Clubbing of Establishments Under the Employees’ Insurance Act

The ESI Act is now applicable to all establishments having ten or more employees. However, since it is a beneficial Act, while calculating the total strength of eligible employees, the total number of employees employed in different branches, sales and service outlets has to be considered. Even if the total strength of each branch/ outlet is below ten, the entire establishment would be covered if the total strength of all branches/ outlets touches ten or more.

Two different units can be clubbed together under the ESI Act for the purpose of coverage only when there are common ownership and most importantly one unit is interdependent on the other.

In ESI Corporation vs. Tops Food Products, the ESI Corporation clubbed the establishment with another one on the ground of having common partners. However, the Learned EI Court rejected the claim of the corporation. Being aggrieved, the ESI Corporation preferred an appeal through their labour law advocates before the Uttaranchal HC which, inter alia, held that the ESI Corporation in its findings have stated that both the establishments are different and each establishment had less than ten employees and hence, the appeal was dismissed.

In another interesting case between Employees’ State Insurance Corporation vs. Kolhapur Motor Malak Sangh Ltd. the Bombay High Court has held that two different petrol pumps having same owners and functional integrity, even if they are located in different geographical locations, are liable to be covered under the ESI Act if the total strength of eligible employees reach ten or more.

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