Employee compensation under the Code on Social Security, 2020 (“Code”) forms a crucial part of India’s labour welfare framework, ensuring financial protection to employees in cases of workplace injury, occupational disease or death. It lays down clear principles governing employer liability, compensation and procedural safeguards, reflecting a strong commitment to social security and worker protection.

What is required when a fatal accident or serious bodily injury occurs at the workplace?

(a)
Where any law requires that notice of an accident resulting in death or serious bodily injury be given by or on behalf of an employer, the person responsible for giving such notice must, within seven days of the occurrence of death or injury, send a detailed report to the competent authority explaining the circumstances surrounding the incident.

(b)
However, if the State Government has specified otherwise, the report may be sent to the authority already designated for receiving such notice instead of the competent authority.

(c)
Serious bodily injury refers to injuries involving permanent loss or impairment of any limb, permanent damage to sight or hearing, fracture of any limb, or injuries that compel the employee to remain absent from work for more than twenty days.

(d)
The State Government may also extend this requirement to other classes of premises and specify who must submit such reports. These provisions do not apply to establishments covered under the Employees’ State Insurance scheme.

When is an employer liable to pay compensation to an employee?

(a)
An employer is liable to pay compensation when personal injury is caused to an employee due to an accident or occupational disease arising out of and during the course of employment.

(b)
However, the employer is not liable in cases where the injury does not disable the employee for more than three days. Further, no liability arises if the injury, not resulting in death or permanent total disablement, is directly attributable to intoxication, wilful disobedience of safety rules, or deliberate removal or disregard of safety devices by the employee.

Can compensation still be claimed if the employee acted against instructions or law?

Yes, compensation may still be claimed if the accident would have otherwise arisen out of employment and the act was done in connection with the employer’s business. Even if the employee acted in contravention of instructions or law, compensation may still be payable provided the act was related to the employer’s work.

How are occupational diseases treated for compensation purposes?

If an employee working in a specified employment contracts a disease peculiar to that employment after at least six months of continuous service, such disease is treated as an injury caused by accident. It is presumed to have arisen out of employment unless proven otherwise.

Are commuting accidents covered?

Yes, accidents occurring during commuting between residence and workplace are treated as arising out of employment if a clear connection exists between the accident and the employment in terms of time, place, and circumstances.

Can governments modify employment categories and diseases?

Yes, both Central and State Governments can modify or add categories of employment and specify occupational diseases applicable to them through notifications after giving prior notice.

When is compensation not payable?

Compensation is not payable unless the accident or disease is directly attributable to employment, except in cases specifically covered under exceptions such as occupational diseases or commuting accidents.

Can an employee pursue both compensation and a civil suit?

No, an employee cannot claim compensation if they have already filed a civil suit for damages. Similarly, once compensation proceedings are initiated or an agreement is reached, no civil suit can be maintained.

What happens in case of death or injury due to collapse of employer-provided housing in plantations?

(a)
If a worker or their family member dies or is injured due to collapse of employer-provided housing, the employer must pay compensation unless the collapse was solely due to occupant fault or natural calamity.

(b)
A worker includes persons employed for hire in various capacities, including contract workers working more than sixty days annually, but excludes certain categories like managerial staff or high-wage employees.

How is compensation calculated in different situations?

(a)
Compensation varies based on the nature of injury. In case of death, it is based on a percentage of monthly wages multiplied by a relevant factor or a notified minimum, whichever is higher.

(b)
For permanent total disablement, a higher percentage applies.

(c)
For permanent partial disablement, compensation depends on loss of earning capacity.

(d)
For temporary disablement, periodic payments are made based on a percentage of wages.

(e)
Medical expenses are reimbursed, and funeral expenses must also be paid in case of death.

What happens if compensation is not paid on time?

Compensation must be paid as soon as it becomes due. If the employer defaults for more than one month, interest becomes payable, and additional damages up to fifty percent may be imposed if there is no justification for delay.

How are monthly wages calculated for compensation purposes?

Monthly wages are calculated based on the employee’s earnings over the preceding twelve months, or by averaging wages of similar employees, or by multiplying daily wages depending on the duration of service prior to the accident.

Can compensation payments be reviewed?

Yes, half-monthly payments may be reviewed upon application supported by medical evidence showing change in the employee’s condition. Payments may be increased, decreased, continued, or converted into lump sum.

Can periodic payments be converted into lump sum?

Yes, by agreement or through decision of the competent authority after at least six months, periodic payments can be commuted into a lump sum.

How is compensation distributed among dependants?

Compensation in death cases must be deposited with the competent authority, who distributes it among dependants after inquiry. Payments to women or persons under disability are regulated and may be invested for their benefit.

What are the requirements for filing a compensation claim?

Notice of accident must be given as soon as practicable, and the claim must be filed within two years. Exceptions exist where sufficient cause is shown or the employer already had knowledge of the accident.

What special provisions apply to employees working outside India?

Special provisions apply to seamen, aircraft crew, and employees working abroad. Notices and claims can be served on designated representatives, and relaxed timelines apply in certain cases.

What are the rules regarding medical examination?

An employee must undergo medical examination if requested by the employer within a prescribed time. Refusal may suspend compensation unless justified. Compensation may also be adjusted if the employee neglects medical advice.

What happens when work is carried out through contractors?

The principal employer remains liable to pay compensation to employees engaged through contractors, though the employer can recover the amount from the contractor.

Can employers recover compensation from third parties?

Yes, if a third party is responsible for the injury, the employer or indemnifying party can recover compensation from that person.

What happens if the employer becomes insolvent?

If the employer becomes insolvent, the employee’s rights against insurers transfer directly to the employee. Compensation dues are treated as priority debts in insolvency proceedings.

What powers does the authority have in fatal accident cases?

The authority may require employers to submit statements regarding fatal accidents and indicate liability. If dependants lack resources, legal assistance may be provided.

Are compensation agreements required to be registered?

Yes, agreements must be registered with the competent authority. Unregistered agreements may lead to the employer being liable for full compensation without deductions.

Who decides disputes regarding compensation?

All disputes regarding liability, amount, or duration of compensation are decided by the competent authority, and civil courts have no jurisdiction.

Who can act as a competent authority?

The State Government appoints qualified individuals such as judicial officers, advocates, or experienced officials to act as competent authorities.

Where should proceedings be initiated?

Proceedings may be initiated where the accident occurred, where the employee resides, or where the employer’s office is located, subject to certain procedural requirements.

What is the procedure for filing applications?

Applications for compensation may be made electronically or otherwise, subject to prescribed forms, fees, and procedural timelines.

What powers does the competent authority have during proceedings?

The authority has powers similar to a civil court, including summoning witnesses, taking evidence, and compelling production of documents.

Can parties be represented in proceedings?

Yes, parties may appear through legal practitioners, insurance officials, trade union representatives, or other authorized persons.

How is evidence recorded?

The authority records a memorandum of witness statements, and medical evidence is recorded as closely as possible word-for-word.

Can questions of law be referred to higher courts?

Yes, the authority may refer questions of law to the High Court and must decide in accordance with its decision.

Is there a right to appeal?

Appeals lie to the High Court in specified cases involving substantial questions of law and subject to monetary thresholds and procedural requirements, including deposit of awarded compensation in certain cases.

In essence, the Code provides a comprehensive and balanced mechanism to address employment related risks. By ensuring timely compensation and establishing an effective dispute resolution process, it upholds fairness, accountability and the broader objective of social justice for employees and their dependants.

Muneeb Rashid Malik is an Advocate. He tweets @muneebmalikrash.