Labour Disputes

The Payments of Gratuity Act, 1972, (hereinafter referred to as the “Gratuity Act”) is applicable to any office, factory or institution which has employed 10 or more employees in the preceding 12 months irrespective of the post they hold and have completed 5 years of employment. There is no minimum eligibility criteria in case of death or disablement. The amount payable to an employee under Gratuity Act 1972 is calculated on the basis of fifteen days wages for every completed year of service. The employer must pay the amount of gratuity within 30 days from when it is payable.

The Gratuity Act provides for the provision of imprisonment for a term (extendable to six months) or fine (extendable to ten thousand rupees) or both to person/persons who make/s false statement for purpose of delaying or avoiding gratuity amount. Minimum three months imprisonment (extended to 12 months) or minimum ten thousand rupees fine (extendable to twenty thousand rupees) or both to employer if he/she contravenes any provisions of the Gratuity Act.

In case of non-payment of gratuity amount the employer can be punished with imprisonment of a period not less than six months.

The main object of the act is to provide security to the dignity of motherhood by providing full and healthy benefit for the child and the mother. Keeping this object in mind the Maternity Benefits Act, 1961 was put in effect on December 12, 1961 after being passed by both the houses and receiving assent of the President. The Act applies to every factory, mine or plantation (including those belonging to government), and to every shop or establishment wherein 10 or more people are employed. There are two types of benefits provided under this Act, namely cash and non-cash benefits. Contravention of this Act incurs a minimum prison sentence of three months, with a maximum of one year. A fine of INR 2,000 – INR 5,000 may also be imposed. However, the Act does not apply to any such factory/other establishment to which the provisions of the Employees’ State Insurance Act are applicable for the time being.

The Minimum Wages Act, 1948(hereinafter referred to as the “MW Act”) is a Central legislation aimed at statutory fixation of minimum rates of wages in the employments where sweated labour is prevalent. In these industries there is a high possibility for exploitation of unorganized labour. The provisions of the MW Act are intended to achieve the object of doing social justice to workmen employed in the scheduled employments by prescribing minimum rates of wages for them. This Act aims at statutory fixation of minimum wages with a view to prevent exploitation of labour.  The main objectives of the Act are –

• To prevent the exploitation of Workers by the Employers.
• To bring social justice.
• To enable the working class to have a minimum standard of life.
• To fix/revise the minimum rate of wages for the scheduled employments.
• To add any new employment to the schedule.

The term “Minimum Wage Fixation” implies the fixation of the rate or rates of minimum wages by a process or by invoking the authority of the State. Minimum wage consists of a basic wage and an allowance linked to the “cost of living” index and is to be paid in cash, though payment of wages fully in kind or partly in kind may be allowed in certain cases. The statutory minimum wages has the force of law and employers are strictly prohibited from paying below the prescribed minimum wage to their employees. The obligation of the employer to pay the said wage is absolute. The process helps the employees in getting fair and reasonable wages more particularly in the unorganised sector and eliminates exploitation of labour to a large extent. This ensures atleast minimum standard of living conditions and basic necessities of the employees.

Wages under the Minimum Wages Act, 1948 in India

Section 2(h) of the MW Act, defines “wages” to mean all remuneration capable of being expressed in terms of money, which would, if the terms of the contract of employment express or implied were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment and includes house rent allowance but does not include –

• the value of –
  • any house accommodation supply of light water medical attendance or
  • any other amenity or any service excluded by general or special order of the appropriate government;
  • any contribution paid by the employer to any person fund or provident fund or under any scheme of social insurance;
  • any traveling allowance or the value of any traveling concession;
  • any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; or
  • any gratuity payable on discharge;

Appropriate government according to the specified schedule sets up the minimum wages which is reviewed atleast every 5 years.

Classification of Wages under the Minimum Wages Act, 1948 in India

The Supreme Court[1] has classified “Wages” into three categories. They are:

1. The Living Wage (highest standard of wage)
2. The Fair Wage (between living and minimum wage)
3. The Minimum Wage.( it is the lowest standard of wage)

Payment of Wages Act, 1936 in India

The main objective of the Payment of Wages Act, 1936 is to ensure that unnecessary delay in the payment of wages is not caused by the employers and to prevent unauthorized deductions from the wages. The State Government may by notification extend the provisions to any class of persons employed in any establishment or class of establishment. The benefit of the Act prescribes for the regular and timely payment of wages (on or before 7th day or 10th day of after wage period is greater than 1000 workers).

Time of payment of wages under the Payment of Wages Act, 1936 in India

According to Section 5 of the Indian Payment of Wages Act, 1936, the wages of every person employed are to be paid:

• when less than 1000 persons are employed, before the expiry of the 7th day of the following month.
• when more than 1000 workers, before the expiry of the 10th day of the following month.

Permitted Deduction from wages under the Payment of Wages Act, 1936 in India

The following deductions are permissible under the Act:

• fine, deduction for amenities and services supplied by the employer, advances paid, over payment of wages, loan, granted for house-building or other purposes, income tax payable, in pursuance of the order of the Court, PF contributions, cooperative societies, premium for Life Insurance, contribution to any fund constituted by employer or a trade union, recovery of fosses, ESI contributions, etc.
• For default or negligence of an employee resulting into loss for the employer after serving a show cause notice has to the employee.
• Unauthorized absence for whole or any part of the day – If ten or more persons absent without reasonable cause.

Labour laws in India, are majorly governed by the provisions of the Indian Constitution, Contract Laws, various Special Labour Laws and a plethora of State enacted laws. Thus, broadly, the labour laws in India can be categorized as under:

1. Constitution of India;
2. Indian Contract Act;
3. Special Laws like the Industrial Disputes Act, Payment of Wages Act, Payment of Gratuity Act, Workmen, Compensation Act, Contract Labour (Regulation and Abolition) Act, Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act etc.
4. State Laws – as enacted under the State List in the Seventh Schedule under the Constitution of India.