Employees Compensation: The Key Concepts

In one line

Chapter VII makes an employer pay compensation when a worker is hurt or killed at work, and five defined words decide who pays, who is paid, and how much.

In exam wording: the concepts governing Chapter VII of the Code on Social Security 2020 are employee in section 2(26), employer in section 2(27), dependant in section 2(24), employment injury in section 2(28), and the three kinds of disablement in sections 2(83), 2(55) and 2(56), namely temporary disablement, permanent partial disablement and permanent total disablement.

Why the law has this at all

The common law was hopeless for an injured worker. To recover anything he had to sue his employer and prove negligence, and three defences stood in his way: that he had voluntarily accepted the risk, that a fellow worker and not the employer had caused it, and that he had contributed to it himself. A man crushed by a machine went home with nothing.

The Workmen's Compensation Act 1923 replaced that with a no fault scheme, and Chapter VII of this Code carries it forward. The bargain has two sides and both matter.

The worker gives up the need to prove fault, and gives up the chance of full damages: the compensation is a formula, not what a court would award for the injury.

The employer gives up the three common law defences and accepts liability whether or not he was careless, in exchange for a predictable, capped liability he can insure against.

That bargain explains why section 74(7) forbids a worker who has sued in a civil court from claiming compensation. He may take the formula or take his chances; he may not take both.

Some words this chapter uses

No fault liability means liability that arises from the happening of an event rather than from anybody's negligence. Earning capacity is what a person is able to earn, as distinct from what he does earn. Relevant factor is the multiplier in the Sixth Schedule which converts a monthly wage into a lump sum by reference to the employee's age. Wholly dependant means relying entirely on another's earnings; in part dependent means relying on them partly. Infirm means physically or mentally weak, so as to be unable to support oneself.

Section 73: the duty to report

Section 73(1). Where any law requires notice of an accident on the employer's premises resulting in death or serious bodily injury to be given to an authority, the person required to give that notice shall within seven days send a report to the competent authority giving the circumstances. The proviso allows a State Government to specify that the report goes instead to the authority to whom the notice was due.