The Supreme Court yesterday ruled that an employer and his employee are liable to contribute to the Employees State Insurance Scheme even if the employee has been suspended.
The Court declared this while quashing the judgements of the Kerala and Karnataka high courts, which had taken a contrary view.
The division bench consisting of Justice S B Majmudar and Justice S Saghir Ahmad corrected the interpretation of the ESI Act on appeals filed by the ESI Corporation on several judgements of these two high courts.
A suspended employee is given a subsistence allowance till the domestic enquiry is over.
Under Section 38 of the ESI Act, both the employer and the employee are bound to contribute equally to the Corporation which insures the employee against disease and health hazards.
Even during the suspended period, the employee is entitled to the benefits under the ESI scheme.
A suspended employee is usually given subsistence allowance which is anywhere between half the salary upto the complete salary.
The present dispute was over the interpretation of the term wages.
The high courts took the view that subsistence allowance paid to the employees during the suspension period would not be covered by the definition of wages under the Act.
It was explained by the high courts that during the suspension period, what was paid was not remuneration for work done. The employee was not working during the period and therefore it was not wages, according to this interpretation.
Rejecting this view, the Supreme Court said that firstly, ESI was a social welfare measure for the employees and the provisions of the law must be interpreted liberally. The insurance fully covered employees who were under suspension. Moreover, during the suspension period, the employer-employee relationship is not cut off. It would end only when he is terminated. The subsistence allowance is also not to be refunded by the employee even if he is terminated. Merely because the total wages got reduced by half or more of his complete salary, it was not possible to say that the employer and the employee need not contribute to the fund. The allowance was part of the wages, the Court said.
