Liability of Employer to Pay Compensation under the Employees’ Compensation Act, 1923
Introduction:
The Employees’ Compensation Act, 1923 (formerly the Workmen's Compensation Act, 1923), is a social welfare legislation aimed at providing financial protection to workers and their dependents in case of accidents arising out of and in the course of employment, resulting in injury or death.
1. Scope and Applicability:
- Objective: To provide compensation to employees/workmen for personal injury, disablement, or death due to accidents during employment.
- Applicability: Applies to certain classes of employers and employees as defined under the Act, particularly in hazardous employments.
2. Employer’s Liability – Section 3:
The cornerstone provision of the Act is Section 3, which deals with the liability of the employer to pay compensation.
Conditions for Liability:
The employer is liable to pay compensation if:
- Personal injury is caused by accident
- The accident arises out of and in the course of employment
- The injury results in either:
- Death
- Permanent total disablement
- Permanent partial disablement
- Temporary disablement (total or partial)
3. Exceptions to Employer’s Liability (Provisos to Section 3):
No compensation is payable if:
- Injury does not result in disablement for more than 3 days
- Injury is caused by employee under the influence of drugs or alcohol
- Injury is due to willful disobedience of safety rules or removal of safety guard (Section 3(1)(b))
However, even in such cases, if the injury results in death or serious permanent disablement, the employer may still be liable (as per judicial interpretation).
4. Concept of "Accident Arising out of and in the Course of Employment":
Arising Out of Employment:
There must be a causal connection between the employment and the injury.
In the Course of Employment:
The injury must occur during the working hours and at the place of work or while engaged in a duty related to employment.
Case Law:
Mackinnon Mackenzie & Co. Pvt. Ltd. v. Ibrahim Mahmmed Issak, AIR 1970 SC 1906
The Supreme Court held that there must be a causal connection between the employment and the accidental injury. Mere presence at the place of employment is not enough; the injury must arise as a result of employment.
5. Doctrine of Added Peril:
If the workman voluntarily does something outside the scope of their duty and is injured, the employer may not be liable.
Case Law: Saurashtra Salt Manufacturing Co. v. Bai Valu Raja, AIR 1958 SC 881
The Court held that the employer was not liable where the employee took an unreasonable risk that led to the accident.
6. Compensation in Case of Occupational Diseases – Section 3(2):
- The employer is liable if the employee contracts a disease specified in Schedule III, provided the disease is peculiar to that employment.
- This is treated as if injury was caused by an accident arising out of employment.
7. Employer's Liability in Case of Contractors – Section 12:
- If a principal employer engages a contractor and a worker employed by the contractor is injured, the principal employer is still liable to pay compensation as if the worker was directly employed.
Case Law: General Manager, G.I.P. Railway v. Shankar, AIR 1937 Nag 215
The Court held the principal employer liable even though the injured worker was employed by a contractor.
8. Compensation in Case of Death or Permanent Disablement – Section 4:
- Death: 50% of monthly wages × relevant factor (as per age) or ₹1,20,000 (whichever is more)
- Permanent total disablement: 60% of monthly wages × relevant factor or ₹1,40,000 (whichever is more)
9. Employer Not to Contract Out Liability – Section 17:
Any contract that tries to remove or reduce the employer's liability under the Act is null and void.
10. Penalty for Default – Section 4A:
- If the employer fails to pay compensation within one month, the Commissioner may:
- Order payment of interest @ 12% p.a.
- Impose a penalty up to 50% of the amount due
Conclusion:
The Employees’ Compensation Act, 1923 ensures protection to employees and their families against unforeseen employment-related injuries. The liability of the employer is statutory and arises automatically on fulfillment of the conditions under Section 3. The Act strikes a balance between the rights of employees and the obligations of employers, ensuring prompt and adequate compensation.
Employer’s Liability
| Condition | Employer Liable? |
|---|---|
| Injury in course of employment | Yes |
| Occupational disease in Schedule III | Yes |
| Injury due to employee’s negligence | No (with exceptions) |
| Death due to accident during duty | Yes |
| Work with added peril (outside duty) | No |
Important Case Laws:
- Mackinnon Mackenzie & Co. v. Ibrahim Mahmmed Issak, AIR 1970 SC 1906
- Saurashtra Salt Manufacturing Co. v. Bai Valu Raja, AIR 1958 SC 881
- General Manager, G.I.P. Railway v. Shankar, AIR 1937 Nag 215
🎯 Mnemonic: “CA-DOPPEL”
Think: The employer's duty is to "CA-DOPPEL" the burden of injury!
| Letter | Stands For | Explanation |
|---|---|---|
| C | Course of Employment | Injury must occur during employment |
| A | Arising out of Employment | There must be a causal link |
| D | Disablement or Death | Employer liable for both |
| O | Occupational Disease (Sec 3(2)) | Liability even if no accident, if listed in Schedule III |
| P | Principal Employer (Sec 12) | Liable for contractor’s workers too |
| P | Provisions (Sec 3 exceptions) | No liability if injury <3 days, under intoxication, etc. |
| E | Extent of Compensation (Sec 4) | Depends on wages and nature of injury |
| L | Late Payment Penalty (Sec 4A) | 12% interest + up to 50% penalty for delay |
🧠 Memory Tip:
Imagine the employer carrying a "CA-DOPPEL" bag, with all his duties stuffed inside — any mistake, and the bag bursts (i.e., liability explodes).
🔖 Blog by Chandan Sha | For more legal insights, stay tuned to Study on Law Hills.
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