27

Employees’ State Insurance Act, 1948

27.1 INTRODUCTION

27.1.1 Objectives

The Employees’ State Insurance Act, 1948, aims at securing maximum labour welfare through various welfare schemes like providing certain benefits to employees in case of sickness, maternity and employment injury and to make provisions for certain other matters in relation thereto.

27.1.2 Applicability

The Act is applicable all over India including Jammu and Kashmir. It is applicable to all factories (including factories belonging to the government) other than seasonal factories. The Act is not applicable to factory or establishment belonging to or under the control of the government whose employees are otherwise in receipt of benefits substantially similar or superior to the benefits provided under this Act.

27.2 DEFINITIONS

27.2.1 Appropriate Government

In the case of establishment which is under control of the Central Government or a railway administration or a major port or a mine or oilfield, Central Government is the appropriate government. In all other cases, State Government is the appropriate government.

27.2.2 Factory

Factory is defined as any premises including the precincts thereof wherein 10 or more persons are or were employed on any day of the preceding 12 months in any part of manufacturing process. The definition does not include mines or railway running shed

27.2.3 Employment Injury—Section 2(8)

Employment injury, under this Act, has the same definition as applicable in the case of Workmen Compensation Act, 1923.

27.2.4 Employee

Any person employed for wages, directly employed by the principal employer or employed by or through an immediate employer

1. on the premises of the factory or establishment or
2. under the supervision of the principal employer or his agent
3. whose services are temporarily lent or let on hire to the principal employer
4. by the person with whom the person whose services are so lent or let on hire has entered into contract of service

Employee does not include:

1. any member of the Indian naval, military or air forces
2. any person so employed whose wages (excluding remuneration for overtime work) exceed such wages as may be prescribed by the Central Government

27.2.5 Principal Employer

In case of factory, owner or occupier of the factory is principal employer. The managing agent of owner or occupier is considered as principal employer. The legal representative of a deceased owner or occupier is principal employer on death of the owner or occupier. The manager of factory is also considered as principal employer.

In an establishment under the control of any department of any government in India, an authority appointed by such government in this behalf or where no authority is so appointed, the head of the department is considered as principal employer.

In any other establishment, any person responsible for the supervision and control of the establishment is principal employer.

27.2.6 Seasonal Factory

A seasonal factory is a factory which is exclusively engaged in one or more of the following manufacturing processes, namely,

1. cotton ginning, cotton or jute pressing, decortications of groundnuts, the manufacture of coffee, indigo, lac, rubber, sugar (including gur) or tea or
2. any manufacturing process which is incidental to or connected with any of the aforesaid processes

It also includes a factory which is engaged for a period not exceeding seven months in a year:

1. In any process of blending, packing or repacking of tea or coffee or
2. In such other manufacturing process as the Central Government may, by notification in the Official Gazette, specify

27.2.7 Wages

Wages are all remuneration paid or payable, in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled. It includes any payment to an employee in respect of:

1. Any period of authorised leave
2. Lock-out
3. Strike which is not illegal
4. Lay-off and other additional remuneration, paid at intervals not exceeding two months

Wages do not include any of following amounts:

1. Provident fund or pension fund contribution by the employer
2. Leave travel concession
3. Reimbursement of expenses
4. Gratuity

27.3 INSURABLE EMPLOYEE

All employees in factories or establishments to which this Act applies shall be insured. The following persons are not regarded as insurable employees:

1. Workers in mines subject to Mines Act, 1952
2. Workers in a railway running shed
3. Any member of the Indian naval, military or air forces
4. Any person so employed whose wages excluding remuneration for overtime work exceed such wages as may be prescribed by the Central Government

27.4 CONTRIBUTION

As per Section 39, both employer and employee both are required to make contribution to the ESI scheme.

The employee’s contribution shall be at the rate of 1.75% of wages whereas employer’s contribution shall be at the rate of 4.75% of wages. Contributions fall due on the last day of the wage period.

If an employer make default in payment of contribution on due date, he is liable to pay interest at the rate of 12% p.a. If higher interest rate is prescribed by regulations, such higher interest specified shall not exceed the lending rate of interest charged by any scheduled bank. Responsibility of payment of employee and employer’s contribution to the ESI Corporation lies with the principal employer. The principal employer may deduct the employee’s contribution from wages of employees who are directly employed by him. Employer’s contribution is not to be deducted from wages.

Principal employer shall bear the expenses of remitting the contributions to the Corporation. A principal employer, who has paid employer’s and employee’s contribution on behalf of immediate employer, can recover the amount so paid from immediate employer. The immediate employer is entitled to recover employee’s contribution as deduction from wages from the employees employed by or through him. Employee’s contribution shall not be paid if his average daily wages are below the prescribed limits. Principal employer and immediate employer are responsible for submission of returns to the ESI Corporation and maintenance of registers. Any contribution payable under the Act may be recovered as arrear of land revenue.

Employees in respect of average daily wages up to ₹ 100/- are exempted from payment of contribution. However, employers will contribute their own share.

27.5 ESI BENEFITS—SECTION 46

27.5.1 Medical Benefits

Medical benefits include expenses incurred for medical attendance, treatment, drugs and hospitalisation. It is available to the insured person and his family members.

27.5.2 Sickness Benefit

To avail sickness benefit, the sickness must be certified by a medical practitioner. It is paid in cash and is available only to the insured person.

27.5.3 Maternity Benefit

Maternity benefit is a periodic payment to an insured workman in case of confinement or miscarriage or sickness arising out of pregnancy. Illegal abortion is not covered under the maternity benefit.

27.5.4 Disablement Benefit

Disablement may be either temporary disablement benefit or permanent disablement benefit. A medical board or special medical board assesses injury and loss of earning capacity.

27.5.5 Other Benefits

Other benefits include funeral expenses in case of death – ₹ 10,000 to eldest member of the family. These benefits are not transferable. They cannot be assigned. An insured person is not entitled for sickness benefit and medical benefit at the same time. Likewise, maternity benefit and temporary disablement benefit are not available to the insured person at the same time. An employer should not dismiss or punish an employee during his period of sickness.

27.6 ESI COURT—SECTIONS 74–75

The State government constitutes ESI Court. ESI Court deals with:

1. Adjudication of disputes under the Act
2. Adjudication of claim

Civil court has no jurisdiction to entertain matters related to ESI. Matters related to ESI are dealt with by ESI court.

LIST OF LANDMARK JUDGEMENTS

1. Shaymdevi vs ESIC (1964)

   The word ‘injury’ does not mean only visible injury in the form of some wound.

2. Hyderabad Asbestos Cement Products, etc. vs ESIC (1978).

   The word ‘employee’ would include not only persons employed in a factory but also persons connected with the work of the factory.

3. ESIC vs Apex Engg. Pvt. Ltd (1997)

   Managing director could be an employee of the company. There could be dual capacity, i.e., as managing director as well as a servant of the company.

4. Sindhi Sehiti, M.P. Transport Coop. Society Ltd., Bhopal vs Regional Director, Employees’ State Insurance Corporation, Indore. (1997)

   ESI Act will be applicable to a co-operative society having more than 20 employees.

5. Narashimha Mills Ltd, Coimbatore vs Regional Director, Employees’ State Insurance Corporation, Madras (2000).

   A godown away from the factory will come within the expression ‘‘premises of the factory’’ for applicability and coverage under the ESI Act..

6. Transport Corporation of India vs Employees’ State Insurance Corporation (2000)

   A notification issued by a State Government under the ESI Act will extend to all branches of the said establishment situated even outside the State.

7. Employees’ State Insurance Corporation, Bangalore vs Bhagatram & Sons, Bangalore (2001)

   Use of LPG for manufacture of sweets will be treated as power for applicability of ESI Act.

8. Vellipalaym Co-operative Milk Supply Society vs Regional Director, Employees’ State Insurance Corporation, Madras, (2004).

   Storing milk in the cold storage collected by a cooperative society will be the ‘manufacturing process’ for coverage under the ESI Act.

9. Employees’ State Insurance Corporation vs Duncan Gleneagles Hospital Ltd., (2005)

   Pathological tests carried on by a laboratory attached to a hospital would not come within the purview of ‘manufacturing process’ to attract its coverage under ESI Act.

10. Employees’ State Insurance Corporation vs M/s. Jaiswal Rolling Mill (2008)

    Non-deposit of ESI contributions since Code Number was not allotted will not be justified.

11. Employees’ State Insurance Corporation, Bangalore vs Dharwad Cooperation Milk Producers Societies Union Ltd., Dharwad (2000)

    Primary liability to pay ESI’s contribution is of the principal employer and not the contractor.

12. Deputy Director, Employees State Insurance Corporation, Bangalore vs Proprietor, M/s. Summer Palace Restaurant, Ullal, Mangalore (2007)

    Security guards through Agency will be included for coverage under ESI Act.

13. Employees’ State Insurance Corporation, Kanpur vs M/s. Tops Food Products (2008)

    Two firms functioning separately having one sales tax number and electricity connections are not to be clubbed for coverage under ESI Act.

14. ESIC vs Ved Parkash Gupta (2008)

    When father allows his son to use the premises for different type of business, their establishments cannot be clubbed for coverage under ESI Act.

15. Managing Director, Orissa Textile Mills Ltd. vs Mandardlulr Naik (1996)

    Municipal corporation employees are not to be covered by the Act.

16. Kirloskar Consultants Ltd. vs Employees’ State Insurance Corporation (2001)

    An establishment providing consultancy services will be deemed as a ‘shop’ for coverage under the ESI Act.

17. Employees’ State Insurance Corporation vs K.N. Premanandan (2007)

    Employees’ Insurance Court is empowered to waive or reduce the damages for late remittance of ESI contributions.

TEST YOUR KNOWLEDGE

1. Explain about applicability about ESI Act.

   (Ref. Para-27.1)

2. Who is principal employer?

   (Ref. Para-27.2)

3. Which establishment can be considered as seasonal factory under ESI Act?

   (Ref. Para-27.2)

4. Define ‘employee’.

   (Ref. Para-27.2)

5. Define ‘wages’.

   (Ref. Para-27.2)

6. Who is an insurable employee as per ESI Act?

   (Ref. Para-27.3)

7. Who are required to make contribution under ESI Act?

   (Ref. Para-27.4)

8. Which benefits are available to an insured person under ESI Act?

   (Ref. Para-27.5)

9. Explain about maternity benefit available to a woman employee under ESI Act.

   (Ref. Para-27.5)

10. What is an ESI Court?

    (Ref. Para-27.6)

MULTIPLE-CHOICE QUESTIONS

1. The Employees State Insurance Act is a ________ legislation.
   1. corporate welfare
   2. social welfare
   3. insurance oriented
   4. None of the above
2. Employees′ State Insurance Act requires contribution by ________.
   1. employer
   2. employee
   3. Either (i) or (ii).
   4. Both (i) and (ii).
3. ESI Act is not applicable to
   1. small factories where less than 20 workers are employed
   2. seasonable factories
   3. factories located in village
   4. None of the above.
4. Who has power to make law on the subject matter of ‘employees′ insurance’?
   1. Central Government
   2. State Government
   3. Insurance department of government
   4. Both (i) and (ii).
5. What happens when the number of employees falls below 10? Can the factory or establishment escape from the application of the ESI Act, 1948?
   1. The establishment does not have to apply the provisions of ESI Act, 1948
   2. The factory does not have to apply the provisions of ESI Act, 1948
   3. The factory and establishment both do not have to apply the provisions of ESI Act, 1948
   4. No, the provision of the ESI Act, 1948 continues to apply.
6. Who is considered dependent of the deceased person under the ESI Act, 1948?
   1. A widow of the deceased person
   2. A legitimate or adopted son of the deceased person who has not attained the age of 25 years
   3. Unmarried legitimate or adopted daughter
   4. All of the above.
7. ________ means an employee who is not liable under this Act to pay the employee′s contribution.
   1. Active employee
   2. Exempted employee
   3. Passive employee
   4. Dormant employee
8. Definition of word ‘factory’ under ESI Act, does not include ________.
   1. Mine
   2. Railway running shed
   3. Both of the above.
   4. None of the above.
9. Principal employer under the ESI Act, 1948, includes ________.
   1. Owner of the factory or establishment
   2. Occupier of the factory or establishment
   3. Managing agent of the occupier
   4. All of the above.
10. Principal employer under the ESI Act, 1948, includes ________.
    1. Owner or occupier of the factory or establishment
    2. Legal representative of a deceased owner or occupier
    3. Named manager of the factory or establishment
    4. All of the above
11. The definition of ‘wages’ under the ESI Act, 1948, does not include ________.
    1. cash remuneration paid by the employer
    2. payment for a lockout or strike which is not illegal
    3. payment for additional remuneration not exceeding two months
    4. Contribution paid by the employer to any pension fund or provident fund
12. The ESI Act, 1948, provides certain benefits to the employees in case of ________.
    1. employment injury
    2. sickness
    3. maternity
    4. All the three.
13. Who has the primary liability/responsibility to deposit (pay) the contribution of employee as well as employer to the ESI Corporation?
    1. The principal employer
    2. The immediate employer
    3. The employee
    4. The permanent employee
14. Under the ESI Act, 1948, what is the employee′s contribution rate in every wage period?
    1. 1.75%
    2. 4.75%
    3. 7.15%
    4. 7.45%
15. Under the ESI Act, 1948, what is the employer′s contribution rate in every wage period?
    1. 1.75%
    2. 4.75%
    3. 7.15%
    4. 7.45%
16. Employees in receipt of a daily average wage up to ________ are exempted from payment of contribution under the ESI Act, 1948.
    1. ₹ 100/-
    2. ₹ 500/-
    3. ₹ 1,000/-
    4. ₹ 1,200/-
17. Under the ESI Act, 1948, sickness benefit is paid for a maximum period of up to ________ in a year.
    1. 45 days
    2. 91 days
    3. 60 days
    4. 78 days
18. Under the ESI Act, 1948, maternity benefit is payable for a period of ________.
    1. 15 days
    2. 3 months
    3. 6 months
    4. 2 years
19. Under the ESI Act, 1948, temporary disablement benefit at the rate of ________ of wage is payable, as long as the disability continues.
    1. 70%
    2. 80%
    3. 90%
    4. 100%
20. According to ESI Act, 1948, an amount of ________ is payable to the dependents or to the person who performs the last rites from day one of entering insurable employment.
    1. ₹ 5,000/-
    2. ₹ 10,000/-
    3. ₹ 15,000/-
    4. ₹ 25,000/-

ANSWER KEYS

1. ii
2. iv
3. ii
4. iv
5. iv
6. iv
7. ii
8. iii
9. iv
10. iv
11. iv
12. iv
13. i
14. i
15. ii
16. i
17. ii
18. ii
19. iii
20. ii