Navigating ESI Claim Rejection: Why Was Our Employee's Accident Not Covered?

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Accident Involving Employee in Company-Arranged Transport

Our employee was involved in an accident while being transported by a company-arranged rental vehicle from his native place, along with other employees from four different districts. Unfortunately, one person died at the accident site, while others were admitted to the hospital with injuries but recovered.

Wage and ESI Coverage Details

The deceased employee's wage was 20,500/- up to March. Starting from April, his wage increased to 25,000/- in accordance with ESI eligibility. However, we failed to mark him as "out of coverage" in April according to the ESI Act. As a result, we decided to pay the contributions for the upcoming months until the contribution period ends. Regrettably, the accident occurred in June.

ESI Claim Rejection

We have submitted all the necessary accident forms and documents. After conducting an investigation, ESI officials rejected the claim, stating that "The case has not been classified as an employment injury, as the alleged accident does not meet the criteria for being considered an employment injury. The reason for rejection, in short: The individual was not an employee on the date of the accident as defined under section 2(9) of the ESI Act, 1948."

Seeking Clarification on ESI Claim Rejection

If the employee had not been involved in the accident, we would have been responsible for paying his contributions until the end of the period. Therefore, my question is, if we were paying the contributions during the accident, why are the ESI officials not accepting this claim?

Please provide your suggestions for the aforementioned case to help me better understand the situation.

All these things happened last year, right?

The employee's salary was revised in April, but in the records, it remained as Rs 20,500 only, and hence he was an insured person at the time of death. The claim cannot be rejected.

You revised the salary in April, and in the ESI records also, you did it as Rs 25,000. Then he is not an insured person from April. Even though you had contributed the contributions, it did not go into the concerned employee. If so, obviously, the ESIC will disown their liability. You can adjust the amount paid erroneously.

Please note that while preparing contributions with Rs 25,000, the system would have given a warning that the insured wages exceed Rs 21,000, and you just ignored it. The system/ESIC will accept the contribution even if the wages exceed Rs 21,000 just because the contribution is on the total wages INCLUDING OVERTIME WAGES. If you just ignore the warning, the system will accept the contribution on Rs 25,000.

You can either fight for coverage, saying that ESIC had collected/received contributions in respect of the employee, and if he was not an employee, the ESIC should have rejected it right when the employer remitted the contribution of April. I am not sure what will be the fate of the case. But you can try.

Since there was an omission on the part of the employer/the person concerned of the employer to buy workmen compensation policy for the employee who went out of ESI coverage, this is an issue of dereliction of duty. In the absence of such a policy, the employer will have to bear it from the working capital. The amount of compensation will be as decided by the workman compensation commissioner.