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| Q.1 We are a hotel, preparing and catering food items for sale. Please advise us whether we are covered by Factories Act, since we prepare snacks and after food items, using power and engaging more than 20 workers? |
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| A.1 Section 2(m) of the Factories Act which defines a ‘factory’ specifically excludes from the definition, a railway shed, hotel, restaurant or eating place, and hence hotel is not factory even though it manufactures food items for sale and consumption with the aid of power and even though engaging 20 or more workers. Please refer to welcome group winders Hanor, Banglore v. State of Karnataka and Another., 2004 II LLJ 496 (Karn.HC) |
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| Q.2 We are a factory, manufacturing engineering products. One of our employees intends to exercise an option not to avail leave of 30 days but to encash it. Please advise us whether it is permissible. |
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| A.2 Since you are a factory, you are governed by the Factories Act. Section 79 of the Factories Act only provides for computation of privilege leave but not encashment of it. Hence the employee is not entitled to encashment of privilege leave. In this connection, please refer to the case of VVF Limited v. Sarva Sharamik Sangh & Others., 2003 I LLN 735 (Bom.HC) |
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| Q.3 We are running a pathological laboratory conducting various pathological tests using blood samples with the aid of power and engaging more than 10 workers including lab technicians etc. Please advise us whether we are treated as factory under the Factories Act? |
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| A.3 The process involved in pathological tests is only analysis of blood samples for diagnostic purpose but does not involve tapping of blood, or processing the same for transfusion or sale or for any other purpose nor is it used for making, altering, repairing or finishing etc any article like x-ray plates or sonographic records within meaning of manufacturing process under section 2(k) of the Act. Therefore a pathological laboratory is not a factory under Factories Act. Please refer to the Employees of State Insurance Corporation and others v. Duncan Gleneagles Hospitals Ltd and Another, 2005 LIC 2118 (Cal.HC) |
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| Q.4 We are a textile Mill and we have also a shop within the factory premises for selling our fabrics. Please advise us whether the employees of the shop which is registered under shops and Establishment Act can claim overtime wages under Factories Act, since they are not workers of the factory. |
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| A.4 Though the employees working in the shop are neither working in any manufacturing process nor performing any work, incidental or corrected with the manufacturing process, they are nevertheless, eligible for overtime under section 70 of the Shops Act. The proviso to section 70 of Bombay Shops Act extends the application of the Factories Act to the employees of shop or commercial establishment located in the factory. Please refer to Shinde A.G v. Bombay Telephones (by Manager) 1968 II LLJ 74 (Bom.DB) and Hira B.P,. Works Manager Central Railway Parel, Bombay v. Pradhan C.M.., 1959 II LLJ 397 (S.C.) |
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| Q.5 We are an Engineering Company engaged in erecting electrical installations and providing service and maintenance of electric installations of factories and industrial establishments, for which purpose, we have engaged technical staff. These employees do the maintenance work on the premises of the client companies under the supervision of our engineers and are paid wages by us. We have received a demand from them for increasing the wages or atleast minimum wages as they contended that their wages are low. In this case, please advise us whether we can reject their demand. If we are liable to pay wages as per any law, please advise about the Act under which we are liable. |
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| A.5 Since you are paying wages and the employees perform their work under the supervision of your engineers, it goes with out saying that there is employer-employee relationship between you both and you are the employer. Once it is established that you are their employer, you being an engineering industry, are covered by the part 1 of the schedule of the Minimum Wages act. Once you are covered by the Minimum Wages Act, you are liable to pay at least minimum wages applicable to the Engineering industry as per the Act. Please refer to Indian Labour Organisation v. D.H. Deshmukh, Presiding Officer, 6th Labour Court., 1996 II CLR 630 (Bom.HC) |
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| Q.6 We are a cement factory and entrusted the work of loading, unloading and handling of cement bags to an Independent contractor who is registered under the contract Labour Act. The contractor has employed workers to do this job and some of these workmen have retired and were not paid gratuity on their retirement. They make an application before the controlling Authority under the Gratuity Act impleading us as well as the contractor. Please advise us whether we can dispute our liability on the ground that there is no employer-employee relationship between us and the contractor’s workmen. |
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| A.6 Section 21(4) of the contact Labour Act lays down that incase the contractor fails to make payment of wages within the prescribed period or makes short payment to the contract labour, the principal employer is liable to make payment of wages in full or the unpaid balance. Now the Question is whether gratuity which was not paid to the contract workmen by the contractor will fall within the definition of wages. Section 2(h) of the Act ‘defines’ wages as having the same meaning as under Payment of Wages Act. The Payment of Wages Act under section 2(IV) defines wages as to include, among others, any sum payable under any law, contract or instrument. Since gratuity is payable under the Gratuity Act, it can very well fall within the definition of wages, having regard to the plain language of the Clause (VI) of the Wages Act and. hence the principal employer becomes liable for Payment of Gratuity to the contractor’s workers in the event of his default but can recover the same from the contractor. Your case is squarely covered by M/s. Madras Fertilizers Ltd. v. Controlling Authority under Payment of Gartuity Act., 2003 I LLJ 854 (Mad.HC) |
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| Q.7 We are a manufacturing company. Some of our managers who own cars engaged drivers in their individual capacity and pay them salary by themselves. The Drivers’ normal duty is to drive the officers from home to office and back as well as their family on personal trips. They occasionally drive the officers, when they are required to visit different places while on duty. Please advise us whether they can be treated as employees of the company and if so whether PF Contribution is to be payable by the company for them. |
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| A.7 We under stand that the drivers are appointed by your managers in their personal capacity and their salary is born by them. The drivers not only drive the vehicle for dropping the managers at office as well as at home but also their families on personal trips. Merely because, the drivers drive the vehicles on official duty of their managers does not render than to be employees of the company because, the basic test of employer-employee relationship namely whether the drivers are working in or in connection with the work of the establishment and the control and supervision of the company is not satisfied. Hence no PF Contribution is payable. Please refer to the case of Ratanalal v. RPFC 1977 LIC 1765 (Del.HC), Jyoti Home Industries v. RPFC 1994 I LLJ 49 |
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| Q.8 We are a financial consultancy service provider employing 19 employees and one retainer who is a legal consultant on a monthly remuneration to advise the firm on legal aspects of the transactions. Since the Provident Fund Act is applicable only to establishments employing 20 or more employees, please advise us whether the retainer is also to be counted as an employee and we are required to deduct EPF Contributions from the wages paid to employees. |
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| A.8 From the details furnished by you, you seem to be of the view that the retainer employed by you cannot be treated as an employee so that the employee strength remains at 19. The definition of ‘employee’ under section 2(f) of the PF Act covers any person employed for wages to do any work in or in connection with the work of the establishment. When the retainer was employed for remuneration and the work assigned to him is very much connected with the work of the establishment, the retainer fulfils all the requirement of an employee under the Act and hence, your establishment is deemed to have employed 20 employees and thus covered by the Act. Please refer to the case of Gain Financial Consultants (Pvt.) Ltd. Bombay v. Regional Provident Fund Commissioner, Bombay & Ors., 2001 II LLJ 1050 (Bom.HC) |
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| Q.9 We are a manufactures of cement. We have suspended an employee for the misconduct of unauthorisedly allowing cement bags to be transported out of the factory. We are paying him subsistence allowance. He has made an application that P.F. Contribution shall be deducted from the subsistence allowance payable to him please advise us whether subsistence allowance is a wage, making it liable for P.F. deduction. |
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| A.9 Though it is commonly held that subsistence allowance paid to an employee during suspension is not wage since the said allowance is paid to him for his subsistence and not for any work, done by him, the decision of the Apex Court in ESIC v. Popular Automobiles, 1998 I LLJ 621, 1997 II CLR 1003; has examined the issue from the perspective whether subsistence allowance is a wage. It held that suspension, pending enquiry does not end employer employee relationship and hence suspended employee is to be treated on par with regular employees and therefore subsistence allowance paid to him forms part of the wages and ranks for ESIC deduction. Since Employees Provident Fund Act is also a beneficial legislation as ESI Act, the same principle can be applied to EPF contributions also. Therefore, it would be also appropriate to effect deductions of PF contributions from the subsistence allowance payable to a suspended employee. |
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| Q.10 We are an engineering industry. We have dismissed an employee. Since an industrial dispute is pending before the Tribunal, we have made an application u/s. 33(2)(b) of the Industrial Dispute Act before the Tribunal concerned for approval while simultaneously paying one month wages to him as required by Section 33(2)(b) of the Industrial Dispute Act. Please advise us whether we have to pay PF Contribution on such wages. |
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| A.10 A. The one month wages payable to a workman who is dismissed from service are to be paid to him as per the requirement of the section 33(2)(b) of the Industrial Disputes Act but not as per any terms of contract of employment. Further, the wages are required to be paid to him for the period he will not be on duty or in service. Therefore, such payments cannot be construed to be part of wages entailing deduction of PF Contribution. Please refer to the case Denesh Khare v. Industrial Tribunal, 1982 LIC 517 : 1982 II LLJ 17 |
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