The Employees Compensation Act ensures fair compensation for work-related injuries, protecting workers' rights and promoting a safe working environment.
The Employees Compensation Act, 1923, plays a key role in social security. It aims to financially protect employees and their dependents by providing compensation for any accidental injuries during employment that result in death or disability. This article explores the details of the Employees Compensation Act.
Overview of the Employees Compensation Act
The Employees Compensation Act, 1923, is a law enacted in India to provide financial compensation to employees for injuries or occupational diseases sustained during their employment. It mandates certain employers to pay compensation to their employees in case of:
Accidents:
- Arising out of and in the course of employment
- Causing temporary, permanent, partial, or total disability
- Resulting in death
Occupational diseases:
- Listed in Schedule III of the Act
- Contracted due to the nature of employment
Key provisions of the Employees Compensation Act
- Employer’s liability: Employers in certain industries are liable to pay compensation under the Act. The specific industries are listed in Schedule I.
- Amount of compensation: The amount of compensation depends on the nature and severity of the injury or disease. It is calculated based on the employee’s monthly wages and the percentage of disability.
- Medical expenses: Employers are also liable to pay for medical expenses incurred due to the injury or disease.
- Procedure for claiming compensation: The employee or their dependents need to file a claim for compensation with the Commissioner appointed under the Act.
- Review of compensation: The Commissioner can review the compensation amount periodically based on the employee’s recovery or worsening condition.
- Non-assignability of compensation: Compensation cannot be assigned, attached, or charged by any court.
Commencement of Business under Companies Act
Companies can officially start their business operations after fulfilling certain requirements and obtaining the necessary approvals. The process and regulations surrounding commencement of business differ between the erstwhile Companies Act, 1956, and the current Companies Act, 2013, with further amendments introduced by the Companies (Amendment) Ordinance 2018. Here’s a breakdown:
Erstwhile Companies Act, 1956
- Private companies: Could commence business immediately upon receiving the certificate of incorporation. No separate commencement of business certificate was required.
- Public companies: Required a certificate of commencement of business in addition to the certificate of incorporation. This was obtained by filing a declaration with the Registrar of Companies (ROC) confirming that all the subscribers to the Memorandum had paid the minimum subscription capital.
Current Companies Act, 2013
- All companies (public and private): Required to file a declaration of commencement of business within 180 days of incorporation. This declaration, in Form INC-20A, needs to be signed by a director and contain the following:
- Confirmation that subscribers to the Memorandum have paid the agreed-upon share value.
- Verification of the registered office address.
- Verification by a chartered accountant, company secretary, or cost accountant.
Companies (Amendment) Ordinance 2018
- Further tightened the requirements for commencement of business:
- Companies now need to file the declaration of commencement of business within 180 days, not just obtain it.
- Failure to file within 180 days can lead to penalties and potential striking off of the company’s name from the register.
Certificate of Commencement of Business under Companies Act, 2013
The Companies Act, 2013, does not actually issue a separate “Certificate of Commencement of Business”. Instead, it introduces a declaration of commencement of business, which companies are required to file within 180 days of incorporation using eForm INC-20A. This form serves as a confirmation that the company has fulfilled certain conditions necessary to start operating, namely:
- Minimum Subscription Capital Paid: All subscribers to the Memorandum of Association have paid the agreed-upon share value.
- Verified Registered Office: The company has a verified registered office address.
There are no different formats for the declaration of commencement of business. The eForm INC-20A itself is the standardized format and needs to be filed electronically through the MCA portal.
Consequences of Not Filing the Declaration of Commencement of Business
Failing to file the declaration of commencement of business within the stipulated time frame of 180 days can have several consequences for the company:
- Late filing penalty: The company will be liable to pay a late filing fee as prescribed by the Ministry of Corporate Affairs (MCA).
- Restriction on business activities: The company cannot legally commence any business activity or exercise borrowing powers until the declaration is filed. Contracts entered into before filing may be deemed invalid.
- Inability to open bank accounts: Banks may refuse to open current accounts for the company in the absence of the declaration.
- Striking off from the register: If the declaration remains unfiled for a prolonged period, the MCA may initiate the process of striking the company’s name off the register of companies, essentially dissolving it.
It’s crucial for companies to understand the importance of filing the declaration of commencement of business within the stipulated time frame to avoid facing legal and operational repercussions.
The Workmen’s Compensation Act
The Workmen’s Compensation Act, 1923, is a crucial piece of legislation in India that safeguards the welfare of workers by providing financial compensation in case of injury or occupational disease arising out of and in the course of their employment.
Objectives of the Workmen’s Compensation Act
- Provide financial support to injured workers: The Act ensures that workers receive monetary compensation to cover medical expenses, loss of wages, and permanent disability. This helps them and their families cope with the financial hardships caused by work-related accidents or illnesses.
- Promote workplace safety: By holding employers liable for compensating injured workers, the Act incentivizes them to prioritize safety measures and create a safer working environment.
- Promote social justice: The Act provides a legal framework for addressing the vulnerabilities faced by workers and ensures that they are not left financially destitute due to work-related risks.
Applicability of the Employee’s Compensation Act
- Employer Coverage: The Act applies to employers in certain industries listed in Schedule I, such as factories, mines, construction sites, transportation, and maritime services.
- Employee Coverage: The Act covers all employees, including temporary, casual, and contractual workers, who are engaged in manual, supervisory, or administrative work.
- Injury Coverage: The Act covers injuries arising out of and in the course of employment, including accidents, occupational diseases listed in Schedule III, and aggravation of pre-existing conditions due to work.
Changes in the Workmen’s Compensation Rules in 2020
The Workmen’s Compensation (Amendment) Act, 2020, introduced several significant changes to the rules:
- Increased compensation amounts: The maximum compensation for death increased from Rs. 8,85,704 to Rs. 12,00,000. Compensation amounts for permanent disability were also revised upwards.
- Faster claim settlement: The Act mandated speedy claim settlement by setting timeframes for different stages of the process.
- Enhanced coverage: The Act extended coverage to certain additional industries and occupations.
- Improved grievance redressal: The Act established a Central Government scheme for providing legal aid to workers in compensation cases.
- The Act is administered by the Employees’ Compensation Commissionerate under the Ministry of Labour and Employment.
- Workers can file claims for compensation directly with the Commissioner or through a lawyer.
- The Act provides for medical examinations and assessments to determine the extent of disability.
- The Commissioner has the power to review and modify compensation awards based on the worker’s recovery or worsening condition.
The Liability of the Employer for Compensation under the Workmen’s Compensation Act (WCA)
The WCA, enacted in 1923, imposes a strict liability on employers to compensate their workmen for injuries arising out of and in the course of their employment. This means that the employer is liable regardless of fault, unless one of the specific exceptions applies. However, there are certain conditions under which an employer may not be liable to pay compensation:
Conditions When Employer is Not Liable
- Minor injuries: If the injury results in temporary disablement for less than three days, the employer is not liable.
- Employee misconduct: If the injury is caused by the workman’s drunkenness, willful disobedience of safety rules, or deliberate removal of safety devices, the employer is not liable.
- Pre-existing disease: If the injury aggravates a pre-existing disease, the employer is only liable for the extent to which the injury worsened the condition.
- Third-party fault: If the injury is caused by the negligence of a third party, the employer is not liable unless they are also negligent.
Calculation of Compensation
The amount of compensation payable under the WCA depends on the nature and severity of the injury. It can be calculated as follows:
- Death: 50% of the monthly wages of the deceased multiplied by a relevant factor (currently, a minimum of Rs. 1,20,000).
- Permanent total disablement: 60% of the monthly wages of the workman.
- Permanent partial disablement: A percentage of the monthly wages based on the nature of the disability (specified in Schedule I of the Act).
- Temporary disablement: Up to 25% of the monthly wages for the period of disablement.
Scope of the WCA
The WCA applies to all establishments employing ten or more workmen, but it can be extended to cover smaller establishments by notification of the state government. It covers a wide range of industries, including factories, mines, plantations, construction sites, transport undertakings, and shops.
Conclusion:
The WCA plays a crucial role in protecting the economic security of workmen and their families in the event of employment-related injury. It ensures that they receive compensation for their loss of income and medical expenses, regardless of fault. However, it is important to note that the Act has its limitations, and there are certain situations where employers may not be liable.
FAQ
What is the Employees Compensation Act, and who does it apply to?
The Employees Compensation Act, 1923, is a law in India that provides financial compensation to employees for injuries or illnesses arising out of and in the course of their employment. It applies to all employees working in establishments covered by the Act, including factories, mines, plantations, shops, and restaurants. There are minimum number of employees required for coverage (varying by state, typically 10 or more).
How does the Employees Compensation Act differ from other labor laws in India?
Unlike other labor laws, which focus on regulating working conditions and preventing employer exploitation, the Employees Compensation Act provides a no-fault compensation system. This means that even if the employer was not negligent, they are still liable to compensate the employee for covered injuries or illnesses.
What types of injuries and illnesses are covered under the Employees Compensation Act?
The Act covers a wide range of injuries and illnesses, including:
- Accidents resulting in death or disability
- Occupational diseases such as silicosis and asbestosis
- Repetitive strain injuries
- Poisoning from handling hazardous materials
- Any illness contracted due to working conditions
What are the obligations of employers under the Employees Compensation Act in the event of an employee injury or death?
The employer's obligations include:
How can employees claim compensation under the Employees Compensation Act, and what is the process involved?
Employees can claim compensation by:
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