SUBJECT: LABOUR LAW II
TOPIC: EMPLOYEE COMPENSATION ACT,1923
SUBMITTED TO : PROF. PRIYA KARMAKAR DAS SUBMITTED BY:
MAHIMA LAKRA
ASSISTANT PROFFESSOR
URN NO: 2022-B-01061989
ADYPU-SCHOOL OF LAW LLB 3 RD YEAR
6TH SEMESTER
INTRODUCTION
The Employee Compensation Act, 1923 (formerly known as the Workmen’s
Compensation Act) is an Indian legislation that mandates employers to provide
compensation to employees or their dependents in cases of injury, disability, or
death arising from workplace accidents or occupational diseases.
The Act is designed to protect workers from financial distress caused by
workplace hazards, ensuring that they receive adequate compensation without
needing to prove employer negligence. It covers medical expenses, disability
benefits, and death benefits, and applies to a wide range of industries and
occupations.
The Act also promotes workplace safety by holding employers accountable for
accidents and occupational diseases, while reducing lengthy litigation through a
simplified compensation process.
Objectives of the Employee
Compensation Act
The core objectives of the Employee Compensation Act can be grouped into
several overarching themes: ensuring legal compliance, providing financial
protection to employees, promoting workplace safety, and reducing litigation.
The Act serves to balance the interests of both workers and employers by
laying down clear guidelines and responsibilities.
Definition
Dependent (Section 2(1)(d))
The Act primarily define dependents. Dependent in this case means those relations of a
deceased employee, who were dependent on the employee wholly or partially for
sustenance.
These dependents are broadly categorised into three categories, viz.
1) direct dependents, like a widow
2) major dependents like a son or daughter and
3) other dependents like for example parents, who are (wholly or partially) dependent
on the employee. This definition is essential, as in case of death of an employee, at the
time it would be essential to understand who is considered and in particular to the case
who are the dependants deserving to be compensated on account of the death of the
employee.
Relevant Case Laws:
Sarla Verma v. D.T.C.
In Sarla Verma v. D.T.C., (2009) 6 SCC 121, T
The Supreme Court held that the mother of the deceased bachelor is entitled to
compensation by taking 50% of his income as loss of dependency on the premise that
the deceased would not contribute more than 50% to his mother after marriage. The
Supreme Court further observed that the mother would be considered as a dependent
even if the father was employed and earning. In light of the above decisions, the High
Court held that the parents of the deceased child are considered as dependents for
computation of compensation. Further, the Bench also highlighted that the principles
relating to the loss to the estate shall apply only to claimants other than parents,
children and spouse. Hence, the deceased’s mother in the instant case is entitled to
compensation for loss of dependency.
Employer Section 2(1)(e)
An employer is a person or organization that hires employees and is responsible for their
management and supervision. Employers are responsible for providing a safe work environment,
paying employees, and offering other benefits.
According to Section 2(1)(e), an employer includes:
1. Any body of persons, whether incorporated or not.
2. Any managing agent of an employer.
3. The legal representative of a deceased employer.
4. When the services of an employee are temporarily lent or let out to another person by the
compensation with whom the employee has entered into a contract of service or apprenticeship,
i.e. such other person while the employee is working for him.
It is essential to define the ‘employer’ as it is the employer who is liable to pay the compensation,
as per the Act, nobody other than the someone who satisfies the definition of the employer as per
the definition laid down in the Act of one who is made expressly liable to pay compensation shall
be responsible to pay the compensation.
Relevant Case Laws
Shobha vs Chairman, Vithalrao Shinde Sahakari Sakhar
Karkhana Ltd
The deceased employee was a sugarcane cutting labourer. While cutting the sugarcane,
he died of a snake bite. His heirs “Shobha” ( Appellants) filed a claim petition before
the Commissioner Workmen's Compensation, Beed and claimed Rs. 5 lakhs. The
Commissioner directed the employers to pay the compensation amount.
Decision:
Allowing the appeal, the Court held that the claimants shall be entitled to the interest @
12% p.a. on the amount of compensation as awarded by the Commissioner from the
date of the incident.
Employee Section (1)(dd)
An employee under labor law is a person who is hired to perform work for a company in exchange for a
wage or reward.
Section (1)(dd) of the Employees' Compensation Act, 1923 defines an employee as:
• A railway servant who is not permanently employed in a railway's administrative district or sub-divisional
office
• A master, seaman, or other crew member of a ship
• A captain or other crew member of an aircraft
• A person who works as a driver, helper, mechanic, cleaner, or in any other capacity in connection with a
motor vehicle.
The Workmen's Compensation Act, 1923 provides financial protection to employees who are injured,
incapacitated, disfigured, or die while performing their duties. This law applies to employees working full-
time, part-time, temporarily.
Relevant Case Laws:
1. Bengal Nagpur Railway Co. Ltd. v. Ratanji Ramji (1938): Defined the scope of "employee" in relation
to railway servants.
2. Oriental Insurance Co. Ltd. v. Siby George (2012): Clarified that an employee working abroad under a
valid contract with an Indian company is covered
Partial Disablement (Section 2(1)(g))
Meaning:
• Temporary Partial Disablement: a condition in which an employee's earning capacity is temporarily
reduced due to an injury.
• Example of TPD: Broken arm or leg.
• Permanent Partial Disablement: Permanent partial disability (PPD) is a long-term impairment that
limits a person's ability to perform certain tasks. It's caused by an injury or illness that doesn't fully
disable the person.
• Examples of PPD are: loss of leg, loss of hearing in one ear, loss of one eye, loss of one toe or finger,
permanent loss of sight In one eye, loss of one hand
Relevant Case Laws:
1. Pratap Narain Singh Deo v. Srinivas Sabata (1976): Established that loss of earning capacity is
critical in determining compensation.
2. Ram Kishan v. Dharam Pal (1998): Highlighted the necessity of medical evidence to establish partial
disablement.
Total Disablement (Section 2(1)(l))
Meaning:
Temporary Total Disablement: It is a condition where a person is unable to work due to a physical or mental injury or illness.
Examples of TTD:
•A broken bone in both hands and both legs
•A recoverable loss of two or more limbs
•A fracture in one hand and one leg
•A condition that prevents someone from performing all of their job duties
Permanent Total Disablement: when an employee is unable to work due to a work-related injury and is unlikely to be able to
work again.
Example: Losing both arms in an accident, resulting in the inability to perform any job due to the complete loss of hand
function, effectively preventing someone from ever working again; other examples include complete blindness, severe
paralysis, or significant brain damage that severely limits cognitive abilities.
Relevant Case Laws:
1. Laxmi Engineering Works v. Divisional Manager, New India Assurance Co. Ltd. (1999): Explained the concept of total
disablement and its impact on earning capacity.
2. National Insurance Co. Ltd. v. Mubasir Ahmed (2007): The court interpreted "total disablement" to mean the employee's
inability to earn wages in the same capacity as before.
CONCLUSION
The act is basically made for the employees so that when they incur
expenses for the injury suffered during an accident, they can get
compensation from the employers. The employer is the master and
employee is the servant. The employee gets compensation only when the
injury takes place in the course of employment and in the workplace.
