THE EMPLOYEE’S COMPENSATION ACT,

1923

CONCEPT NOTES
Contents
1 History.....................................................................................................................................................2
2 Objective of The Employee’s Compensation Act, 1923 .........................................................................4
3 Section 2 – Important definitions ...........................................................................................................4
4 Section 3 - Employer’s liability for compensation ..................................................................................5
5 Section 4 - Amount of compensation .....................................................................................................6
6 Section 4A - Compensation to be paid when due and penalty for default ............................................7
7 Section 8 - Distribution of compensation ...............................................................................................7
8 Section 10 - Notice and claim .................................................................................................................8
9 Section 15 - Special provisions relating to masters and seamen ...........................................................8
10 Section 15A - Special provisions relating to captains and other members of crew of aircrafts ............9
11 Section 15B - Special provisions relating to employees abroad of companies and motor vehicles ......9
12 Section 19 - Reference to Commissioners ..............................................................................................9
13 Section 25A - Time limit of disposal of cases relating to compensation ................................................9

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 1 History
The history of employee's compensation, also known as
workers' compensation in some regions, is a significant aspect
of labor law and social welfare policy.

It represents the evolving understanding and legal framework

regarding the rights and protections for workers injured or
disabled in the course of their employment. Here's an
overview of its development:

Early Industrial Age: Prior to the establishment of workers'

compensation laws, the industrial revolution saw a significant
increase in work-related injuries. During this period, the
burden of injury and loss of income fell almost entirely on the workers. The prevailing legal doctrines,
like "contributory negligence" and "the fellow servant rule," often made it extremely difficult for
injured workers to receive any compensation from their employers.

Late 19th Century - Early 20th Century: The first formal workers' compensation laws began to emerge
in the late 19th and early 20th centuries. Germany, under Chancellor Otto von Bismarck, was a
pioneer in this area, introducing the Employer's Liability Law of 1871 and subsequently the Workers'
Accident Insurance in 1884. This system provided a model for other countries.

United States: In the U.S., the first comprehensive workers' compensation law was passed in
Wisconsin in 1911, followed by other states. These laws typically provided for limited compensation
(medical costs and wage loss) regardless of fault, in exchange for mandatory relinquishment of the
employee's right to sue their employer for negligence.

United Kingdom: The UK's Workmen's Compensation Act of 1897 was an early form of workers'
compensation, providing a structured approach to workplace injury and compensation, although it
was limited in scope.

Expansion and Evolution: Throughout the 20th century, workers' compensation laws expanded and
evolved across the world. These laws started including broader protections, covering occupational
diseases and providing for long-term rehabilitation services.

Contemporary Trends: In recent years, there's been a focus on workplace safety, prevention of
injuries, and efficient management of workers' compensation systems. Issues such as occupational
stress and mental health injuries are gaining recognition in some jurisdictions.

Challenges and Reforms: Workers' compensation systems often face challenges like ensuring fair and
adequate compensation, preventing fraud, and balancing the interests of employers, insurance
companies, and workers. Many countries continue to reform their workers' compensation systems
to address these challenges.

The concept of employee's compensation reflects a fundamental shift from treating work-related
injuries as individual misfortunes to recognizing them as a social and economic issue that requires
systemic solutions. The history of workers' compensation is thus intertwined with the broader
narrative of labor rights, industrial safety, and social welfare.

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 INDIAN CONTEXT:

The history of employee compensation in India has evolved significantly over time, influenced by its
unique social, economic, and political contexts. Here's an overview:

Pre-Independence Era: Prior to independence, India was under British colonial rule, and the labor
laws and practices were largely influenced by British legal principles. Industrialization was in its
nascent stages, and labor rights were minimal. Work-related injuries or illnesses were generally not
compensated, and workers had little to no legal recourse.

The Workmen's Compensation Act, 1923: This was one of the first significant laws in India providing
compensation to workers for injuries sustained during employment. It marked the beginning of
formalized employee compensation in India. The Act provided for payment of compensation to
workers and their dependents in the case of injury or death during employment.

Post-Independence Developments: After gaining independence in 1947, India embarked on a path

of creating a comprehensive legal framework for labor rights and welfare. The Indian Constitution,
adopted in 1950, laid down principles for labor welfare, including the right to work, to education, and
to public assistance in cases of unemployment, old age, sickness, and disablement.

The Employees’ State Insurance Act, 1948: This Act provided for mandatory social insurance for
workers in certain sectors. It was a significant step in providing a more comprehensive social security
net for workers, including medical care and cash benefits in the case of sickness, maternity, and
employment injury.

The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952: This Act provided for the
institution of provident funds, pension funds, and deposit-linked insurance funds for employees in
certain establishments. It was aimed at ensuring long-term financial security for workers.

Recent Developments: Over the years, India has continued to enhance its labor laws and policies.
The Workmen's Compensation Act was renamed the Employees' Compensation Act in 2009,
expanding its coverage and increasing the compensation amounts. The Indian government has also
introduced other initiatives, such as the Pradhan Mantri Rojgar Protsahan Yojana (PMRPY) to
incentivize job creation and the Atal Pension Yojana for unorganized sector workers.

Current Challenges and Reforms: Despite these developments, the implementation of employee
compensation laws in India faces challenges like bureaucratic delays, limited reach in the unorganized
sector, and the need for more comprehensive coverage. Ongoing reforms and policy discussions
continue to address these challenges.

In summary, the history of employee compensation in India reflects a gradual but significant shift
towards improving workers' rights, social security, and welfare, particularly in the context of a rapidly
changing economic landscape and a large unorganized labor sector.

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 2 Objective of The Employee’s Compensation Act, 1923
 Mandate the provision of compensation by specified classes of
employers to their employees for injuries sustained due to accidents
arising out of and in the course of employment.

3 Section 2 – Important definitions

 " Employee” means a person, who is:
 Railway servant
 Master, seaman or other member of the crew of a ship
 Captain or other member of the crew of an aircraft
 Driver, helper, mechanic, cleaner or in any other capacity in
connection with a motor vehicle
 Person recruited for work abroad by a company
 Employed in any such capacity as is specified in Schedule II
 But does not include any person working in the capacity
of a member of the Armed Forces of the Union

 “Dependent” means any of the following relatives of a deceased employee, namely:

 Widow
 Minor son (legitimate or adopted)
 Unmarried daughter (legitimate or adopted)
 Widowed mother
 If at the time of the employee's death, a son or daughter over the age of 18 is infirm
and fully dependent on the employee's earnings
 If wholly or in part dependent on the earnings of the employee at the time of his death
following are also considered as dependent:

 “Employer” means:
 Any person whether incorporated or not
 Managing Agent of an employer
 Legal representative of a deceased employer
 Temporary employment – employer for whom employee is working or worked

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  “Partial disablement” means:
 Temporary disablement - Reduces the earning capacity of an employee in any
employment in which he was engaged at the time of the accident. (E.g. – Cuts in both
the hands)
 Permanent disablement - Reduces his earning capacity in every employment which he
was capable of undertaking at that time. (E.g. - Loss of Thumb)

 “Total disablement” means:

 Such disablement, whether of a temporary or permanent nature,
incapacitates/disables an employee for all work which he was capable of performing at
the time of the accident resulting in such disablement. (E.g. – Temporary Total
Disablement → Broken hand) (E.g. – Permanent Total Disablement → Loss of a hand and
a foot)

 "Wages" means:
 Anything extra you get from your job that can be thought of in terms of money.
 This includes special benefits or privileges.
 But it doesn't include money for travel, any deals on travel you might get, or any
money your employer puts into a retirement or savings fund for you.
 It also doesn't include money given to you to help pay for any special costs you have
because of your job.

 “Minor” means a person who has not attained the age of 18 years.

Concept Check
Q. Which of the following is NOT included in the definition of 'Employee' according to the Employee’s
Compensation Act, 1923?
A) Railway servants
B) Crew members of ships or aircraft
C) Members of the Armed Forces of the Union
D) Individuals working in capacities specified in Schedule II

Ans: C

4 Section 3 - Employer’s liability for compensation

 If an employee is injured in the course of his employment, the employer has to pay
compensation to the employee:
 But the employer is not responsible or liable in situations:
 Injuries that do not disable the employee for more than 3 days
 For any injury not resulting in death or permanent total disablement caused by an
accident directly linked to:
o Influence of alcohol or drugs at the time
o Willfully disobeying an explicit safety order or rule
o knowingly removing or ignoring a safety guard or device provided for employee
safety.

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  If an employee in specific employments listed in Schedules III A, B, or C contracts a disease
listed there as an occupational disease peculiar to that employment.
 It is considered an injury by accident within the law, unless proven otherwise. The
accident is deemed to have occurred during the course of employment.

5 Section 4 - Amount of compensation

 The amount of compensation shall be as follows:

 For Serial number (A) and (B), "relevant factor" concerning an employee refers to the
factor listed in the 2nd column of Schedule IV

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  Funeral expenses - If the employee dies due to the injury, the employer must, along
with the compensation mentioned, deposit a sum of 5,000 rupees with the
Commissioner.

Concept Check
Q. How much funeral expenditure has to be deposited by an employer with the Commissioner in
addition to the compensation in case of injury results into death?
A. 2000
B. 5000
C. 2500
D. 1500

Ans: B

6 Section 4A - Compensation to be paid when due and penalty for default

 The compensation must be paid as soon as it falls due.

 In cases where the employer does not accept the liability for
compensation to the extent claimed, he shall be bound to
make provisional payment based on the extent of liability
which he accepts, and such payment shall be deposited with
the Commissioner or made to the employee.
 If the employer doesn't pay the compensation within 1 month
of its due date, the Commissioner can:
 In addition to the amount of the arrears, impose simple interest, either at 12% per
annum or at a higher rate specified by the Central Government.
 If there is no valid reason for the delay, the employer may also be required to pay
in addition to the amount of the arrears and interest thereon, a penalty, not
exceeding 50% of the outstanding amount, after giving the employer an
opportunity to explain the delay.

Concept Check
Q. What is the compensation for Permanent Total Disability as per the Employee’s Compensation
Act, 1923
A. 50% of monthly wages * factor or ₹1,20,000, whichever is more
B. 60% of monthly wages * factor or ₹1,40,000, whichever is more
C. As per Schedule or proportionate to loss of earning capacity
D. 25% of monthly wages, paid half-monthly

Ans: B

7 Section 8 - Distribution of compensation

 If an employee dies because of an injury, any compensation must be paid to the
Commissioner, not directly to the beneficiaries.

 This also applies to cases where the beneficiary is a woman or someone who is legally
unable to handle their own financial matters.
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  Any compensation paid directly by an employer will not be considered a proper
compensation payment.
 If an employee has died, the employer is allowed to give an advance payment to the
employee's dependents.
 This advance can be as much as what the employee would have earned in 3 months.
 When the official compensation is calculated, the Commissioner will subtract the
advance amount already paid from the total compensation due to the dependent.

Concept Check
Q. When the Compensation under the Employees’ Compensation Act, 1923 has to be paid?
A. Within one month of its due date
B. Within 3 months of its due date
C. Within 6 months of its due date
D. As soon as it falls due

Ans: D

8 Section 10 - Notice and claim

 Compensation claim will not be considered by a Commissioner
unless 2 conditions are met:

 Notice of the accident must be given as soon as possible

after the accident happens.
 The compensation claim must be made within 2 years of
the date of the accident, or if the accident resulted in
death, within 2 years from the date of death.

9 Section 15 - Special provisions relating to masters and seamen

 When an accident occurs, both the notice of the accident
and the claim for compensation usually need to be given to
the master of the ship as if he were the employer except
where the person injured is the master of the ship.

 Where the accident happened and the disablement

commenced on board the ship it shall not be
necessary for any seaman to give any notice of the
accident.
 If a ship's captain (master) or a sailor (seaman) dies,
the person who wants to claim compensation must do so within 1 year after the news
of the death has been received by the claimant.
 However, if the ship is considered to have been lost at sea with no survivors, the
claim for compensation should be filed within 18 months from the date the ship is
assumed to have been lost.

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 10 Section 15A - Special provisions relating to captains and other members of crew of
aircrafts
 The notice of the accident and the claim for compensation may,
except where the person injured is the captain of the aircraft,
be served on the captain of the aircraft as if he were the
employer.
 Where the accident happened and the disablement
commenced on board the aircraft it shall not be necessary
for any member of the crew to give notice of the accident.
 If the captain or a crew member of an aircraft dies,
whoever is making a claim for compensation (the claimant) must do so within 1 year
after the news of the death has been received by the claimant.
 If the aircraft is considered lost with no survivors, the claim must be filed within 18
months from the date the aircraft is presumed to have been lost.

11 Section 15B - Special provisions relating to employees

abroad of companies and motor vehicles
 Employees hired by Indian companies to work overseas,
including those who go abroad with Indian-registered vehicles,
as drivers or other roles. Specific rules or exceptions will apply to
these employees:

 If there is an accident, the notice and the claim for

compensation can be given to the company's local agent or
the vehicle owner's local agent in the country where the accident happened.
 If an employee dies, anyone seeking compensation must file their claim within 1 year
after the news of the death has been received by the claimant.

12 Section 19 - Reference to Commissioners

 If any question arises as to:

 The liability of any person to pay compensation, or

 The amount of the compensation, or
 The duration of the compensation, or
 The nature or extent of the disablement
These questions shall be settled by a Commissioner.

13 Section 25A - Time limit of disposal of cases relating to

compensation
 The Commissioner must resolve any issues related to compensation under
this law within 3 months from the date of reference and intimate the
decision to the employee.

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 Concept Check
Q. When the compensation under Employees’ Compensation Act, 1923 has to be paid?
A. Within one month of its due date
B. Within 3 months of its due date
C. Within 6 months of its due date
D. As soon as it falls due

Ans: D

Concept Check
Q. Claim of compensation shall be made before a commissioner within what period of accident or
death?
A. Within two years of the occurrence of the accident or death
B. Within one year of the occurrence of the accident or death
C. Within three years of the occurrence of the accident or death
D. Within four years of the occurrence of the accident or death

Ans: A

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