Study of Employer's Liability & Non-Liability for Compensation under the Employee’s Compensation Act, 1923

The Author, Riya Rathi, is Founder and Director of LatestLaws.com.

Introduction

Employees are any company or organisation's most important resource. One of the most important factors in employee performance is to achieve goals. Successful employees meet deadlines, make sales and build the brand via positive customer interactions. Every employee needs a secured job and wants to get compensation for the expenses he has incurred. This is a requirement that needs to be fulfilled by the organisation whether it is small scale or large scale, after all, its success depends on its employees. Therefore, the protection of employees’ and their safety is a top priority of an employer. The increasing use of machinery and consequent rise in danger to workmen, made it imperative that they should be protected from hardship arising from accidents. This paper deals with the questions as to under what conditions compensation can be claimed and under what conditions there no is liability to pay compensation.

The “Employees Compensation Act, 1923” was enacted to provide payment in the form of compensation by the employers to the employees for any injuries suffered in an accident. It is one of the earliest labour welfare and social security legislation enacted in India. Earlier this Act was known as the Workmen Compensation Act, 1923. It was named as Employee’s Compensation Act on 18^th January 2010 as now employees in clerical capacity are also eligible for compensation.[1]

Nature of Liability

An employee who is putting in great efforts in the work, would desire to get some benefits in return. When the principle of vicarious liability is applied, the employer is liable to pay compensation irrespective of employee’s negligence. Employer anticipates it as damages payable to the employees but it is actually a relief for the employees. An employer becomes liable when employees have sustained injuries by any accident or unavoidable situations during the course of employment. An employee who is a part-time worker would still be entitled to get the benefits under the Act.

To be eligible for the benefits under the Employees’ Compensation Act, the following requirements need to be fulfilled:

1. The person must be an employee of the Company or Organisation.
2. The person must have been injured at the workplace in the course of employment.

Employer’s liability for payment of Compensation

Under Section 3(1) of the Employees Compensation Act, 1923[2], if personal injury is caused to an employee by accident arising out of and in the course of his employment, his employer shall be liable to pay compensation.

Under this Section, an employee who dies or suffers partial or total disablement for more than 3 days or permanent total disablement due to accident is entitled to get compensation from employer.

However, in order to succeed under Section 3(1) for claiming compensation, it has to be proved by the employee that,

1. there was an accident,
2. the accident had a causal connection with the employment and
3. the accident must have been suffered in course of employment.

Concept of ‘Arising out of Employment’

The phrase "arising out of employment" isn’t merely confined to the nature of the employment. The phrase applies to conditions, obligations and incidents of employment as well. If by reason of any of these factors the workman is under danger and suffers injury, then the injury would be one which arises "out of employment."

In Lancashire and Yorkshire Railway Co. v. Highley[3], the following test was laid down for determining whether an accident "arose out of the employment":

1) Was it part of the injured person's employment to hazard, to suffer, or to do that which caused his injury? If yes, the accident arose out of his employment. If nay, it did not, because, what it was not part of the employment to hazard, to suffer, or to do, cannot well be the cause of an accident arising out of the employment.

2) To ask if the cause of the accident was within the sphere of the employment, or was one of the ordinary risks of the employment, or reasonably incidental to the employment, or conversely was an added peril and outside the sphere of the employment, are all different ways of asking whether it was a part of his. employment,

3) The workman should have acted as he was acting or should have been in the position in which he was, whereby in the course of that employment he sustained injury.

In Oriental Fire and General Insurance Company Limited v. Sunderbai Ramji[4], the Gujarat High Court determined the scope of the expression ‘accident arising out of employment’ occurring under Section 3 of the Act. In this case, the deceased labourer was doing work involving hard labour and strenuous physical exertion. One morning after 3 hours of work, he had suffered chest pain and subsequently fainted. He was declared dead at Hospital.

The Commissioner found that deceased was involved in a very heavy and hard labour work, which undoubtedly would affect the physical efficiency and health, and inferred that the labourer died because of the nature of his job. It means he died due to an accident arising out of employment covered under Section 3 of the Act

On appeal the High Court upheld the conclusion of the learned Commissioner that the deceased died of an accidental injury arising out of and in the course of his employment is fully justified. The personal injury resulting into death has direct and proximate nexus with employment.

Concept of ‘in the course of his employment’

The phrase "in the course of the employment" means in the course of the work which the workman is employed to do and which is incidental to it.

The Doctrine of Notional Extension provides the scope of the phrase “in the course of the employment. As a rule, the employment of a workman does not commence until he has reached the place of employment and does not continue when he has left the place of employment. The journey to and from the place of employment is excluded. However, as per the Notional

Extension theory there could be reasonable extension of course of employment in terms of time and place and a workman may be regarded as in the course of his employment even though he had not reached or had left his employer's premises.

There is a notional extension of both the entry and exit of work place by time and space. The scope of such extension must necessarily depend on the circumstances of a given case. An employment may end or may begin not only when the employee begins to work or leaves his tools but also when he uses the means of access and egress to and from the place of employment.

In General Manager, B. E. S. T. Undertaking, Bombay v. Mrs. Agnes[5], a public utility transport service run by the Bombay Municipal Corporation, owned a number of buses and employed a staff, including bus drivers, for conducting the said service. The deceased driver finished his work for the day. After leaving the bus in the depot, he boarded another bus in order to go to his residence. Bus collided with a parked lorry. As a result of the said collision, the he was thrown out on the road and got injured. Later he died in the hospital. His widow, filed an application in the Court of the Commissioner for compensation.

The Supreme Court stated that in view of the long distances to be covered by the employees, the Corporation, as a condition of service, provides a bus for collecting all the drivers from their houses so that they may reach their depots in time and to take them back after the day's work. They are given that facility as a right because efficiency of the service demands it. The Court observed that,

“The employment does not necessarily end when the "down tool" signal is given or when the workman leaves the actual workshop where he is working. There is a notional extension at both the entry and exit by time and space. The scope of such extension must necessarily depend on the circumstances of a given case. The doctrine of notional extension of employment developed in the context of specific workshops, factories or harbours, equally applies to such a bus service which provided to employees to get to job on time and reaching their home without further strain contributing to their overall efficiency. The bus service is used as a privilege and matter of right. Their workplace gets notionally extended by virtue of this service.”

The Supreme Court held that when a driver when going home from the depot or coming to the depot uses the bus, any accident that happens to him is an accident in the course of his employment.

Employer’s liability in case of occupational diseases

There are certain occupations which due to their nature expose employees to particular diseases that are inherent, like-

• Diseases caused by work in compressed air,
• Infra-red radiations;
• Skin diseases due to chemical or leather processing units;
• Hearing impairment caused by noise;
• Lung cancer caused by asbestos dust and
• Diseases due to effect of extreme climatic conditions.

For example- Miners are at a risk of developing a disease called silicosis. Sometimes miners also develop lung diseases due to exposure to dust. The people who work in agricultural lands, develop diseases through spraying of pesticides. These pesticides are toxic in nature and are health hazards to many farmers.

There are thousands of workplaces where occupation itself is dangerous in nature.

Part A of Schedule III

Section 3(2) of the Act provides that if an employee employed in any employment specified in Part A of Schedule III contracts any disease specified therein as an occupational disease, or if an employee, whilst in the service of an employer in whose service he has been employed for a continuous period of not less than 6 months (which shall not include a period of service under any other employer in the same kind of employment). It shall be deemed to be an injury by accident unless contrary is proved. Thus, employer would be liable to pay compensation.

Part B of Schedule III

In any employment specified in Part B of Schedule III, contracts any disease specified therein as an occupational disease peculiar to that employment, it shall be deemed to be an injury by accident arising out of or in the course of the employment, making employer liable to pay compensation.

Part C of Schedule III

Where in any employment specified in Part C of Schedule III employee contracts any disease, employer shall be liable:

• If an employee was in the service of one or more employers for such continuous period as the Central Government may specify in respect of each such employment, and
• If employee contracts any disease specified therein as an occupational disease peculiar to that employment,

If the above conditions are fulfilled, the contracting of the disease shall be deemed to be an injury by accident within the meaning of Section 3 and, unless the contrary is proved, shall be deemed to have arisen out of, and in the course of the employment and employer shall be liable to pay compensation under Section 3(1) of the Act.

Employer’s Non-liability for payment of Compensation

As per Section 3(1) of the Employees Compensation Act, 1923, the employer is not liable to pay compensation in following cases:

1. If the injury does not end in the entire or partial disablement of the employee for a period exceeding three days.
2. If the injury, not leading in death or permanent total disablement, is caused by an accident which is directly attributable to: 

• The employee having at the time of the accident is under the influence of drink or drugs; 
• The wilful disobedience of the employee to an order if the rule is expressly given or expressly framed, for the purpose of securing the safety of employees; or
• The wilful removal or disregard by the employee of any safety guard or other device which has been provided for the purpose of securing the safety of employees.

Doctrine of Added Peril

When an employee performs something which is not required in his duty and which involves extra danger, the employer cannot be held liable to pay compensation for the injuries caused. The doctrine of added peril disentitles an injured worker from compensation on the ground that he had taken a greater risk than he had been required by his employer to assume. Therefore, where the injury is not caused to workman by an accident arising out of employment, he/she is not entitled to get any benefit or compensation.

Doctrine of added peril can be used as a defence by the employer for pleading non-liability for the compensation.[6] In Lancashire and Yorkshire Railway Co. v. Highley[7] the court laid down the doctrine of added peril as an exception to the imperative of injury arising out of employment.

Self-inflicted Injury

If a worker inflicts an injury to himself or herself it is a self-inflicted injury. The injury may be intentional or accidental but the employer is not liable for such injuries. There are some types of jobs that have a high risk for self-inflicted injuries which include law enforcement, medical employees, farmers, teachers, salespersons.

Contributory negligence

Employees owe a duty to their employers to carry out their work with reasonable care so as to avoid accidents and injury. Employers are vicariously liable for the negligence of their employees but are entitled to claim a contribution or indemnity from their negligent employee in appropriate circumstances. So, if there is negligence on the part of both employee and the employer then the employer will be liable to pay compensation to the extent of his own negligence, not of the employee. Hence, the compensation amount may reduce as the employer will not be liable for the negligence of the employee.

Conclusion

Employee’s Compensation Act, 1923 is almost a century old enactment, providing social security to workmen. Social security offers to ensure compensation is paid to a disabled or injured person only if the accident rose in the middle of the employment. The compensation paid to a workman by an employer when an accident occurs is a relief and social security measure provided by the Act.

The Act makes it clear that employers should have duties and obligations that include the welfare of workers after an injury resulting from employment, in the same way they have reserved the right to make profits. The Act aims to see workmen have a sustainable life after an employment-related accident.

However, a closer study of the Act reveals that its benefits are not only confined to employees or workmen. This Act has numerous benefits for both – employers and employees. It keeps up motivation and loyalty of employees towards the company, and thereby reduces employee turnover. Another advantage of this legislation is that it increases the importance of adequate safety devices for the employer, hence, reduces the number of accidents in a manner that isn’t likely to be achieved by mere official inspection.

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