Everything you need to know about Workmen’s Compensation Act
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Everything you need to know about Workmen’s Compensation Act

How to handle claims arising out of employment? Is COVID19 disease covered under EC Policy considering it as an occupational disease?
1.

The Object of the Workmen’s Compensation Act 1923 (came into effect from 1st July 1924) is to provide for the payment of compensation by certain employers to their employees for injury caused to them by accident happened in course of employment. If an employee contracts an occupational disease (list of diseases) while in employment, it is also treated under the Act as injury caused by accident. There is a structured formula to settle the claims.

There is a statutory requirement for any Industrial employer towards his employees to have coverage against the liabilities arising out of industrial accidents. This policy is governed by the Fatal Accident Act 1855 and Workmen’s Compensation Act 1923.

  • Fatal Accident Act 1855 – The Fatal Accidents Act, 1855, which is the subject matter of this study, provides that on the death of a person caused by the “wrongful act, neglect or default” of another person, the personal representative of the deceased can maintain an action for damages on behalf of the wife, husband, parent or child of the deceased.

  • Common-Law

    (a) Common law is defined as a body of legal rules that have been made by judges as they issue rulings on cases, as opposed to rules and laws made by the legislature or in official statutes. An example of common law is a rule that a judge made that says that people must read contracts.

    (b) the law of a country or state based on custom, usage, and the decisions and opinions of law courts: it is now largely codified by legislative definition.

  • Workmen’s Compensation Act 1923 – It has evolved a scientific formula for payment of compensation, based on the age and earnings of the employee. An employer must pay the compensation as per the provision of the WC Act 1923 and the Employee or his heirs don’t have to prove negligence.

TO WHOM DOES THE WORKMEN’S COMPENSATION ACT APPLY?

  • All Establishments hiring 20 workers and above must compulsorily register themselves under the Employees State Insurance Act (ESI Act).

  • It is only those establishments that employ a lesser number of workers and therefore do not come under the purview of the ESI Act that the EC Act applies to.

  • Also, if the employer fails to register under the ESI Act, then they will be responsible to pay compensation under the EC Act.

  • However, the EC Act will only apply to those persons considered “workers” and those Employers considered “employers”, as defined under the EC Act.

GENERAL PRINCIPALS

  • There must be a causal connection between the injury and the accident and the work done in the course of employment;

  • The onus is upon the applicant to show that it was the work and the resulting strain which contributed to or aggravated the injury

  • It is not necessary that the workman must be working at the time of his death or that death must occur while he was working or had just ceased to work; and

  • Where the evidence is balanced if the evidence shows a greater probability that satisfies a reasonable man that the work contributed to the causing of the personal injury it would be enough for the workman to be entitled. But where the accident involved a risk common to all humanity and did not involve any peculiar or exceptional danger resulting from the nature of the employment or where the accident was the result of an added peril to which the workman by his own conduct exposed himself, which peril was not involved in the normal performance of the duties of his employment, then the employer will not be liable.

Indicia to confirm the employer-employee relationship:

  • The employer must have the authority to use or choose the employee.

  • Some consideration is to be paid by the employer to the employee for services rendered.

  • The employee should do the job as per the method shown by the employer.

  • The employer must be in a position to terminate the job of the employee.

  • Master servant relationship.

  • Servant doing the job for the development of trade or business of the master.

  • Not of casual nature.

  • Railway employment as per Section- 3 of Railway Act 1980.

Workmen Compensation Policy does not cover employees who are covered under the ESIC Act.

‘ARISING OUT OF AND IN THE COURSE OF EMPLOYMENT'[1]:
Section- 3 of W.C.Act 1923

The employer is liable to compensate if personal injury[2] is caused to his employee

a) by accident arising out of and

b) in the course of his employment[3],

his employer shall be liable to pay compensation following the provisions of the act.

Employment of an employee is deemed to commence from the time he reaches his place of work and continue up to the time he leaves it.

“in the course of his employment”. The dictionary meaning of “in the course of” is “during (with time, as time goes by) while doing. The dictionary meaning indicates that the accident must take place within or during the period of employment. The journey to the factory may have been undertaken for working at the factory. But this journey was certainly not in course of employment[4]. If employment begins from the moment the employee sets from his house for the factory, then even if the employee stumbles and falls at the doorstep of his house, the accident will have to be treated as to have taken place in the course of his employment. This interpretation leads to absurdity and has to be avoided.

There might be some reasonable extension[5] in both time and place[6] to this principle. A workman might be regarded as in the course of his employment even though he had not reached or had left his employer’s premises in some special cases. The facts and circumstances of each case would have to be examined very carefully to determine whether the accident arose out of and in the course of the employment of a workman, keeping in view at all times this theory of notional extension.[7]

When a workman is on a public road or a public place or a public transport he is there as any other member of the public and is not there in the course of his employment unless the very nature of his employment makes it necessary for him to be there. A workman is not in the course of his employment from the moment he leaves his home and is on his way to his work. He certainly is in the course of his employment if he reaches the place of work or a point or an area that comes within the theory of notional extension[8], outside of which the employer is not liable to pay compensation for any accident happening to him.[9]

WORKPLACE AS DEFINED UNDER THE ACT:

As establishments, enterprises, institutions, offices, branches, premises, locations or units established, owned, controlled by the Company or places visited by the employees out of or during employment including accommodation, transportation provided by the employer for undertaking such journey.

NOTIONAL EXTENSION: Notional extension[10] means broadening the concept of the workplace. As a rule, the employment of a workman does not commence until he has reached the place of employment and does not continue when he has left the place of employment. There may be some reasonable extension[11] in both time and place and a workman may be regarded as in the course of his employment. The concept of Notional Extension[12] has been applied to ensure the applicability of beneficial labour legislation to situations wherein the course of employment cannot be limited to the time or place of the specific work which the workman is employed to do. The said doctrine has been applied time and again to broaden the concept of “workplace”.
W.C. allows cover only in India except anything happens to any Indian Marine employee covers under the policy on the Indian Ship.

WHAT ARE THE COVERS AVAILABLE IN THE WORKMEN’S COMPENSATION INSURANCE POLICY?

  • Death

  • Permanent Total Disablement

  • Permanent Partial Disablement

  • Temporary Disablement

  • Legal Costs Incurred If any with Insurer’s consent

  • The policy can also be extended to include medical expenses for necessary treatment

EXCLUSIONS:

1. The employer is not liable to pay compensation for injury to an employee under the following circumstances: –

a) If the injury does not result in total or partial disablement of the employee for a period exceeding three days;

b) If the injury does not result in the death of the employee and is caused by an accident that is directly attributable to:-

(i) If an employee has been at the time thereof under the influence of drink or drugs.

(ii) The disobedience of the employee to an order expressly given, or to a rule framed, to secure the safety of workman, OR

(iii) The wilful removal or disregard by the employee of any safety guard or other device which he knew to have been provided to secure the safety of the employee.

In addition to the above as per Policy the following Exclusions:-

1. Any injury caused by accident or diseases directly linked to war invasions and other perils.

2. Any injury or accident which doesn’t cause fatality or partial disablement for a period exceeding three years.

3. Liability towards Contractors Employees, unless it is specifically covered.

4. Any liability of the Insured which attaches under an agreement but which would not have attached in the absence of such agreement.

5. Any compensation for disease mentioned in Part ‘C’ of Workmen Compensation Act 1923

SUM INSURED

Ø The sum insured is calculated based on: -Earnings include wages, salaries, over time, board/lodging, and other perquisites

Ø No deductions for pension / PF to be accounted

Ø TA / travelling concessions not to be accounted

Ø No deduction for IT deducted at source

WAGES – All type of earnings measured in terms of money except.

– Travelling Expenses.

– Contribution to P.F.

– Contribution to Family Pensions.

MAXIMUM WAGES – Employee’s Compensation Act rule change 2020: The Central government has changed the number of wages to be considered for calculation of compensation to workers under the Employee’s Compensation Act 1923 vide notification S.O.71 (E) dated January 3, 2020. The number of wages considered previously for the calculation of compensation was just Rs 8,000. Now, it will be Rs. 15,000, according to the notification by the Ministry of Labour and Employment.

Therefore, Monthly wages of Rs. 15,000/- per month are to be considered for calculation of compensation, in case monthly wages are above Rs. 15,000/-.

WHEN THE COMPENSATION IS TO BE PAID?

As per Section 4A

Ø The compensation has to be paid as soon as it is due

Ø In case the Employer does not accept the liability of paying the compensation, he is bound to make a provisional payment to the extent of the liability he accepts. Such amount has to be deposited with the commissioner or paid to the Workman. If he defaults, the commissioner may order:

Ø The payment of the amount with interest at 12% per year

Ø If the default is unjustifiable then the commissioner may order payment of a sum not exceeding 50% of the amount due, by way of penalty.

Ø The amount of compensation is not payable to the workman directly. It is generally deposited along with the prescribed statement, to the Commissioner who will then pay it to the workman. Any payments made to the workman or his dependant, directly, in the following cases will not be deemed to be a payment of compensation;

Ø In case of death of an employee

Ø In case of sum compensation payable to a woman or a minor or a person of unsound mind or whose entitlement to the compensation is in the dispute or a person under a legal liability

Ø Besides, compensation of Rs.10 or more may be deposited with the commissioner on behalf of the person entitled thereto.

Ø The receipt of deposit with the Commissioner shall be the sufficient proof of discharge of Employers Liability.

AMOUNT OF COMPENSATION

DEATH –

When the injury to an employee results in his death, the amount of compensation payable to his dependents is an amount equal to 50% of the monthly wages of the deceased employee multiplied by a figure ranging from 228.54 to 99.37 (depending upon the completed age of the deceased employee) or an amount of 1,20,000, whichever is more. However, if the monthly wages of the deceased employee exceed Rs. 15000/-, his monthly wages to calculate the compensation shall be deemed to be Rs. 15,000/- only (w.e.f. 3rd January 2020).[13]

PERMANENT TOTAL DISABILITY –

When the injury of an employee results in his permanent total disablement, the amount of compensation he is entitled to receive is an amount equal to 60% of the monthly wages of the injured employee multiplied by a figure ranging from 228.54 to 99.37 (depending upon the age of the injured person) or an amount of Rs. 1,40,000/- whichever is more. However, if the monthly wages of the injured employee exceed Rs. 15000, his monthly wages to calculate the compensation shall be deemed to be Rs. 15,000/- only.

PERMANENT PARTIAL DISABILITY –

When the injury of an employee results in his permanent partial disablement, the amount of compensation he is entitled to receive is a percentage of the compensation payable in the case of permanent total disablement. The percentage is determined concerning the extent of loss of earning capacity caused by the injury and is a lump-sum payment.

TEMPORARY TOTAL DISABILITY –

When the injury of an employee results in his temporary total disablement or temporary partial disablement he is entitled to receive compensation in the form of a half-monthly payment. The amount of a half-monthly payment is determined concerning the monthly wages the employee was drawing at the time of the injury and is equal to 25% of the monthly wages of the employee. The maximum period during which the employee can receive compensation for temporary total disablement or temporary partial disablement is five years.

i) Shall be payable on the sixteenth day from the date of disablement where disablement is for more than 28 days.

ii) After the expiry of 3 days from the date of disablement where such disablement lasts for less than 28 days.

Illustration For Temporary Total Disablement:

Where the workmen having wages above Rs. 15,0000/-, remained disabled for 145 days:

No. of half months – 145 ÷ 15 = 9 weeks and 10 days

Monthly wages = Rs. 15,000/-

Half-monthly payment @ 25% of monthly wages = Rs. 3,750/-

For 9 ‘Half-monthly’payments = 3,750 X 9 = Rs. 33,750/-

Payments for 10 days = 3,750 / 15 X 10 = Rs.2,500/-

Rs. 36,250/-

Claim Amount payable would be Rs. 36,250/-.

MEDICAL EXPENSES –

Ø Medical Expenses are payable in addition and up to the sum insured.

INFORMATION REQUIRED –

For Injury Claim –

– Nature of injury and whether it falls under the Schedule

– Treatment period and the nature of the treatment

– Medical expenses spent towards treatment and whether it is covered in the policy

– Completed Age of the injured and the relevant factor for calculation of compensation (Proof of Birthdate is compulsory).

– Wages declared for insurance. (Number of employees and Wages declared for insurance should always be more than the actual numbers and wages, respectively. Else, the claim will be settled in the proportion of the policy coverage to actual.

– Medical certificate issued by Doctor on the disability aspect – PTD or PPD or TTD or TPD

For Death Claim–

– Age of the deceased with proof

– Wages declared by the insured

– Factor applicable to the age

– Dependents of the deceased

How to handle claims arising out of employment?

List of documents required under WC claim:

– Claim Form along with Medical Report

– Detailed Note on the incident from Site-In-charge

– FIR, Post mortem (Attested legible copy) and Birth certificate or School leaving certificate in case of death claim

– Death Certificate (original) in case of death claim

– PTD Claim-Doctors certificate certifying permanency of disability, recent photograph and Birth certificate or School leaving certificate of the injured employee.

– PPD Claim-Doctors Certificate certifying permanency of disability, recent photograph and Birth certificate or School leaving certificate of the injured employee.

– TTD Claim-Doctors Certificate certifying period of disability and Leave Certificate issued by the Employer.

– Past 12 months Wages slips and Attendance slip of the injured employee

– Declaration for month-wise total wages paid and the total number of employees worked, from policy inception till the month of the accident

– Copy of work order/Contract, if applicable.

– NEFT Details (a) Original cancel cheque/Bank passbook showing the name of insured, A/c. No., Type of account and (b) NEFT Form duly filled up

Above is an indicative list of documents for the WC claim process, and an additional document may be called for if required in support of the claim.

Important Suggestions:

To HAVE HASSLE-FREE PROCESSING OF THE CLAIMS, INSUREDS ARE ADVISED TO

A) KEEP DOCUMENTARY PROOF OF BIRTH DATE OF ALL THERE EMPLOYEES IN THE RECORDS

B) KEEP WAGE REGISTER AND ATTENDANCE REGISTER UPDATED ALWAYS.

MV Act Section 167. Option regarding claims for compensation in certain cases.

(a) Notwithstanding anything contained in the Employee Compensation Act, 1923 (8 of 1923) where the death of, or bodily injury to, any person gives rise to a claim for compensation under this Act and also under the Employee Compensation Act, 1923, the person entitled to compensation may without prejudice to the provisions of Chapter X claim such compensation under either of those Acts but not under both.

ESIC Act 1948 SEC. 53 – Bar against receiving or recovery of compensation or damages under any other law.

An insured person or his dependants shall not be entitled to receive or recover, whether from the employer of the insured person or any other person, any compensation or damages under the Workmen’s Compensation Act, 1923 or any other law for the time being in force or otherwise, in respect of an employment injury sustained by the insured person as an employee under this Act.[14]

Is Employee Compensation Act has become redundant due to ESIC Insurance?

(b) The Legislative Body had seen it relevant to revise the erstwhile Workmen Compensation Act, 1923 and bring it about in its current avatar of Employee Compensation Act, 1923 in the year 2010. Hence this is a pointer that the Act is not redundant and very much relevant.

(c) ESI Act applies to organizations employing 10 or more employees and even where numbers of employees are more than 10, it does not apply to those employees drawing wages/salary in excess of`21,000 per month. Employees falling under this category have their recourse with either the Employee Compensation Act, 1923 or common law which is better known as Law of Tort. Of the two, the Employee Compensation Act provides for a faster and cost-effective resolution.

(d) All Establishments hiring 20 workers and above must compulsorily register themselves under the Employees State Insurance Act (ESI Act).

(e) It is only those establishments that employ a lesser number of workers and therefore do not come under the purview of the ESI Act that the EC Act applies to.

(f) Also, if the employer fails to register under the ESI Act, then they will be responsible to pay compensation under the EC Act.

(g) However, the EC Act will only apply to those persons considered “workers” and those Employers considered “employers”, as defined under the EC Act.

Is COVID19 disease covered under EC Policy considering it as an occupational disease?

A) COVID19 sickness is not on the list of diseases declared as occupational diseases under the EC Act.

B) The policy essentially covers sickness arise out of and in course of employment. COVID19 has spread all over the world and is declared as Pandemic. It has no relevance to any occupation per se.

C) Further, the Employee is not necessarily exposed to COVID19 at his workplace only. Due to the very nature of the pandemic, he exposed to this disease, as any other member of the public and is not only in the course of his employment. Therefore, the employer is not liable to pay compensation for the COVID19 disease.

References:

[1] All Answers ltd, ‘Legal Obligation on Employer to Pay Compensation’ (Lawteacher.net, March 2021), available at:<https://www.lawteacher.net/free-law-essays/contract-law/legal-obligation-on-employer-to-pay-compensation-contract-law-essay.php>, accessed on 09-03-2021.
[2] Section 3(1) in The Workmen’ S Compensation Act, 1923, available at: <https://indiankanoon.org/doc/1648422/>, accessed on: 09-03-2021.
[3] Mukesh, Employment Injuries – Some Issues, available at: <https://www.topcafirms.com/white-paper/employment-injuries-some-issues>, accessed on:09-03-2021.
[4] Rebecca Furtado, Doctrine of Respondeat Superior: A Legal Interpretation, Course of Employment, available at: <https://blog.ipleaders.in/doctrine-respondeat-superior-legal-interpretation/>, accessed on:09-03-2021.
[5] General Manager, A. P. State Road Transport Corporation, Hyderabad vs. Mohd. Sarwaraidin, Appeal Against Order Appeal No. 636 Of 1974 | 23-12-1975, para 7, available at: <https://www.legitquest.com/case/general-manager-a-p-state-road-transport-corporation-hyderabad-v-mohd-sarwaraidin/B292>, accessed on:18-02-2021.

[6] Oriental Insurance Company vs Tilak Raj and ors. Punjab & Haryana High Court, FAO No. 4529 of 2011|FAO No. 5077 of 2011|20-08-2014, available at: <https://www.casemine.com/judgement/in/56ea822e607dba378d9d3173>, accessed on: 09-03-2021.
[7] General Manager, B. E. S. vs Mrs. Agnes on 10 May, 1963, para 7, available at: <https://indiankanoon.org/doc/948846/>, accessed on 18-02-2021.
[8] Ibid.
[9] ESI Corporation vs Lakshmi, in S.S. Manufacturing co. vs Bai Valu raju, AIR 1958 SC 881 at 882| 16-08-1978, available at: <https://www.casemine.com/judgement/in/56e66b01607dba6b5343727a>, accessed on 09-03-2021.
[10] Supra N. 7.
[11] Supra N.5.
[12] Supra N.7.
[13] Bombay Chamber of Commerce, Enhancing the Statutory Salary Ceiling for Calculation of Compensation under The Employees Compensation Act – 1923, published on: Jan 10, 2020, available at: <http://www.bombaychamber.com/newsdetail.html?news=142>, accessed on:18/02/2021.
[14] India Code, Bar against receiving or recovery of compensation or damages under any other law, available at: <https://www.indiacode.nic.in/showdata?actid=AC_CEN_6_6_00020_194834_1517807322294&sectionId=41924&sectionno=53&orderno=71>, accessed on: 18/02/2021.

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