Workmen Compensation Insurance - something at length

[something on Workmen Compensation Insurance circulated on 2^nd Sept 2009 to my group and posted now]

Dear (s)

There was some discussion on whether WC Act distinguishes between Skilled & Unskilled labourers which prompted my detailing this to my Team.  Might be of some use to you as well.  If you have some additional information or feel that something is conceptually incorrect or not properly portrayed, please do provide your feedback point-wise;  – this will help in understanding things in a better perspective.

1)   The need for Workmen Compensation : 

Any workplace can be beset with misfortunes such as accidents occurring to the employees whilst at work. Duty is cast on the  Employer's liability for compensation arising out of  personal injury  / death  caused to a workman by accident arising out of and in the course of his employment.   The Workmen's Compensation Act, 1923 provides for the payment of compensation by the employer caused to the employees  by accidents arising out of and in the course of their employment.

Prior to the statutory establishment of workers' compensation, the only recourse available to employees who were injured on the job  was to sue through civil or tort law. In the United Kingdom, the legal view of employment as a master-servant relationship required employees to prove employer malice or negligence, a high burden for employees to meet. Although employers' liability was unlimited, courts usually ruled in favor of employers, paying little attention to the full losses experienced by workers, including medical costs, lost wages, and loss of future earning capacity.

As a preface, the scheme of WC Act is not to compensate the workmen in lieu of wages.  The compensation is for the injuries / death arising out of and in the course of employment. 

2)   Who is a workman ?

There are various labour laws having their own definition.   Under Industrial Dispute Act  'workman' means any person employed (including an apprentice) in any industry to do any skilled or unskilled, manual or clerical work for hire or reward and includes, for the purposes of any proceeding under this Act in relation to an industrial dispute, a workman discharged during that dispute, but does not include any person employed in the naval, military, or air service of the Crown."

The one relevant to the topic – WC Act  defines "workman" as  any person (other than a person whose employment is of a casual nature and who is employed otherwise than for the purposes of the employer's trade or business) .  Thus it would mean that the person is not employed as a casual workman and that his employment is in connection with the employer’s trade and business.    The Act lists out 48 categories of employees who would fall within the purview of workmen as specified.  By very definition those employed in the clerical capacity and above would not fall within the purview.

3)   Skilled Vs. Unskilled 

In the eyes of WC enactment – for the purpose of computation or adjudication there is no distinction between skilled Vs. unskilled labourers. 

Again, the  Industrial Dispute Act defines   'workman' as any person employed (including an apprentice) in any industry to do any skilled or unskilled, manual or clerical work for hire or reward ……….

There is another piece of legislation ‘The  Minimum Wages Act’ which  prescribes  minimum wages for all employees in all establishments or working at home in certain employments specified in the schedule of the Act.  This statute classifies workers  as unskilled, semi-skilled, skilled; and highly skilled.

4)   About the  Policy of Insurance

Now the obvious Question is what is our WC Policy. Please do understand that WC Act and WC Policy can be quite different and policy can be more encompassing and perhaps can have its own conditions as it is a contract between the employer (who becomes the policy holder) and the Insurer and is separable between the one between employer and employee.     The WC tariff applies to all policies issued to Employers to provide compensation to their Employees in respect of accidents and diseases of occupation,  whether  or  not   such   employees    come  within   the   scope   of the Workmen’s Compensation Act, 1923, . 

There are two tables  and the higher version provides coverage against liability to all employees under WC Act, Fatal Accidents Act 1855 and Common Law.  The other one provides restricted cover against the WC Act 1923 only.

Thus one should understand that for those employees who would not fall within the purview of the Act, the coverage would be to the limit of liabilities / amount of compensation as envisaged under the Law (s)  though the Employer may not have the obligation to insure them.  The WC Policy also provides for some specified medical expenses based on the premium paid.   The rating parameters would include besides salary, the nature of the industry of employment, their work, the height , the ground etc.,

5)   Comparitive Coverage: 

To those not so well versed, there would be some  confusion on the coverage as offered in WC Vs. other insurances such as GPA, Mediclaim etc.,  This is not comparable with GPA / Mediclaim or any other policy.  Basically, they are driven by the SI and the factors like Age, earning capacity etc., are not at all relevant factors.  In MACT, the age / salary earned / dependants would be determinants.  Here in WC the determinants are the age, % of disability and to a limited extent  the salary but not the future earnings.

WC claim of a workman will statutorily have to be adjudicated by the WC Commissioner and there cannot be any nomination facility in a WC Policy. 

6)   Some Definitions : 

o            Workmen  means any person (other than a person whose employment is of a causal nature and who is employed otherwise than for the purposes of the employer’s trade or business)  -  here the  term casual would connote  employment necessitated by chance circumstance. 

o            Infact in a recent case, the Apex court ruled that a casual worker undertaking repair works in a residential building is not entitled to compensation under WC Act.

o            Fatal Accidents Act 1855 is an enactment to provide compensation to families for loss occasioned by the death of a person caused by actionable wrong. 

o            Common Law is no enactment but  refers to law developed by judges through decisions of courts and similar tribunals (called case law), rather than through legislative statutes or executive action, and to corresponding legal systems that rely on precedential case law. The body of precedent is called "common law" and it binds future decisions.

o             Fatal Accidents Act is a statute enacted in 1855 which provides for suit for compensation to the family of a person for loss occasioned to it by his death by actionable wrong. 

o            The incapacity does not mean that the workman cannot do any work but only means incapacity to do the work as is reasonably capable of being sold in the market.

o            WC coverage is not applicable to employees covered under ESI Act as the ESI Act Sec 53 bars receiving or recovery of compensation or damages under any other law.

o             The  Policy of Insurance would only cover the workmen in the direct employ of the Insured and would exclude Contractors / Subcontractors and the persons employed by them, unless specified otherwise.

7)   Latest developments

Lastly before the dust settles the  Union Cabinet recently  (on 1^st Sept 2009) gave its approval for introducing the Workmen’s Compensation (Amendment) Bill, 2008 in Parliament. The Amendment Bill with give the following benefits : 

i) to give effect to the recommendations of the Second Commission on Labour to substitute the term ‘employee’ for the term ‘workmen’.
ii) To change the name of the Act to make it gender neutral;
iii) To remove the restrictive clauses in Schedule II to make the Act applicable to all classes of employees;
iv) To enable the Central Government to revise the wage ceiling and enhancement of funeral expenses from time to time.

As usual look forward to your views !!

With regards

S Sampathkumar