Calculation of compensation, notice and claim, and the competent authority

1. Amount of compensation: section 76 [EC Act s.4]

• Death (s.76(1)(a)): 50 per cent of the monthly wages of the deceased × the relevant factor, or the amount notified by the Central Government, whichever is more.
• Permanent total disablement (s.76(1)(b)): 60 per cent of monthly wages × the relevant factor, or the notified amount, whichever is more.
• Permanent partial disablement (s.76(1)(c)): for an injury in Part II of the Fourth Schedule, the percentage of the total-disablement compensation shown against it as loss of earning capacity; for an injury not in the Schedule, a percentage proportionate to the loss of earning capacity assessed by the medical practitioner. Where one accident causes several injuries the amounts are added, but never beyond the total-disablement figure.
• Temporary disablement (s.76(1)(d)): a half-monthly payment of 25 per cent of monthly wages, payable on the sixteenth day from the date of disablement if it lasts 28 days or more, or after a waiting period of three days if it lasts less, and then half-monthly for the period of disablement or five years, whichever is shorter (s.76(4)).

The relevant factor is the figure in the Sixth Schedule against the employee's completed years of age on his last birthday before the compensation fell due. It falls with age: 228.54 at 16 or under, 207.98 at 30, 184.17 at 40, 153.09 at 50, 99.37 at 65 or more. Under the 1923 Act the minimum amounts were fixed in the section itself; the Code leaves them, and any monthly-wage figure for the calculation (s.76(3)), to notification by the Central Government.

Three additions in section 76:

• Medical expenses: the employer must reimburse the actual medical expenditure for treatment of the injury (s.76(5)) [EC Act s.4(2A), added in 2009].
• Funeral expenses: on death, the employer must also deposit with the competent authority not less than fifteen thousand rupees or the amount prescribed by the State Government, for the eldest surviving dependant (s.76(7)) [the 1923 Act's figure was five thousand rupees].
• Accidents abroad: compensation awarded under the foreign law is deducted (s.76(2)).

2. Monthly wages: section 78 [EC Act s.5]

• Continuous service of twelve months or more before the accident: one-twelfth of the total wages due in the last twelve months.
• Continuous service of less than one month: the average monthly earnings of an employee on the same work under the same employer (or on similar work in the locality) in the preceding twelve months.
• Other cases: thirty times the total wages earned in the last continuous period of service, divided by the number of days in that period.

Service is continuous if not interrupted by absence of more than fourteen days. “Wages” is the Code's general definition in section 2(88).

3. When due, interest and penalty: section 77 [EC Act s.4A]

Compensation must be paid as soon as it falls due (s.77(1)). If the employer disputes the extent of liability he must still make a provisional payment of what he admits (s.77(2)). If he defaults for one month from the date it fell due, the competent authority shall direct payment of interest at the prescribed rate and may, if there is no justification for the delay, direct a further sum of up to 50 per cent of the arrears as damages, after giving the employer a chance to show cause (s.77(3)). The 1923 Act called the second sum a penalty.

• Pratap Narain Singh Deo v. Srinivas Sabata, 1975 INSC 301, (1976) 1 SCC 289 — a carpenter lost his left arm at work. Compensation falls due on the date of the accident, not on the date the Commissioner adjudicates it; an employer who fails to pay within a month is liable to the penalty.
• Ved Prakash Garg v. Premi Devi, 1997 INSC 671, (1997) 8 SCC 1 — the insurer is liable to pay the interest along with the compensation, but not the penalty, which is imposed for the employer's own unjustified default and stays with him.

4. Review, commutation and distribution

• Review (s.79) [s.6]: a half-monthly payment may be continued, increased, reduced or ended on a medical certificate of change in condition, or converted into a lump sum if the disablement turns out to be permanent.
• Commutation (s.80) [s.7]: the right to half-monthly payments may be redeemed for a lump sum by agreement, or on application after payments have run for six months.
• Distribution (s.81) [s.8]: compensation for death, and any lump sum due to a woman or a person under legal disability, must be paid only by deposit with the competent authority; a direct payment by the employer is not payment of compensation. The employer may advance up to three months' wages to a dependant, which is deducted later. The authority calls the dependants, hears them, and apportions the sum among them with reasons, or allots it to one of them. If no dependant exists, the balance goes back to the employer.

5. Notice and claim: section 82 [EC Act s.10]

No claim is entertained unless notice of the accident was given as soon as practicable and the claim is made within two years of the accident or, in case of death, two years from the date of death. For an occupational disease the accident is deemed to occur on the first day of continuous absence caused by it; where it does not force absence, the two years run from the notice to the employer; and where symptoms appear within two years after leaving the employment, from the day they are first detected.

Want of notice is no bar where the employee died on the employer's premises or at the place of work, or where the employer or his manager knew of the accident at or about the time. In any case the competent authority may condone delay in notice or claim if there was sufficient cause. The notice must give the name and address of the injured person, the cause of injury and the date, and may now be served electronically (s.82(5)).

Employers must also report fatal accidents and serious bodily injuries to the competent authority within seven days where any law requires notice of such accidents (s.73) [s.10B], and the authority may call on the employer for a statement on a fatal accident (s.88) [s.10A].

6. The competent authority

Appointment (s.91) [s.20]: the State Government appoints, for a notified area, a person who is or has been a member of the State Judicial Service for at least five years, or an advocate of five years' standing, or a Gazetted Officer of five years with qualifications and experience in personnel management, human resource development, industrial relations and legal affairs. He may take the help of persons with special knowledge (s.91(3)).

Exclusive jurisdiction (s.90) [s.19]: any question of liability (including whether the injured person is an employee) or of the amount or duration of compensation is settled by the competent authority in default of agreement, and no civil court has jurisdiction.

Venue (s.92) [s.21]: the authority for the area where the accident took place, where the employee or claiming dependant ordinarily resides, or where the employer has his registered office, with power to transfer matters.

Powers and procedure: the powers of a civil court for evidence on oath, attendance of witnesses and production of documents, and it is a civil court for section 195 and Chapter XXVI of the Criminal Procedure Code (s.95) [s.23]; it may call for further deposit in a fatal case (s.94) [s.22A]; it records a memorandum of evidence, but medical evidence nearly word for word (s.97) [s.25]; it may refer a question of law to the High Court (s.98) [s.27]. Parties may appear through a legal practitioner, an insurance official, a registered trade union official or an inspector-cum-facilitator (s.96). Agreements on lump-sum compensation must be registered with it (s.89) [s.28].

Appeal (s.99) [s.30]: to the High Court against orders awarding or disallowing a lump sum, awarding interest or damages, refusing redemption, distributing compensation, on indemnity, or on registration of agreements; only if a substantial question of law is involved and (except for refusal of redemption) the amount in dispute is at least ten thousand rupees; within sixty days, with section 5 of the Limitation Act applying. An employer appealing against a lump-sum award must first deposit the amount.

7. Problem

R, aged 30 on his last birthday, earning Rs 20,000 a month for the past three years, is killed at work. His employer pays Rs 2 lakh in cash to his widow and refuses anything more. Advise the widow.

Issue. The amount of compensation, and whether the direct payment discharges the employer.

Law. Section 76(1)(a): 50 per cent of monthly wages × the Sixth Schedule factor, or the notified minimum, whichever is more; s.76(7) adds funeral expenses. Section 81(1): compensation for death can be paid only by deposit with the competent authority.

Application. Monthly wages under s.78(a) are Rs 20,000. The factor for age 30 is 207.98. Compensation is 10,000 × 207.98 = Rs 20,79,800 (unless a monthly-wage figure notified under s.76(3) caps the calculation). The cash payment is not “payment of compensation” at all; at most up to three months' wages (Rs 60,000) can be treated as an advance under the proviso to s.81(1).

Conclusion. The widow should claim before the competent authority within two years of the death. The employer must deposit the full amount plus not less than Rs 15,000 for funeral expenses, with interest, and up to 50 per cent damages if the delay beyond one month is unjustified (s.77(3); Pratap Narain Singh Deo).

How this is examined

Expect “How is compensation calculated?”, “notice and claim” and “appointment, powers and functions of the competent authority (Commissioner)” as short notes, and a numerical or direct-payment problem. Write the four heads of section 76 in order, show one worked calculation with the factor, and never forget that death compensation goes through the competent authority.