Industrial Law (Unit- II)

Workmen‘s Compensation Act, 1923

The Workmen‘s Compensation Act, 1923 is one of the earliest labor welfare and social security
legislation enacted in India. It recognizes the fact that if a workman is a victim of accident or an
occupational disease in course of his employment, he needs to be compensated. The Act does not
apply to those workers who are insured under the Employees State Insurance Act, 1948. Section 53
of the Employees State Insurance Act provides that an insured person or his dependents shall not
be entitled to receive or recover whether from the employer of the insured person or from 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.

This is a very old enactment for providing social security to workmen. Under this Act, a workman
who dies or suffers disablement (partial or total) due to accident is entitled to get compensation
from employer. A workman covered under Employees State Insurance Act is not entitled to get
compensation under Workmen‘s Compensation Act, as per section 53 of ESIC. However, Act is
applicable to factories, mines, plantations, transport establishments, construction work etc. who are
not covered under Employees State Insurance Act.

Objectives

The Workmen‘s Compensation Act, 1923, aims to provide workmen and their dependents some
relief in case of accidents, arising out of and in the course of employment and causing either death
or disablement of workmen as a measure of relief and social security. It also provides payment by
certain classes of employers to their workmen, compensation for injury by accident. The act enables
a workman to get compensation irrespective of his negligence. It lays down the various amounts
payable in case of an accident, depending upon the type and extent of injury. The employer now
knows the amount of compensation he has to pay and is saved of many uncertainties to which he
was subject before the Act came into force. The legislation has given security to the worker and this
has increased the availability of labor to some extent. The worker now secured, has become
efficient.

Scope and coverage

The Act extends to the whole of India and it applies to railways and other transport establishments,
factories establishments engaged in making, altering, repairing, adapting, transport or sale of any
articles, mines, docks, establishments engaged in constructions, fire-brigade, plantations, oilfields
and other employments listed in Schedule II of the Act. The Workmen's Compensation
(Amendment) Act, 1995, has extended the scope of the Act to cover workers of newspaper
establishments, drivers, cleaners, etc. working in connection with motor vehicle, workers employed
by Indian companies abroad, persons engaged in spraying or dusting of insecticides or pesticides in
agricultural operations, mechanized harvesting and thrashing, horticultural operations and doing
other mechanical jobs.
Definitions under workmen's compensation act

1) Dependant: Section 2(d) gives a list of persons who come within the category of "dependant" of
a workman. In ordinary language the dependant of a person is one who lives on his earnings. Under
Section 2 (d) there are three categories of dependants.

1) The following relations are dependants, whether actually so or not-widow, minor legitimate son,
unmarried legitimate daughter, a widowed mother.

2) The following relations come within the category if any were wholly dependant on the earnings
of the deceased workman at the time of his death-a son or daughter who has attained the age of 18
years and who is infirm.

3) The following relations are dependants if they were wholly or partially so at the time of the
workman's death-widower; parent, other than widowed mother, minor illegitimate son, unmarried
illegitimate daughter or a daughter legitimate or illegitimate if married and a minor or if widowed
and a minor, a minor brother or an unmarried sister or widowed sister if minor, a widowed
daughter-in-law, a minor child from a predeceased son, a minor child from a predeceased daughter
where no parent or child is alive, or a paternal grandparent if no parent of the workman is alive.

Whosoever is dependant at the time of death will get the Compensation. It has been held that the
widow of deceased workman would not be disentitled to compensation on her remarriage as
Subsequent event would not affect the right to claim Compensation.

2) Minor: According to Section 2(1) (ff), minor means a person who has not attained the age of 18
years.

3) Employer: Sec. 2 e) provides that the term Employer "includes" the following: (i) any body of
persons, whether incorporated or not (ii) any managing agent of an employer (iii) the legal
representatives of a deceased employer, and (iv) any person to whom the services of a workman
are temporarily lent or let out, while the workman is working for him. Thus the word employer
includes not only natural persons, and body of persons, but artificial and legal persons.

4) Managing agent: According to 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. For
example The Chief Engineer of the P.W.D. manages the department on behalf of the Government
and therefore, he is managing agent of the Government.

5) Qualified medical practitioner: According to Section 2(1) (i), Qualified medical practitioner
means any person registered under any Act providing for the maintenance of a register of medical
practitioners, or, in any area where no such last mentioned Act is in force, any person declared by
the State Government, by notification in the Official Gazette, to be a qualified medical practitioner
for the purposes of this Act.

6) Seaman: Under Section 2(1) (K), Seaman means any person forming part of the crew of any ship,
but does not include the master of the ship.
7) Partial 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.

By Section 2 (g) Temporary Partial Disablement means such disablement as reduces the earning
capacity of a workman in any employment in which he was engaged at the time of the accident, and
Permanent Partial Disablement means such disablement as reduces his earning capacity in every
employment he was capable of undertaking at that time. In a case of Partial Disablement it is
necessary that (a) there should be. an accident, (b) as a result of the accident the workman should
suffer injury, (c) which should result in permanent disablement and (d) as a result whereof his
earning capacity must have decreased permanently. In the proportion in which his earning capacity
has been decreased permanently he is entitled to compensation. 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. But it is provided that every injury specified
in Part II of Schedule I to the Act shall be deemed to result in permanent partial disablement. The
schedule also mentions the percentage loss of earning capacity which is to be presumed in each
such case.

8) Total Disablement: According to Section 2(1) (g), total disablement means such disablement,
whether of a temporary or permanent nature, as incapacitates a workman for all work which he
was capable of performing at the time of the accident resulting in such disablement, provided that
permanent total disablement shall be deemed to result from the permanent total loss of the sight of
both eyes or from any combination of injuries specified in Schedule I, where the aggregate
percentage of the loss of earning capacity as specified in that schedule against those injuries,
amounts to one hundred per cent. If a Carpenter‘s left hand above elbow is amputated as a result of
a personal injury suffered in the course of his employment, it is total disablement because a
carpenter cannot work with one hand.

9) Wages: Wages include any privilege or benefit which is capable of being estimated in money,
other than a travelling allowance or the value of any travelling concession or a contribution paid by
the employer of a workman towards any pension or provident fund or a sum 'paid to a workman to
cover any special expenses entailed on him by the' nature of his employment. The definition of
wages is important because an employee whose monthly wages exceed Rs. 1000 is not a workman
for the purpose of the Act.

Wages include all payment which can be calculated in terms of money, e.g., ordinary wages, extra
payment for overtime, bonus and other inducements in the shape of payment for idle time, free
meals, allowances for grain and clothing, free or cheap housing, etc., offered to the workman to
enter into a contract with the employer. But travelling expenses or employer's provident fund
contributions are excluded. Local allowance to a workman for cost of living in a particular place
forms part of wages. Share of profit or bonus under a profit sharing scheme is wages.
Dearness allowance is covered by definition of wages. It is attached to the wages. Free quarter, free
water are benefits enjoyed by a worker and are, therefore wages within the meaning of the
definition. Bonus falls within the definition of wages.

10) Monthly Wages: Section 5 of the Act defines "monthly wages" and states the methods of
calculating it. "Monthly" wages means the amount of wages deemed to be payable for a month's
service (whether the wages are payable by the month or by whatever other period or at piece rate).
Monthly wages are calculated as follows:

Where the workman was in service for a continuous period of 12 months immediately preceding
the accident, monthly wages shall be one-twelfth of the total wages due for the last twelve months
of the period.

Where the whole of the period of continuous service was less than one month, monthly wages shall
be the average monthly amount which during the twelve months immediately preceding the
accident was being earned by a workman employed on the same work by the same employer, or if
there was no workman so employed, by a workman employed on similar work in the same locality.

11) Workman: The definition of the term workman is important because only a person coming
within the definition is entitled to the reliefs provided by the Workmen's Compensation Act.24

Examples: Persons employed otherwise than in a clerical capacity or in a railway to operate or

maintain a lift or a vehicle propelled by steam, electricity or any mechanical power ; person
employed otherwise than in a clerical capacity in premises where a manufacturing process is
carried on; seamen in ships of a certain tonnage; persons employed in constructing or repairing
building or electric fittings; persons employed in a circus or as a diver; etc.

Defenses of the employer

Prior to the passing of this Act, the employer was liable to pay compensation only if he was guilty of
negligence. Even in case of proved negligence, the employer could get rid of his liability by using
any of the following defenses:

a) The Doctrine of Assumed Risks: If the employee knew the nature of the risks he was
undertaking when working in a factory, the employer had no liability for injuries. The court
assumed in such case that the workman had voluntarily accepted the risks incidental to his work.
The doctrine followed from the rule Volenti Non Fit Injuria, which means that one, who has
volunteered to take a risk of injury, is not entitled to damages if injury actually occurs.

b) The Doctrine of Common Employment: Under this rule, when several Persons work together
for a common purpose and one of them is injured by some act or omission of another, the employer
is not liable to pay compensation for the injury.

c) The Doctrine of Contributory Negligence: Under this rule' a person is not entitled to damages
for injury if he was himself guilty of negligence and such negligence contributed to the injury.
The three aforesaid defenses and the rule no negligence no liability made It almost impossible for an
employee to obtain relief in cases of accident. The Workmen's Compensation Act of 1923 radically
changed the law. According to this Act, the employer is liable to pay compensation irrespective of
negligence.

Two ways of claiming compensation

An injured workman may, if he wishes, file a civil suit for damages against the employer. Section
3(5), however, provides that if such a suit is filed, compensation cannot be claimed under the Act
and if compensation has been claimed under the Act, or if an agreement has been entered into
between the employer and the workman for the payment of compensation, no suit can be filed in
the civil court. Thus the workman has to choose between two reliefs

a) Civil suit for damages and

b) Claim for compensation under the Act. He cannot have both.

In a civil suit for damages, it is open to the employer to plead all the defenses provided by the law of
Torts. Therefore, a civil suit is a risky procedure for a workman and is rarely adopted. The legal
position of workmen has, however, been improved by two Acts, viz., The Indian Fatal Accidents Act
of 1855 and the Employers' Liability Act of 1938.

Employer’s liability for compensation

An employer is liable to pay compensation if personal injury is caused to a workman by accident

arising out of and in the course of his employment. An employer is not liable in following cases:

a) Injury which does not result in total or partial disablement of workman for a period exceeding 3
days.

b) Injury caused by an accident directly attributable to workman under influence of drinks or drugs,
willful disobedience of express orders for safety, willful removal of safety guard or device. [Even if
such case, if the workman dies or suffers permanent total disablement, the employer will be liable].

Connection between accident and employment

The deceased employee while travelling by public transport to his place of work met with a fatal
accident. Nothing has been brought on record that the employee was not obliged to travel in any
particular manner under the terms of the employment nor he was travelling in the official
transport. Held, no casual connection between accident and employment could be established.
Hence, the claimant is not entitled to any compensation.

Death during the course of employment

If the deceased employee met with his death while he was going to his place of work and the death
has arisen during the course of employment, then the employer is liable for compensation.

Entitlement to claim compensation

Where death was accelerated on account of stress and strain of the working condition, it is not
necessary that there should be a direct connection between the cause of death and the nature of
duties. Even if a casual connection between the two can be shown then the dependants of the
deceased would be entitled to claim compensation from the employer.

Liability for compensation

In order to attract section 3 (1) of the Act, following three conditions must be fulfilled:

a) Personal injury;

b) Accident; and

c) Arising out of and in the course of employment.

In order to succeed in an application for getting compensation under section 3 of the Act the
following points are required to be established:

a) that the accident must arise out of and in the course of the workman‘s employment;

b) there must be causal connection between the injury and the accident and the work done in the
course of the employment;

c) the workman has to say that while doing a part of his duty or incidental thereto it has resulted
into an accident.

It is necessary that the workman must be actually working at the time of the injury or the accident.
Therefore, the three factors, that there must be injury, which must be caused in an accident, it must
be caused in the course of and out of the employment must be established.

Occupational disease

Section 3(2) of the Act recognizes that the workman employed in certain types of industries of
occupation risk exposure to certain occupational disease peculiar to that employment. Employer is
liable if a workman contracts any specified occupational disease, while he is in service of employer
for at least 6 months.

Amount of compensation

(a) where death results from the injury an amount equal to fifty percent of the monthly wages of
the deceased employee multiplied by the relevant factor; or an amount of one lakh and twenty
thousand rupees, whichever is more.

(b) where permanent total disablement results from the injury an amount equal to sixty percent of
the monthly wages of the injured employee multiplied by the relevant factor; or an amount of one
lakh and forty thousand rupees, whichever is more.

Provided that the Central Government may, by notification in the Official Gazette, from time to time,
enhance the amount of compensation mentioned in clauses (a) and (b).
(c) Where permanent partial disablement results from the injury. (i) in the case of an injury
specified in Part II of Schedule I, such percentage of the compensation which would have been
payable in the case of permanent total disablement as is specified therein as being the percentage of
the loss of earning capacity caused by that injury, and (ii) in the case of an injury not specified in
Schedule I, such percentage of the compensation payable in the case of permanent total
disablement as is proportionate to the loss of earning capacity (as assessed by the qualified medical
practitioner) permanently caused by the injury.

Compensation to be paid when due and penalty for default

(1) Compensation under section 4 shall be paid as soon as it falls due.

(2) 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, as
the case may be, without prejudice to the right of the employee to make any further claim.

(3) Where any employer is in default in paying the compensation due under this Act within one
month from the date it fell due, the Commissioner shall--

(a) direct that the employer shall, in addition to the amount of the arrears, pay simple interest
thereon at the rate of twelve percent per annum or at such higher, rate not exceeding the maximum
of the lending rates of any scheduled bank as may be specified by the Central Government by
notification in the Official Gazette, on the amount due; and

(b) if, in his opinion, there is no justification for the delay, direct that the employer shall, in addition
to the amount of the arrears and interest thereon, pay a further sum not exceeding fifty per cent of
such amount by way of penalty:

Provided that an order for the payment of penalty shall not be passed under clause (b) without
giving a reasonable opportunity to the employer to show cause why it should not be passed.

Duty of employer to inform employee of his rights

Every employer shall immediately at the time of employment of an employee, inform the employee
of his rights to compensation under this Act, in writing as well as through electronic means, in
English or Hindi or in the official language of the area of employment, as may be understood by the
employee.

Appointment of Commissioners

(1) The State Government may, by notification in the Official Gazette, who is or has been a member
of a State Judicial Service for a period of not less than five years or is or has been for not less than
five years an advocate or a pleader or is or has been a Gazetted Officer for not less than five years
having education qualifications and experience in personnel management, human resource
development and industrial relations appoint any person to be a Commissioner for Workmen's
Compensation for such area as may be specified in the notification.
(2) Where more than one Commissioner had been appointed for any area, the State Government
may, by general or special order, regulate the distribution of business between them.

(3) Any Commissioner may, for the purpose of deciding any matter referred to him for decision
under this Act, choose one or more persons possessing special knowledge of any matter relevant to
the matter under inquiry to assist him in holding the inquiry.

(4) Every Commissioner shall be deemed to be a public servant within the meaning of the Indian
Penal Code.

Medical examination

(1) Where a employee has given notice of an accident, he shall, if the employer, before the expiry of
three days from the time at which service of the notice has been effected offers to have him
examined free of charge by a qualified medical practitioner, submit himself for such examination.

(2) If a employee, on being required to do so by the employer under sub-section (1) or by the
Commissioner at any time, refuses to submit himself for examination by a qualified medical
practitioner or in any way obstructs the same, his right to compensation shall be suspended during
the continuance of such refusal or obstruction unless, in the case of refusal, he was prevented by
any sufficient cause from so submitting himself.

(3) If a employee, before the expiry of the period within which he is liable under sub-section (1) to
be required to submit himself for medical examination, voluntarily leaves without having been so
examined the vicinity of the place in which he was employed, his right to compensation shall be
suspended until he returns and offers himself for such examination.

(4) Where a employee, whose right to compensation has been suspended under sub-section (2) or
sub-section (3), dies without having submitted himself for medical examination as required by
either of those sub-sections, the Commissioner may, if he thinks fit, direct the payment of
compensation to the dependants of the deceased employee.