour as he wills.
 A registered Trade Union shall not be liable in any suit or other legal
proceeding in any Civil Court in respect of any tortious act done in
contemplation or furtherance of a trade dispute by an agent of the
Trade Union if it is proved that such person acted without the
knowledge of, or contrary to express instructions given by, the executive
of the Trade Union.
Q. Is Trade Union a Company?
Characteristics of a Trade Union are similar to a Company but there are many
exceptions.
Differences between Trade Union and Company (S. 13, 14, 15,16)

33
MODULE 6: SOCIAL SECURITY LEGISLATION
Workmen’s Compensation Act, 1923
 Social Act initiated in India
 Before this, there was Accident Act, 1885.
 The Act was brought in to address multiple and complex issues.
 Schedule II of the Act was amended. Earlier Schedule II contained
categorization of workmen. Now anyone working comes in the category
of “workman”, irrespective of the nature of work being engaged into.
 Now the Act is known as the Employee’s Compensation Act, 1923. The
word “Workman” has been replaced by “Employee”.
Employee’s Compensation Act, 1923
Objective of the Act
The Act aims to provide for the payment by certain classes of employers to
their Employees of compensationfor injury by accident.
Definition Clause
34
 Section 2 (1) (b): “Commissioner” means a Commissioner for employee’s
Compensation appointed under section 20.
 Section 2 (1) (d): “Dependant” means any of the following relatives of
deceased employee, namely:
(i) a widow, a minor legitimate or adopted son, an unmarried
legitimate or adopted daughter or a widowed mother; and
(ii) if wholly dependent on the earnings of the employee at the time
of his death, a son or a daughterwho has attained the age of 18
years and who is infirm;
(iii) if wholly or in part dependent on the earnings of the employee at
the time of his death,
(a) a widower,
(b) a parent other than a widowed mother,
(c) a minor illegitimate son, an unmarried illegitimate daughter
or a daughter legitimate or illegitimate oradopted if married
and a minor or if widowed and a minor,
(d) a minor brother or an unmarried sister or a widowed sister
if a minor,
(e) a widowed daughter-in-law,
(f) a minor child of a pre-deceased son,
(g) a minor child of a pre-deceased daughter where no parent
of the child is alive, or
(h) a paternal grandparent if no parent of the employee is alive;
Manada Devi vs. Calcutta Bone Mills
Step mother – not dependent.
 Section 2 (dd): “Employee” means a person, who is-
(i) a railway servant as defined in the Railways Act, 1989
(ii) a master, seaman or other members of the crew of a ship,
(iii) a captain or other member of the crew of an aircraft,
(iv) a person recruited as driver, helper, mechanic, cleaner or in any
other capacity in connection with amotor vehicle,
(v) a person recruited for work abroad by a company, and who is
employed outside India in any suchcapacity as is specified in
Schedule II and the ship, aircraft or motor vehicle, or company, as
the case maybe, is registered in India; or
(vi) employed in any such capacity as is specified in Schedule II,
whether the contract of employmentwas made before or after the

35
 passing of this Act and whether such contract is expressed or
implied, oral or in writing; but does not include any person
working in the capacity of a member of the Armed Forces ofthe
Union; and any reference to any employee who has been injured
shall, where the employee is dead,include a reference to his
dependants or any of them;
Schedule II – List of persons who are included in the definition of
“employee” under the Act.
Types of persons who are not employees under the Act
 Anyone employed for casual nature of work;
 Anyone belonging to the armed forces;
 When there is no Contract/ Agreement
 Section 2 (e): “Employer” includes any body of persons, whether
incorporated or not, and any managing agent of an employer and the
legal representative of a deceased employer. When the services of an
employee are temporarily lent or let on hire to another person by the
person with whom the employee has entered into a contract of service
or apprenticeship, employer means such other person for whom the
employee is working.;
 M.D. Orissa State Warehousing Corporation vs. Smt. Geeta Rani – Any
person, which obviously includes a Corporation, who engages contractor
in the course or for the purposes of his trade or business, contracts with
any other person for the execution of some work, incurs the liability in
respect of the workman vis-a-vis the contractor. The liability in such an
event passes on to the principal employer. Thus, in case of contract
labour, the principal employer is liable to pay compensation in the same
manner, as he is liable for his departmental labour. However, he is
entitled to be indemnified by the contractor for such compensation.
 Contractor can be an employee and seek compensation under the Act.If
any work is done in furtherance of work given by employer, only under
those situations, the contractor will be an employee.
 Section 2 (1) (f): “Managing Agent” means any person appointed or
acting as the representative of another person for the purpose of
carrying on such other person's trade or business, but does not include
an individual manager subordinate to an employer
 Section 2 (m): “Wages” includes any privilege or benefit which is capable
of being estimated in money, other than a travelling allowance or the

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 value of any travelling concession or a contribution paid by the employer
of an employee towards any pension or provident fund or a sum paid to
an employee to cover any special expenses entailed on him by the
nature of his employment;
 Are privileges wages? – Only such privileges are wages which can be
estimated in money but it does not include travelling allowance/
travelling concession/ contribution made by the employer towards
pension or provident fund/ any sum paid by the employer to meet any
special expenses made by the employee due to nature of the
employment.
 Reimbursements are not wages – The reimbursement of any sum spent
by the employee due to the nature of the employment shall not come
within the purview of ‘wages’ under the Act. For example, the
reimbursement of medical expense bills for the injuries caused during
the course of employment shall not be treated as wages.
Liability Clause – Employer’s liability to pay compensation.
Section 3 of the Act provides for the employer’s liability to pay compensation.
According to thisSection, the employer of any establishment covered under
this Act, is required to compensate an employee:
 who has suffered an accident arising out of and in the course of his
employment, resulting into:
(i) death,
(ii) permanent disablement, whether total or partial
(iii) temporary disablement, whether total or partial, or
 who has contracted an occupational disease.
However, the employer shall not be liable:
 In respect of any injury which does not result in the total or partial
disablement of the workman for a period exceeding three days;
 In respect of any injury not resulting in death, caused by an accident
which is directly attributable to:
 the workman having been at the time thereof under the influence
or drugs, or
 the wilful disobedience of the workman to an order expressly
given, or to a rule expressly framed, for the purpose of securing
the safety of workmen, or

37
  the wilful removal or disregard by the workmen of any safeguard
or other device which he knew to have been provided for the
purpose of securing the safety of workmen.
The burden of proving intentional disobedience on the part of the
employee shall lie upon the employer.
 when the employee has contracted a disease which is not directly
attributable to a specific injury caused by the accident or to the
occupation; or
 when the employee has filed a suit for damages against the employer or
any other person, in a Civil Court.
How can an employee seek compensation?
 A claim for the compensation shall be made before the Commissioner.
 No claim for compensation shall be entertained by the Commissioner
unless the notice of accident has been given by the workman in the
prescribed manner, except in the following circumstances:
 in case of death of workman resulting from an accident which
occurred on the premises of the employer, or at any place where
the workman at the time of the accident was working died on
such premises or such place or in the vicinity of such premises or
place;
 in case the employer has knowledge of the accident from any
other source, at or about the time of its occurrence;
 in case the failure to give notice or prefer the claim, was due to
sufficient cause.
 The amount of compensation is not payable to the workman directly. It
is generally deposited alongwith the prescribed statement, with the
Commissioner who will then pay it to the workman. Any payment made
to the workman or his dependents, directly, in the following cases will
not be deemed to be a payment of compensation:
 in case of death of the employee;
 in case of lump sum compensation payable to a woman or a minor
or a person of unsound mind or whose entitlement to the
compensation is in dispute or a person under a legal disability.
 The receipt of deposit with the Commissioner shall be a sufficient proof
of discharge of the employer's liability.
Amount of Compensation

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Section 4 provides for the amount of compensation to the employee.
According to this section, the amount of compensation payable by the
employer shall be calculated as follows:
 In case of death – 50% of the monthly wages X Relevant Factor or Rs.
50,000, whichever is more; Plus Rs. 1000 for funeral expenses.
 In case of total permanent disablement Specified under Schedule I – 60%
of the monthly wages X Relevant Factor or Rs. 60,000, whichever is
more.
 In case of partial permanent disablement specified under Schedule I–
Such percentage of the compensation payable as in the case of total
permanent disablement as is the percentage of the loss in earning
capacity (specified in Schedule I)
 In case of temporary disablement (whether total or partial) – A half-
monthly instalment equal to 25% of the monthly wages, for the period
of disablement or 5 years, whichever is shorter.
 Schedule IV of the Act contains the factors for working out lump sum
equivalent of compensation amount in case of permanent disablement
and death

Disablement
Disablement, in ordinary language, means loss of capacity to work or move.
Such incapacity may be partial or total and accordingly there are two types of
disablement, partial and total. In the Act, both types of disablement are further
subdivided into two classes, temporary and permanent.
Partial Disablement
 Temporary partial disablement
 Permanent partial disablement
Total Disablement
 Temporary total disablement
 Permanent total disablement

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  According to Section 2 (l) of the Act, “total disablement” means such
disablement, whether of a temporary or permanent nature,
asincapacitates an employee for all work which he was capable of
performing at the time of the accidentresulting in such disablement:
Provided that permanent total disablement shall be deemed to result
from the permanent total loss of sight of both eyes or from any
combination of injuries specified in Schedule I, where the
aggregatepercentage of the loss of earning capacity, as specified in that
Schedule against those injuries, amounts toone hundred per cent.
 According to Section 2 (g), “partial disablement” means, where the
disablement is of a temporary nature, such disablement as reduces the
earning capacity of an employee in any employment in which he was
engaged at the time of the accident resulting in the disablement, and,
where the disablement is of a permanent nature, such disablement as
reduces his earning capacity in every employment which he was capable
of undertaking at that time:
 Sukkai vs. Hukum Chand Jute Mills
The Act is not limited only to physical capacity of disablement, but
extends to the reduction of earning capacity as well.
 Commissioner for Port of Calcutta vs. A.K. Ghosh
The medical evidence showing loss of physical capacity is a relevant
factor but it is certainly not the decisive factor as to the loss of earning
capacity. It is the loss of earning capacity that has to be determined. The
type of disablement suffered is to be determined from the facts of the
case.
Doctrine of Added Peril
According to Doctrine of Added Peril, if a workman whileperforming his duty
does something which is not required to do andwhich involves extra danger,
the employer would not be liable to paycompensation if any injury is caused to
him.
Doctrine of Notional Extension
 The expression “in the course of his employment”, connotes not only
actual work but also any other engagement natural and necessary
thereto, reasonably extended both as regards workhours and work-
place.

40
  It refers to the time during which the employment continues.
 However, this is subject to the theory of notional extension of the
employer's premises so as to include an area which the workman passes
and re-passes in going to and in leaving the actual place of work. There
may be some reasonable extension in both time and place and a
workman may be regarded as in the course of his employment even
though he had not reached or had left his employer's premises. This is
called as the Doctrine of Notional Extension.
 The doctrine of notional extension could not be placed in a straitjacket;
it was merely a matter of sound common sense as to when and where
and to what extent this doctrine could be applied.
Employees State Insurance Act, 1948 (ESI Act)
Need of the Act
The Employees’ State Insurance Act, 1948 is a social security legislation that
provides formedical care and cash benefit in the contingencies of sickness,
maternity, disablement and death due toemployment injury to workers.
Objectives of the Act
To provide for certain benefits to employees in case of sickness, maternity and
injury during employment and to make provision for certain other matters in
relation thereto.

Difference between ESI Act and Employees Compensation Act

Subject Matter E State Insurance Act E Compensation Act
Applicability Applicable to a non- Applicable to any
seasonal organization/ organization (other than
factory clerical jobs)
No. or persons Non-seasonal factories Any number of
employed using power and employing employees
10 or more persons.
Non-seasonal and non-
power using factories and
establishments employing
20 or more persons.
Monthly wages Monthly wage of the Minimum monthly wage
employees is up to Rs. considered for calculating
41
 10,000. benefits is Rs. 8000.
Country of Applicable to workforce Applicable to workers
employment employed in India. employed by Indian
employers in foreign
countries.
MemObjective To cover employee To cover statutory liability
accidents arising out of and of an employer for the
in course of employment, death of or bodily injuries
hospitalization and funeral or occupational diseases
expenses and family health sustained by the
care for card holders etc. workmen arising out of
and in course of
employment.
Benefits In case of death of the In case of death of the
employee, 90% of the employee, compensation
monthly wage is distributed is awarded by the court
among all the dependents. not only taking into
(Spouse, till remarriage or consideration the salary,
death, children up to 18 but also age of the
years,parents till death) employee, of dependents;
usually the amount
awarded by the court is
much higher.
Premium Employee has to contribute Only the employer
1.75% of their salary as contributes premium for
premium and employer has the period of contract
to contribute 4.75% of the
salary as premium on
monthly basis throughout
the employment period.

Purposes for which the ESI Act can be invoked

 Medical benefits
 Sickness benefits
 Maternity relief
 Funeral benefits
 Employment injuries.
Conditions under which ESI Act applicable?

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  Non-seasonal factories using power and employing 10 or more persons.
 Non-seasonal and non-power using factories and establishments
employing 20 or more persons.
Who can get benefits under the ESI Act?
Employees of covered units and establishments drawing wages upto Rs.
10,000/- per month come under the purview of the ESI Act, 1948 for multi-
dimensional social security benefits. Employees covered under the scheme are
entitled to medical facilities for self and dependants.
ESI Fundraising System
 The ESI Scheme is mainly financed by contributions raised from
employees covered under the scheme and their employers, as a fixed
percentage of wages. As of now, the rates of contribution are:
 Employees’ Contribution: 1.75% of wages
 Employers’ Contribution: 4.75% of wages
 Employees earning upto Rs.50/- a day as wages are exempted from
payment of their part of contribution.
 The State Govts. bear 1/8thshare of expenditure on Medical Benefit
within the per capita ceiling of Rs.900/- per annum and any additional
expenditure beyond the ceiling.
Employees State Insurance Corporation (ESIC)
 According to Section 2 (6) of the ESI Act, the term “Corporation” under
the Act refers to the Employees’ State Insurance Corporation (ESIC).
 Section 3 of the Act further states that the Central Government has to
establish the Corporation as per given provisions.
 The ESIC is principally policy formulating body and governs the wide
range of activities under the Act.
 The main function of this Corporation is to implement the provisions of
the ESI Act and carry out its duties.
 Follows perpetual succession.
 Regulated by the Central Government.
Constitution of ESIC
 Representatives of
 Central Government (5 members)
 State Government (1 each)
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  Members of Lok Sabha
 Medical profession
 Employers and Employees (10 persons)
 Headed by a Chairman and a Vice Chairman, appointed by the Central
Govt.
Organs and Functionaries of ESIC
 Standing Committee
 Medical benefit Council
 Director General
 Insurance Commissioners
 Medical Commissioner
 Chief Accounts Officer and the Actuary
 In order to achieve decentralization, Regional Boards and local
committees can also be constituted.
Functions and Powers of the ESIC
The ESIC is primarily concerned with policy formulation and effective
implementation of various provisions of the ESI Act. For this, it has the
following functions and powers:
1. The Corporation can appoint staff members and officers for carrying out
its business effectively.
2. The Corporation has powers to purchase and sell movable as well as
immovable properties. It can even raise loans and invest its money with
the Central Govt.’s sanctioned funds.
3. The Corporation can frame regulations on various matters such as:
 Method of recruitment and service conditions of the employees
of the corporation.
 Remission of contributions to the Corporation.
 The constitution of Medical Boards and the Medical Appeal
Tribunals.
 Penalties for breach of regulations.
 Any other matter relevant under the Act.
The Standing Committee
 The Standing Committee constitutes of representatives of:
 Central and State Govts. (3 members)

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  Employers and Employees (3 elected members)
 Paramedical professionals (1 each)
Powers of the Standing Committee
 To administer the affairs of the Corporation. It may exercise any of the
powers of the Corporation and perform any of the functions of the
Corporation.
 To submit for the consideration and decision of the Corporation all such
cases and matters as may be specified in the regulations made in this
behalf.
 To submit in its discretion any other case or matter for the decision of
the Corporation.
Employees Provident Fund & Miscellaneous Provision Act, 1952 (EPF Act)
 Salary consists of two parts: earnings & deductions. Provident Fund is
one of the statutory deductionsmade by the employer at the time of
salary payment.
 Provident Fund is governed by the Employee’s Provident Fund Act, 1952
– A social security legislation but quite different from Employees
Compensation Act.
 Provident Fund has come into force to give better future to employees
on their retirement & his dependants in case of his death during
employment.
 The EmployeesProvident Fund (EPF) is administered by the Employees
Provident Fund Organization (EPFO), a statutory body developed by the
government of India under the Ministry of Labour and Employment. It
has been formed to administer the mandatory contribution towards the
PF scheme by both the employees and employers.
 It is a mandatory contribution – equal contribution by the employer and
the employee.
Applicability of the Act and Registration
 An establishment with less than 20 employees can voluntarily opt for PF
registration to protect employee’s benefits.
 However, Companies with more than 20 employees compulsorily have
to register under EPFScheme (EPFS).
 Once a company is covered under the EPF Act, even if its employee
strength drops below 20, it will still be covered.
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Need of EPF
 Tax benefits.
 Insurance benefits.
 Lifelong pension.
 Premature withdrawal option.
 Higher returns.
 Does not exhaust even if one switches his job.
Important Components of the EPF Act
1. Employee Provident Fund, 1952 (EPF): This scheme aims to promote
retirement savings.
 Employee Pension Scheme, 1995 (EPS): This scheme aims to provide
post retirement pension.
 Employee Deposit Linked Insurance Scheme, 1976 (EDLI): This scheme
gives life insurance to family members in case of sudden death.

Some important key points

 For every employee, it is mandatory to contribute towards EPF and EPS
if his/her wages (Basic + DA) are under Rs. 15,000. If an employee is
drawing wages over 15,000 per month, then he can ask for PF
deductions from his salary.
 Both the employees and employers contribute 12%of the basic wages
and dearness allowance to the provident fund (PF) account. Thus, the
total contribution to the PF is 24% per month.
 In the EPF account, entire 12%is contributed by the employee, while
3.67% is contributed by the employer. The employer’s remaining
contribution of 8.33% is diverted to the Employee’s Pension Scheme. It is
important to note that if the employee salary exceeds Rs. 15000, the
employer’s contribution towards EPS is restricted to 8.33% of Rs 15000
per month.
 Currently, Employee provident fund interest rate is 8.65 % per annum.
The interest is decided by the Government with the consultation of
Central Board of Trustees of the EPFO.

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  The EPF also offers the nomination facility. An employee can nominate
his mother, father, spouse or children who are entitled to receive EPS
money in the event of the death of an employee. However, an employee
cannot nominate his brother and sister for EPF.
 The employer also makes 0.50% of contribution towards the EDLI
(Employees’ Deposit Linked Insurance) account of the employee.
EPF withdrawals Rules
 EPF can be completely withdrawn under any of the following
circumstances:
 When an individual retires from employment
 When an individual remains unemployed for a period of 2 months
or more
 Partial withdrawal of EPF can be done under certain circumstances and
subject to certain prescribed conditions
Tax Benefits
 The employer contribution to employee EPF is tax-free,
 Employee contribution is tax-deductible under Section 80Cof the Income
Tax Act.
 The money invested by employee in EPF, the interest earned and the
money eventually withdrawn, by employee after the mandatory
specified period (5 years) are exempt from Income Tax.
Post- retirement benefits of EPF
 Upon retirement, the employee receives the full amount in his EPF
account.
 The employee also receives his/her pension from the EPS account
provided that the employee has completed over 10 years of service.

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