Employee's Compensation under the Code on Social Security

Employee's compensation makes the employer liable, without proof of fault, to compensate an employee injured, disabled or killed by an accident at work, or affected by an occupational disease. Chapter VII of the Code on Social Security replaces the Employees' Compensation Act, 1923, and applies to employees not covered by ESI. This note explains the basis of liability, its exceptions, the compensation payable, the procedure and the leading cases.

1. The Basis of Liability, Section 74

Figure 1: When the employer is liable

• No-fault liability. The employee need not prove negligence; the question is whether the injury arose out of and in the course of employment.
• Occupational disease. A disease in the Third Schedule contracted in the specified employment is treated as an injury by accident, subject to minimum periods of service for some diseases.
• ESI employees. Employees covered by ESI claim employment injury benefits under Chapter IV instead (Topic 21)

2. Compensation Payable, Section 76

Figure 2: Amounts of compensation

• Relevant factor. Depends on the employee's age, set out in a Schedule to the Code; younger employees receive more.
• Monthly wages, s.78. Calculated on the wages for the period of service before the accident, subject to any ceiling notified.
• Payment and default, s.77. Compensation is payable as soon as it falls due. If unpaid within one month, the competent authority orders interest and, if the delay is unjustified, damages up to 50% of the arrears, after a show cause notice.

3. Contractors and Procedure

• Principal employer, s.85. Where work ordinarily part of the employer's business is done through a contractor, the principal employer is liable to the contractor's employees and may seek indemnity from the contractor.
• Appeal, s.99. To the High Court, only on a substantial question of law, where at least ₹10,000 is in dispute, within 60 days; an employer must first deposit the amount awarded.

4. Leading Cases

Figure 3: Course of employment in the Supreme Court

• Notional extension. The course of employment extends beyond the workplace to the reasonable approach and to travel the employer requires or provides, but not to a public route used like any other member of the public. The Code's express cover for commuting accidents now widens this protection.

5. Frequently Asked Questions

Is an accident while travelling to work covered?

Yes, if a nexus is established. Section 74 deems an accident while commuting from residence to the place of employment for duty, or back after duty, to arise out of and in the course of employment where the circumstances, time and place of the accident are connected with the employment.

When does drunkenness defeat a compensation claim?

Only where the injury does not result in death or permanent total disablement. If the employee was under the influence of drink or drugs, wilfully disobeyed a safety rule or removed a safety device, the employer is not liable for lesser injuries, but remains liable where the result is death or permanent total disablement.

Is the principal employer liable for injury to a contractor's employee?

Yes, where the work is ordinarily part of the principal employer's trade or business and the accident occurs on or about premises under its control. Under section 85 the principal employer pays compensation as if the employee were directly employed, and may claim indemnity from the contractor. The employee may also recover directly from the contractor.

What is the doctrine of notional extension?

It extends the course of employment beyond the actual workplace to the reasonable approach to it and to travel the employer requires or provides, as in BEST v Agnes (1964). It does not cover a public route used by the employee like any member of the public, as held in Saurashtra Salt v Bai Valu Raja (1958). Section 74 now goes further by expressly covering commuting accidents where a nexus with employment is shown.

6. Related Topics

• Topic 21: Employees' State Insurance. Employment injury benefits under ESI.
• Topic 29: Duties of Employers and Employees. Preventing injuries under the OSH Code.