Navigating Workers' Compensation and Wage Disputes: What Should Management Do Now?

Seeking Advice on Workers' Compensation and Wage Dispute

In one of my client units, a contractor laborer met with an accident resulting in the amputation of his arm from the shoulder joint. Workers' Compensation (WC) was applicable. He is 20 years old, earning Rs. 4000 per month as wages. As he is a local resident, all village people accompanied him, surrounded staff employees, and through a written document on May 8, 2014, the Management agreed that the Company would pay for medical expenses and reappoint him under any contractor at a monthly wage of Rs. 9000 after his treatment. The Company complied with this until November 2014 and then started paying only the minimum wage, approximately Rs. 4500 per month. After 14 months, the worker has recently approached the management, demanding unpaid wages at Rs. 5000 per month.

Many of our learned fellow members may have dealt with similar matters, and I am seeking your advice.

Please suggest alternative and legally tenable actions that the management needs to take now.

Regards,
RDS Yadav

Agreement was obtained by coercion, and such agreements are voidable by their nature.

What was the role of the contractor whose employee he was?

You can decline to make further payments, but take care to assess the law and order situation that may arise.

Dear Mr. Nath Rao,

The contractor played it safe and remained neutral, not working in the unit after 2-3 months as his assignment had also been completed. Once management halts the entry of labor, the chances of labor troubles are high. One of the experts has suggested filing a case before the WC commissioner to determine the legally payable compensation amount. I agree with his views. We are not providing any additional money apart from the earned wages.

Regards,
RDS Yadav

I am not getting the issue. Is it that one of your contract workers met with an accident while on duty (please specify whether while on duty or not) and following that, his hand was amputated from the shoulder? Now he has only one hand. Am I right?

Now, if this has happened during the course of employment, he would have received Rs 5,37,600 as compensation as per the Workmen Compensation Act. I have taken the age, 20 years, and the corresponding compensation factor, i.e., 224, and 60% of wages, which is applicable for disablement, i.e., 2400 (4000 X 60%).

Now, there has been a direction that while deciding the compensation, you should take the minimum wages as applicable to the employee. Although the maximum wage is 8000 per month, if we take that as the base, the compensation would be double the amount shown above. It is difficult to accept that the minimum wage is only Rs 4500, and it should be basic wages only, without taking the variable DA part of the wages.

One more thing is that if the establishment is situated in an ESI implemented area, the entire liability would have been shifted from the employer to the ESI Corporation. Again, it should be noted that you should have enrolled the employee under ESI.

Now, without making any such payments and without referring the dispute to the Workmen Compensation Commissioner, you have made a bilateral settlement that the employee would be given employment. This is not a proper settlement, I should say, because the poor fellow and others who came to you on the issue were totally ignorant about the compensation payable by the employer (whether contractor or the principal employer himself in the absence of the contractor not paying) and his legal obligation that all medical expenses, including the loss of income, should be borne by the employer only. The employer or the contractor misused the situation and found an easy settlement saying that the employee would be given employment once he is discharged from the hospital.

Therefore, you should first settle the issue of compensation and then come to the issue of non-payment of the agreed salary. You cannot deny that also because you have undertaken to give Rs 9000 per month, and if not given, pay it with retrospective effect.

Regards, Madhu.T.K

Understanding the Complexities of Worker Compensation and Employment Agreements

Thanks for shedding light on the issues. This is a true and fact-based, real IR matter, not hypothetical. I am pleased to share a few other pieces of information below.

The workman was engaged with effect from 1st May '14 and met with an accident on 25th May '14, within the same month. The establishment was not in an ESI-implemented area. Medical expenses and interim relief of Rs. 1.60 lakhs (which was signed under coercion) were paid through a contractor by my client company. He was then taken on by a different contractor in July '14. Wages payment at Rs. 9K/month was paid by the contractor, as the previous contractor completed the assignment in June '14. The injured person is working as per the terms and conditions of the agreement, paid at Rs. 9K/month. However, from Nov. '14 onwards, he was only given the minimum wages, not Rs. 9K/month.

There are three major situations that I foresee and would like your strategic and legal views on:

(a) What should be done when the employer has to pay double the wages while the injured person's disability/earning capacity is significantly reduced by 90%?

(b) Will there not be a cascading effect on any major/minor accidents in the future? What should be done?

(c) What is the effect of the agreement regarding employment and wages at an enhanced rate if the Workers' Compensation does not permit it, and in such conditions, what are the risks and liabilities?

I am gaining more insights. Please express your viewpoints candidly, considering both the present and future aspects.

Thanks and regards,

RDS Yadav Labour Law Adviser Director - Future Institute of Engineering and Management Technology

Addressing Coercive Agreements in Labor Disputes

The agreement entered into by literal coercion cannot hold water. Take up the matter with the union and abrogate the agreement. Management should not be blackmailed as it can become an IR matter. Such agreements that create unforeseen liabilities should be reviewed as they can be an existential threat to the future of its finances.

A private company cannot keep paying more than its capacity. Be bold and take this up with the union—facts and figures need to be presented, and also the fact that the whole company can wind up if such agreements are forced upon the management. This will touch the union's mind—if there is no firm, where is the employment going to come from? Self-interest may make their mind change, but the firmness of management should be seen.

Merit in the Statement of Coercion

I do not find any merit in the statement that the payment of Rs. 1.6 was made by coercion. Why so? If you had approached the Workmen Compensation Commissioner immediately, he would have helped you to arrive at the compensation. Medical expenses should, anyway, become your responsibility (in case the contractor is not taking it up), and what is left is the payment of compensation, which would be around the same amount as shown in my previous post.

Internal Arrangements and Legal Maintenance

As opposed to the above, if you have made any internal arrangement, that will not be legally maintainable because this is a matter to be settled before the WC Commissioner. I am not sure if the WC Commissioner will permit that instead of paying the lump sum amount, say, Rs. 5,36,000, you can pay Rs. 5,000 each month (Rs. 9,000 minus the amount you were paying before the accident, i.e., Rs. 4,000).

Employer's Responsibility and Compensation

The employer should take responsibility for the reduction in the earning capacity of the employee because it was due to the accident that his earning capacity reduced by 90%. First, the employer should compensate for the loss caused to the employee and then think of rehabilitating the employee by giving work that can be done by him. The wages or remuneration that were fixed without putting any thought into these might be on the higher side, but considering that he has lost his earning capacity for the rest of his life, it is negligible.

Following Rules and Mediation

It will not have a cascading effect provided you follow the rules. If a similar incident happens, you should proactively follow the rules and get mediation by the Labor department and decide on the compensation. In the present case also, if you had approached the WC Commissioner, you would not have to spend Rs. 9,000 every month. The Commissioner should not have ordered that you should give employment to a person with 90% disability and that also at double the minimum wages (I still doubt if the minimum wage is Rs. 4,500 only).

Agreement Validity and Consent

As the matter was not brought to the notice of the WC Commissioner, the agreement MAY prevail, and if so, you have to pay Rs. 9,000 every month because it is there in the agreement. Whether the agreement is valid or not (due to the absence of free consent) is another question.

Regards, Madhu.T.K

Thank you for your wonderful contribution in helping me be better prepared in this particular case. We are legal advisers who specialize in extracting solutions when opportunities are missed or when employers are derailed from fair resolutions. In coordination with the Labour department and local machinery during such complex situations, we strive to set things back on track. The Workers' Compensation (WC) commissioner has accepted our case for disposal. Following your advice to seek resolution within the legal framework, I am hopeful for the same from the WC Commissioner. I will update you upon receiving further orders from him.

Best wishes,

Regards,
Labour RDS Yadav
Labour Law Adviser
Director - Future Institute of Engineering and Management Technology