Introduction

Through the course of history, the employer-employee relationship dynamics has seen a
transformational change as have societies and civilisations. Historically speaking, the employees
were largely at the mercy of their employers, who in case of injury would exercise, at their own
discretion based on their will whether or not to or how to in case of injury or death while at work,
compensate an employee or their dependents.

With the oncoming of industrial age and implementation of large labour based workforces, there
came about a time where employees started working for employers in possibly riskier environments
with exposure to sophisticated machinery, technology, toxic chemicals etc., exposing the workmen
to riskier environments at the behest of earning profits for the employer.

While earlier the question of compensation arose only in cases of negligence of the employer, with
the passage of time, the legal mechanism and machinery provided for wider adoption of scope for
compensation to employees.

The object of the Act is to provide for the payment of compensation by

certain employers to their employees for injury caused to them by accident
while in employment. If an employee contracts an occupational disease while
in employment, it is also treated under the Act as injury caused by accident.
Section 1 of the Act states that the Employee Compensation Act is applicable to the whole of India.
While the Act was enacted in 1923, it came into force on the 1st of July, 1924.

However, the provisions of this Act do not apply to the persons covered under the provisions of the
Employee’s State Insurance Act. The benefit of this Act was observed in Rengasamy v. Amalraj, 2002,
where the court held:

“The Act is a Beneficial piece of Legislation that has been enacted to Compensate the Workmen and
their dependent’s in the event of accidents during the course of Employment. It is not to be used to
extort money from people with whom there is no nexus of employment. It is unfortunate that a
beneficial enactment such as this is misused by some persons.

1. Dependant

The Act proceeds to primarily define dependents. Dependent in this case means those relations of a
deceased employee, who were dependent on the employee wholly or partially for sustenance.

These dependents are broadly categorised into three categories, viz. 1) direct dependents, like a
widow 2) major dependents like a son or daughter and 3) other dependents like for example
parents, who are (wholly or partially) dependent on the employee.

This definition is essential, as in case of death of an employee, at the time it would be essential to
understand who is considered and in particular to the case who are the dependants deserving to be
compensated on account of the death of the employee.

The above relationship chart illustrates clearly the relations classified as the dependents of a
deceased employee. as defined by the Employee Compensation Act, 1923:

As shown above, the following relations of deceased employees are classified as a dependant under
Section 2(1)(d) of the Act:
A widow, a minor or legitimate or adopted son, an unmarried legitimate or adopted daughter, or a
widowed mother.

If wholly dependent on the earnings of the employee at the time of his death- a son or a daughter
who has attained the age of 18 years, and who is infirm.

If wholly or in part dependent on the earnings of the employee at the time of his death

A widower

A parent other than a widowed mother.

A minor illegitimate son, an unmarried illegitimate daughter or a daughter, legitimate or illegitimate

or adopted, if married and a minor, or if widowed and a minor.

A minor brother or unmarried sister, or a widowed sister, if a minor.

A widowed daughter-in-law.

A minor child of a predeceased son.

A minor child of a predeceased daughter, where no parent of the child is alive;

A paternal grandparent, if no parent of the employee is alive.

2. Employer

According to Section 2(1)(e), an employer includes:

Any body of persons, whether incorporated or not.

Any managing agent of an employer.

The legal representative of a deceased employer.

When the services of an employee are temporarily lent or let out to another person by the
compensation with whom the employee has entered into a contract of service or apprenticeship, i.e.
such other person while the employee is working for him.

It is essential to define the ‘employer’ as it is the employer who is liable to pay the compensation as
per the Act, nobody other than the someone who satisfies the definition of the employer as per the
definition laid down in the Act of one who is made expressly liable to pay compensation shall be
responsible to pay the compensation.

3. Employee

The chart is illustrative of the definition of employee as per Section(1)(dd) of the Act. However, the
Schedule II of the Act exhaustively defines further those defined as employees under the Act. The
definition of employee is far wider than the employer under the Act. The central and state
governments have been empowered to add to Schedule II, any class of personnel employed in any
occupation, which satisfies the government to be classified as a hazardous occupation. The injuries
that fall under such provisions can be expressly defined with limitations. It is important to note that
as stated the definition of the term employee is exhaustive as it covers what the definition includes
as well as does not include in the definition of an employee.

4. Wages
Section 2(1)(m) defines wages as including any privilege or benefit which is capable of being
estimated in money. The definition of wages is important as the amount of compensation lays its
entire base on the amount of wages of the employee.

5. Disablement: Partial and total

The Act doesn’t expressly define disablement. It only defines partial and total disablement. These
definitions elicit the idea that disablement under the ambit of the Act is the loss of capacity to earn
and depending on the nature of injury and percentage of loss of earning capacity, can be expressly
defined as partial or total.

6. Compensation

The amount paid by the employer, liable to compensate the employee for loss of earning capacity or
incapacitated by the disablement arising out of injury or accident or occupational illness, etc. Or the
amount to the dependents of a deceased employee that the employee is liable to pay as defined by
Section 2(1)(c) of the Employee Compensation Act, 1923.

Now that the context of the Employee Compensation Act, 1923, is clear with the illustration of the
important definitions under the Act. It is now important to understand how the Act relates employer
and employee in terms of liabilities and compensation, which will also in turn expressly lay out the
main aims and objectives upon which this enactment was brought about.

Employer’s liability

When an employee, in the course of his employment incurs a personal injury by an accident arisen
while in course of such employment, is bound to compensate by his employer who is liable to offer
such compensation to such employee. These compensations should be in accordance with
provisions of Sections 3 to 18A of the Act.

However, the employer is not liable to compensate the employee in cases as under:

These defences, however, are not available to the employer in case of the death of the workman, in
which case, even though the employee was negligent, the employer is liable to pay full
compensation to the dependants of the workman, whose death arose out of and in the course of his
employment.

The case related to employer’s liability in case of workman’s death is illustrated as under:

There is sufficient judicial precedent for the liability of the employer for compensation due to death
in the course of his employment. To bolster the above two scenarios following was held by the
courts in various cases:

1) In the case of the Regional Director, E.S.I. Corporation & Anr. v Francis De Costa & Anr. a Three-
Judge Bench of the court held as under; “In the case of Dover Navigation Company Limited v.
Isabella Craig 1940 A.C. 190, it was observed by Lord Wright that nothing could be simpler than the
words “arising out of and in the course of the employment.” It is clear that there are two conditions
to be fulfilled. What arises “in the course of the employment is to be distinguished from what arises
“out of the employment.” The former words relate to time conditioned by reference to the man’s
service, the latter to causality. Not every accident which occurs to a man during the time when he is
on his employment, that is directly or indirectly engaged on what he is employed to do, gives a claim
to compensation unless it also arises out of the employment. Hence the section imports a distinction
which it does not define. The language is simple and unqualified.
2) It has been held by various High Courts that mere negligence does not disentitle a workman to
compensation. Lord Atkin in the case of Harris v. Associated Portland Cement Manufacturers Ltd.
observed as under; “Once you have found the work which he is seeking to be within his
employment the question of negligence, great or small, is irrelevant and no amount of negligence in
doing an employment job can change the workman’s action into a non-employment job … In my
opinion, if a workman is doing an act which is within the scope of his employment in a way which is
negligent in any degree and is injured by a risk incurred only by that way of doing it he is entitled to
compensation.”

On analysis of the above provisions, it is apparent that the employer is liable to pay compensation
when:

There is a personal injury caused to the workman;

Such jury is caused by an accident;

The accident has arisen out of and in the course of, his employment.

2. Occupational diseases

Since injuries arising out of accidents are liable to be compensated, it was considered necessary to
specify that occupational diseases are to be regarded as injuries arising out of accidents.

An occupational disease is one that arises out of the occupation or employment and is peculiar to
that employment. There arises a need to protect the workmen from the risk of contracting such
occupational diseases, therefore it is necessary that employers be made liable to compensate for
adequate safety of workmen.

For example, there are certain occupations that expose employees to particular diseases that are
inherent;

Infra-red radiations;

Skin diseases due to chemical or leather processing units;

Hearing impairment caused by noise;

Lung cancer is caused by asbestos dust and diseases due to the effect of extreme climatic conditions.

Example- Sometimes miners develop lung diseases due to exposure to dust. The people who work in
agricultural lands, develop diseases through the spraying of pesticides. These pesticides are toxic in
nature and are health hazards to many farmers.

Provided that the employer shall not be liable:

(a) if any injury does not result in the total or partial disablement of the employee for a period
exceeding three days;

(b) if any injury does not result in death or permanent total disablement caused by an accident
which is directly attributable to;

If the employee is under the influence of drink or drugs at that time,

The willful disobedience of the employee to an order expressly given, or to a rule expressly framed,
for the purpose of securing the safety of employees,
The wilful removal by the employee of any safety guard or other devices which he knew to have
been provided for the purpose of securing the safety of employees.

Part A of Schedule III

If an employee contracts any disease that is mentioned in occupational diseases or the employee is
employed for a continuous period of six months (this does not include the service period) and not
less than that, the employer shall not be liable to pay the compensation as the disease will be
deemed to be injury and it shall be considered as out of the course of employment.

Part B of Schedule III

Diseases caused by phosphorus or the toxic substance present, all include exposure to risk
concerned.

Diseases caused by mercury or toxic substances found exposure to the risk concerned.

Diseases caused by benzene or the toxic substances found which pose risk to the concerned.

Diseases caused by nitro and amino toxic substances of benzene involve risk to the concerned.

These diseases are considered occupational diseases, and they are deemed to be out of the course
of employment and therefore the employer will not be liable to pay the compensation.

Part C of Schedule III

If an employee contracts a disease that is mentioned as an occupational disease that is specific to

that employment, during a continuous period that is less than the period mentioned under this part
of Schedule 3 is known as an occupational disease. It will be deemed that the disease has arisen out
of and in the course of the employment, the contracting of such disease will be deemed to be an
injury by accident within the meaning of this Section:

Section 3(3)

The Central Government or the State Government gives a notification in the Official Gazette which
species the diseases will be deemed to be occupational diseases under the provisions of sub-
section(2) and in the case of notification by the state government, these diseases are declared by the
Act.

2. Section 3(4)

No compensation will be payable to an employee unless the disease is directly attributable to a

specific injury that arises out of or in the course of employment.

Compensation

Section 4 of the Act deals with the amount of compensation. The provisions related to the quantum
of compensation can be divided into 4 contingencies as under:

The amount of compensation varies in each case, as demonstrated by the chart below:

The above provisions are subject to two conditions:

From the lump sum or half-monthly payments, one must deduct the amount of any payment of
allowance which the employee has received from the employer by way of compensation other than
payment for medical treatment, during the period of disablement prior to receipt of such lump sum
or do the first half-monthly payment.

No half-monthly payment can, in any case, exceed the amount, if any, by which half the amount of
the monthly wages of the employee before the accident exceeds half the amount of such wages
which he is earning after the accident.

Cessation of disablement: In case disablement ceases before the half monthly payment is due,
payment shall be made proportional to the number of days in the half-monthly cycle.

Funeral expenses: In case of death due to injury, the employer must, apart from the compensation
pay Rs. 5000 to the eldest surviving dependant of the deceased, as funeral expenses.

Reimbursement of Medical Expenses: By the amendment of 2009 provision is made for the
employee to get full reimbursement of the actual medical expenses incurred by him for the
treatment of injuries caused to him during the course of his employment.

Provisions of the Act, not sympathy or generosity will be the determining factor: In Oriental
Insurance Co. v. Mohammed, 2002, the Kerala Court held that the provisions of Section 4 will
determine the compensation in case of injuries falling in Schedule I. The courts cannot act ignore the
statutory mandate and act as benevolent kings; generosity and sympathy cannot be exercised at the
expense of others.