Latest Increase in Wage limit of Rs.21,000/- Under the ESI Act

As per Rule 50 of the Employees’ State Insurance (Central) Rules, 1950, the wage limit for coverage of an employee under the ESI Act is Rs.15,000/- per month. However, as per the amendment dated 06.10.2016, the wage limit for coverage of any employee has been proposed to increase from Rs.15,000/- to Rs.21,000/-.

Such amendment reached its finality after one month’s time from 06.10.2016 was given by the Central Government inviting objections and suggestions from all corners of people likely to be affected from such proposed enhancement of wage limit. After considering all suggestions and objections and in consultation with appropriate authorities, the Central Government has given the amendment finality by way of publishing in the gazette on 22.12.2016 giving it an effect from 01.01.2017.

Hence, it can be concluded that w.e.f. 01.01.2017, the wage limit for coverage of any employee under the Employees’ State Insurance Act would be Rs.21,000/-.

You can download the latest gazette publication dated 22.12.2016 related to enhancement of wage limit to Rs.21,000/-


Is Confirmation of a Probationer Automatic

Confirmation is not a right of an employee when on probation. An employer, after completion of the probationary period of the employee, has to evaluate the performance of the employee, and upon such evaluation of performance, the employer has to either confirm him or reject him. However, in many instances we have seen that even after completion of the probationary period, the service of the employee is neither confirmed nor terminated. Can an employee be kept on probation for indefinite period?

It is the general conception that an employee remains a probationer until confirmed. However, it will depend on the condition of employment and terms and conditions as stipulated in the service rule/ standing order of the company.

As per the Industrial Employment (Standing Order) Act, 1946 a probationer can remain in probation for a period of three months only. Such period can be extended on the discretion of the management but it should not be very long. On many occasions, company intentionally keeps their employee on probation with an intention to deprive him of the legal status of a permanent employee and often to deny him statutory benefits and legal rights which he acquires during his course of employment.

The Hon’ble Bombay High Court as well as Allahabad High Court have opined that if an employee completes the period of his probation as mentioned in the appointment letter or standing order or service rules then automatically such employee gathers the permanent status unless and until his service is terminated immediately on completion of such probationary period.

Employer Holds the Exclusive Power to Transfer an Employee

Transfer of an employee often creates trouble both in the professional and personal life of such employee if due to such transfer one has to move to another city. Settling in a new city is difficult if an employee has to tag along his family members with him especially spouse and children. Practically it is harsh for the children as it is difficult to get admission in school during the middle of a session. Even though some companies compensate their employees with relocation benefits, it is not the financial constraint that always creates hindrances. However, the company on the other hand for its own benefit has to take the decision of transferring an employee from one place to another, which often upsets such employee. He can often show reluctance to such transfer. Is such transfer valid it is in the eye of law?

The power to transfer an employee for place A to place B remains in the hands of the employer. It is up to the employer to decide who, when and where to be transferred for the betterment of the company. As long as such transfer is done in terms of the appointment letter and/ or standing order, then it will be considered legal and under such circumstances no local courts would have the jurisdiction to interfere with such transfer. Even trade union leaders are transferred from one place to another which cannot be said an act of victimization directly. Trade union is engaged in the activities of welfare of the employees and not related to the activities of the management. Hence, it has been held by Rajasthan High Court in Kishori Lal Verma vs. Hindustan Zinc Ltd & Anr that transfer is a condition of service which is to be followed by every employee unless it is done with an intention of victimization; which on the other hand is very difficult to prove.

Employees Providing their Services Outside the Establishment will also come Under the Purview of the ESI Act, 1948

What is the legal position regarding the applicability of the Employees’ State Insurance Act, 1948 if the services provided by the employees of the establishment are outside the establishment? E.g. a business of playing music (band) at marriages and birthdays which take place outside the establishment or the catering services where food is cooked and served in the client’s premises. These establishments are mostly seasonal basis as marriages are a seasonal affair and do not take place on daily basis. Under such circumstances, does the ESI Act become applicable to the establishment of such nature where the employees are providing services outside the establishment?

In the case of Hindu Jea Band, the applicant establishment through their labour law advocate challenged the coverage before the Learned EI Court, Rajasthan on the plea that the employees are providing services outside the establishment which is of seasonal in nature. However, the plea of the applicant establishment was rejected by the Learned EI Court and thereafter the Hon’ble Rajasthan High Court dismissed the appeal filed by the appellant establishment.

Finding no other alternatives, the applicant establishment moved before the Hon’ble Supreme Court. The Supreme Court of India held that employees whether paid on daily basis or part time employees, will be treated as ‘employees’ under the Act. Hence, the establishment has been rightly covered under the Employees’ State Insurance Act, 1948. Thus it can be concluded that even if the employees provide services outside the establishment, still they will be treated as employees and will come under the coverage of the ESI Act.

Importance of Supplying Enquiry Report to the Charge Sheeted Employee

Is a delinquent employee entitled to copy of the enquiry report before any punishment is imposed upon him? If the employee does not get the copy of the enquiry report, then part of reasonable opportunity is lost as held by the Hon’ble Supreme Court of India.

Enquiry report is a vital document because basing on such report punishment is awarded. If copy of enquiry report is not provided to the delinquent employee, then it automatically violates the principle of natural justice.

An enquiry officer during the enquiry records evidences, considers documents and finally submits his enquiry report and findings to the disciplinary committee/ management of the company for deciding the quantum of punishment. There is a possibility for various reasons that the enquiry report might contain some findings which are not based on the actual proceedings. In such circumstances, if the copy of the enquiry report is not available with the delinquent employee, then such unknown facts would be considered by the disciplinary committee while deciding the quantum of punishment. The enquiry report might have been prepared by the whim of the enquiry officer without considering the evidence and facts. The delinquent employee needs to know what is in the enquiry report and then give his explanation to such report. Non-supplying of the enquiry report is not recommended since it violates the principle of natural justice which is the basic ingredients of holding any domestic enquiry. However, the Hon’ble Supreme Court in the case of Oriental Bank of Commerce vs. S. Balakrishnana has held that mere non-supplying of the enquiry report would not completely vitiate the enquiry. But such act should no way prejudice any delinquent employee.

Observance of principle of natural justice is mandatory while conducting a domestic enquiry. Hence, it is always advisable to supply a copy of the enquiry report to the delinquent employee before imposing minor or major punishment which would save the company from future unnecessary legal complications.

Relationship between Completion of Probationary Period and Automatic Confirmation

If an employee completes a stipulated probationary period in the company successfully, is he entitled to confirmation automatically? Certainly not, but such an employee would have a positive impression for the purpose of permanent appointment. The situation is tricky, and each and every case needs independent interpretation of a labour law advocate.

The Hon’ble Allahabad High Court in Mustafa Ansari vs. Kisan Gramin Bank & ors. has held that the power of confirmation of a probationer is in the hands of the confirming authority and such authority takes decisions on the basis of the performance of the probationer. Just because a probationer has completed the probationary period does not mean that he is fit for the service and should be made permanent. It is up on completion of the probationary period when the confirming authority gets the opportunity to judge the overall performance of the probationer and only after considering the performance of the probationer; his service is either confirmed or terminated. The Court held that termination of a probationer cannot be unjustified or illegal.

On the same line of action, the Hon’ble Gujrat High Court in Edwin A. Daniel vs. Labour Court has opined that completion of probationary period does not give right to confirmation. An order of confirmation is must before an employee is confirmed after the probationary period.

In the case of LIC vs. Ramapal Mandola, the Hon’ble Court held that the probationer, who has left his service soon after completion of probationary period, cannot claim himself to be a confirmed.

Hence, it can be concluded that a probationer does not become a permanent employee unless he is confirmed. However, non-confirming a probationer after completion of probationary period and making him continue to do the same work for a longer period of time without either confirming or terminating his service in order to deprive him of all the statutory benefits of a permanent employee would attract the provisions of unfair labour practice.

EPFO Plans to Reduce the Strength of Employees to 10 for the Purpose of Coverage

In order to provide social security to millions of workers who are beyond the ambit of provident fund benefits under the Employees’ Provident Fund Organization, the labour ministry has decided to reduce the minimum strength of eligible employees to ten for the purpose of extending the coverage to the maximum limit. Currently, the total strength of employees required for the purpose of coverage under the Employees’ Provident Fund & Miscellaneous Act, 1952 is twenty.

As per the labour ministry, which is planning to reduce the strength to ten from the existing strength of twenty employees through an executive order is hopeful that such change will bring an additional five million workers under the coverage of EPF & MP Act and benefits provided under such Act. Talks regarding the amendment of EMP & MP Act, 1952 are also going on. The Act itself allows change in number of eligible employees for the purpose of coverage under this Act through a notification with a time limit of two months for consultation and/ or modification. Since such amendment does not require permission from the Parliament, the officials of the labour ministry are very much keen on publishing a notification soon. It is pertinent to mention that the EPFO’s apex decision making body the central board of trustees have already approved the decision of reducing the strength of eligible employees to ten in 2008, but for reasons unknown, it could not be implemented till today.

Such decisions, if implemented soon will bring a lot of workers under the coverage of the EPF & MP Act and they will be able to enjoy the benefits of provident fund. However, on the other hand, it will create a huge financial burden of the small scale industries and employers.