Indian Industrial Law - Wages

In its judgment dated September 20, 2018, the Supreme Court of India (SC), in the matter of Rajasthan State Road Transport Corporation, Jaipur vs. Shri Phool Chand[1] (Phool Chand) has ruled on a worker’s (workmen as per Industrial Disputes Act, 1947) entitlement to back-wages, if he/she his reinstated.

Under Indian labour and industrial laws, the provisions pertaining to a worker’s entitlement to back-wages is covered under the legal regime of Industrial Disputes Act, 1947 (ID Act).

In this regard, the ID Act stipulates that a worker[2] will be entitled to back-wages during pendency of proceedings.In the provisions of the ID Act,[3] a worker is entitled to full wages last drawn, [inclusive of maintenance allowance (if applicable)], during the pendency of an appeal preferred by an employer before a High Court or the SC, against a decision wherein reinstatement has been awarded to a worker by a Labour Court, Tribunal or National Tribunal. To be entitled to such payment, the employee should not be employed in any establishment during the pendency of such proceedings. Further, if the relevant High Court or the SC is satisfied that a worker has been employed during the pendency of such proceedings and had been receiving adequate remuneration, no back-wages would be payable for the period of such pendency.[4]

The SC’s recent judgment in Phool Chand has held that a worker cannot automatically be entitled to back-wages. In the aforementioned judgment, the worker was dismissed from service on account of dereliction of duties. The Labour Court ordered reinstatement of service and awarded payment of full back-wages to the employee for a period of 13 years.

The employer preferred an appeal against the order of the Labour Court; however, the position of the Labour Court was affirmed by both the single judge and the division bench of the Hon’ble High Court of Rajasthan. The employer challenged the order of the division bench before the SC. The SC partly set aside the order of the High Court and held that the worker has no right to claim back-wages purely on the basis that the dismissal order had been set aside.

The SC further laid down that in order to claim back-wages, a worker is required to prove (by adducing evidence) that he was not gainfully employed anywhere after dismissal, and had no earnings to maintain himself and/or his family. The SC also observed that an employer is required to prove that a worker was gainfully employed elsewhere – however, the initial burden lies on the worker to substantiate his unemployment. Citing various judicial precedents, the SC reiterated that several factors should be taken into account to determine the entitlement of back-wages and/or the amount to be paid to such a worker, which was not done by the lower courts in the present case. The SC overturned the decision of the lower courts, noting that the lower courts did not consider the principles for awarding back-wages.

However, the SC in exercise of its powers under Article 142 of the Constitution of India (Constitution) took note of various circumstances of the worker, including the period and money spent in litigation by the worker and his legal representatives after his death, and awarded 50% back-wages.

The law relating to the calculation and payment of back-wages to workers has been discussed at length by the SC in various cases. In U.P. State Brassware Corporation Ltd. vs. Uday Narain Pandey, it was laid down that there was no precise formula to determine the circumstances under which a worker is entitled to back wages.[5]

In Deepali Gundu Surwase vs. Kranti Junior Adhyapak Mahavidyalaya (D. Ed.) and Ors.,[6] (Surwase) the SC held that in the case of wrongful termination of a worker, reinstatement with continuity of service and back-wages was a normal rule. However, the payment of back-wages has to be determined as per the facts and circumstances of each case and cannot be automatically granted on an order of reinstatement of the worker. The worker has to specifically raise the claim for back-wages, as well as present supporting evidence demonstrating his unemployment. The court also set out various factors for calculating the back-wages, which include, among others: (a) the length of service of a worker; (b) the nature of misconduct, if any, proved against a worker; and (c) the financial condition of an employer.

Therefore, the current judgment of the SC in Phool Chand reiterates the existing legal position in relation to circumstances in which back-wages can be awarded.

Since the reasons cited by the SC in the Phool Chand case with regard to awarding back-wages were in view of Article 142 (considering the period and money spent in litigation by the worker and his representatives), the same is not in line with the criteria laid down by Surwase and various other cases of the SC for determining back wages. The position with regard to awarding 50% back-wages cannot be considered as binding on the lower courts, since in the Phool Chand case, the SC exercised its special power under Article 142 of the Constitution.

[1] Civil Appeal No. 1756 of 2010.

[2] workman” means any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, and for the purposes of any proceeding under this Act in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute, but does not include any such person-

(i) ………; or

(ii)……….; or

(iii) who is employed mainly in a managerial or administrative capacity; or

(iv) who, being employed in a supervisory capacity, draws wages exceeding [ten thousand rupees] per mensem or exercises, either by the nature of the duties attached to the office or by reason of the powers vested in him, functions mainly of a managerial nature.]

[3] Section 17 B, ID Act

[4] Proviso, Section 17B, ID Act.

[5] (2006) 1 SCC 479.

[6] (2013) 10 SCC 324.