This article is written by Shefali Chitkara. This article gives a detailed analysis of the “Tamil Nadu Labour Welfare Act, 1972” , its essential features, scope, and purpose, along with the case laws on the same. It also seeks to highlight the important provisions covered in the Act and the penalties given for obstruction in the compliance of the provisions.
Table of Contents
Introduction
Since the very beginning, labourers have been subjected to mental and physical harm or harassment, along with long working hours and low salaries, which could not even support their families. India, being a welfare state, is duty bound to promote the welfare of its people and labour. Being a larger part of the general public, it has a right to be protected against such harassment and deserves social security. The formation of the International Labour Organisation in 1919 has been one of the noteworthy milestones to promote welfare of the labour. There are numerous laws on the protection of labour, like Factories Act, 1948, the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, the Workmen’s Compensation Act, 1923 and many more. Similarly, we specifically have the Tamil Nadu Labour Welfare Fund Act, 1972 which was enacted by the Legislature of the State of Tamil Nadu and applicable in that state only. As labour is the subject of the concurrent list, the state government is also empowered to make legislation on the same. The article mentions the rules made in this respect in 1973 under Section 41(1) of the Act. Further, it tries to clarify the scope and purpose of this Act by highlighting the need for creating the labour welfare fund and the benefits of the same. The article seeks to explain the powers and functions of the board, which is constituted to administer the fund.
Scope and purpose of the Act
The Act is applicable and extendable to the whole of the state of Tamil Nadu. The main objective behind such legislation has always been to encourage and provide social security to labourers so as to maintain themselves and their families. The benefits are dual in nature, i.e., beneficial for employees as well as employers by increasing profitability and viability. The Act has provided for the constitution of a fund in order to promote the welfare of labour in the State of Tamil Nadu. The Act has aimed to determine the amount of contributions in the fund to be made by the employer and employee through boards established for this purpose. Such contributions are used to provide financial aid to the labourers in order to raise their standard of living and provide social security. The funds can be utilised by the labourers for the education of children, medical facilities, transportation, loans, food requirements, etc.
Definitions to look out for
There are various definitions mentioned under Section 2 of the Act. The definitions have been provided for board, employee, employer, establishment, fund, government, inspector, secretary, unpaid accumulation, and wages. The most important and exhaustive definitions have been discussed below:
Employee
An employee has been defined under Section 2(b) of the Act. An employee is a person who is employed for hire or reward to do any skilled, unskilled, manual, supervisory, clerical, or technical work in any establishment as defined below. Further, it clarifies that a person should have worked for a period of thirty days during the preceding twelve months. It also includes those who are declared to be employees by the government by notification for the purposes of this Act. The terms of employment could be expressed or implied.
The definition expressly mentions those who are not included under this definition of an employee. Any person employed in a managerial capacity or supervisory capacity drawing wages exceeding fifteen thousand per men-sem or exercises functions of a managerial nature, or someone who is employed as an apprentice or on a part-time basis.
Employer
According to Section 2(c) of the Act, any person who is having the ultimate control over the affairs of the establishment or if such affairs are entrusted to any person then such other person is known as an employer whether called a manager, managing director, or superintendent.
Establishment
An establishment, as per Section 2(d) of the Act, means any of the following:
- Any factory or a place deemed to be a factory as mentioned in Section 2(m) and Section 85(2) of the Factories Act, 1948,
- Any motor transport undertaking as defined under Section 2(g) of the Motor Transport Workers Act, 1961,
- Plantation, as defined under Section 2(f) of the Plantations Labour Act, 1951,
- A catering establishment, as defined under Section 2(1) of the Tamil Nadu Catering Establishments Act, 1958 which has employed or have five or more than five employees on any working day during the preceding twelve months,
- A society registered or deemed to be registered under the Tamil Nadu Societies Registration Act, 1975 and charitable or other trust whether registered or not which has employed or have five or more than five employees on any working day during the preceding twelve months. But it does not include an establishment of the Central or State Government which is not a factory,
- Lastly, any other establishment which the government may declare through the notification as such for this Act.
In a case where an establishment has different branches at different places or the same place, such branches shall be treated as parts of the same establishment only.
Unpaid accumulation
Unpaid accumulation is defined under Section 2(i) of the Act. It means all the payments that are payable to an employee other than gratuity and they are not paid to him within a period of three years from the date when the payments became due. It includes the gratuity, which is accrued after the commencement of this Act and not paid within three years from the date of accrual. However, the definition also states that the amount of contribution made by the employer to a provident fund is not included in unpaid accumulation.
Wages
Wages, as defined under Section 2(j) of the Act, means all remuneration which is capable of being expressed in terms of money and payable to an employee if the terms of the contract of employment are fulfilled. However, wages do not include the following:
- Gratuity, which is payable at the time of termination of employment,
- Value of house accommodation or of supply of light, water, medical or any other amenity which is excluded from the computation of wages by the government’s special or general order,
- Contribution made by the employer to any pension scheme, provident fund, any social insurance scheme,
- Travelling allowance paid or travelling concession given,
- Amount paid to defray special expenses which entailed on an employee by the nature of his employment.
Labour Welfare Fund
The Labour Welfare Fund can be defined as a fund created by the government for statutory contributions in order to improve the economic conditions of employees in the unorganised sector. According to Section 3 of the Act, there shall be a labour welfare fund which will be constituted by the government. The board will be responsible for crediting all the unpaid accumulations to the fund, and it will maintain a separate account until claims have been decided as per Section 13. The fund will be credited with the following items:
- Unpaid accumulations paid to the board under Section 13(2) of the Act,
- All fines and also the amount realised under Standing Order 20 of the Model Standing Orders issued under the Tamil Nadu Industrial Employment Rules, 1947, from the employees,
- Deductions made under proviso of Section 9(2) of the Payment of Wages Act, 1936 and proviso of Section 36(2) of the Tamil Nadu Shops and Establishments Act, 1947,
- Contributions made by the employers and employees,
- Interest as a penalty under Section 14,
- Voluntary donations made by any party,
- Amount if raised by the board from any source to augment the resources of the board,
- Funds transferred under Section 17(5) of the Act,
- Amount borrowed under Section 18,
- The unclaimed amount that is credited to the government as per the rules under Payment of Wages Act, 1936, and the Minimum Wages Act, 1948,
- Grants or advances by the government,
- Fines realised from employers by courts for violation of labour laws, excluding the deductions made by the court for administrative expenses,
All the funds as specified above have to be paid to such agencies, and accounts have to be maintained and audited in the manner as has been prescribed.
Contribution by employee and employer
In order to fulfil the aim of establishment of the fund, contributions have to be made by both the employer and the employees. Section 15 of the Act talks about the contribution to the fund by employer, employee and the government as well. The amount keeps on updating from time to time and it can be interpreted that the amount expected to be paid by the employer is always more than that by the employee. The employee contribution is fixed at ₹20 per year, the employer’s contribution is ₹40 per year and the government has to contribute ₹20 per year in respect of each such employee as per the notification dated 02.12.2022.
Benefits for the employee
With the establishment of a labour welfare fund, the employees are expected to become more committed to their work and feel more secure with their jobs. A few of the benefits or implications for the employees are:
- The increased contributions in the fund would be able to provide better medical facilities for such people and their dependents.
- It will help in enhancing social security, which will promote the growth of workers and their performance.
- It will improve the working conditions of the workers in terms of transportation, training, and recreational activities.
- It will give them special privileges and concessions for availing house loans, etc.
- The contribution in the fund is used only for the employees and their dependents in activities like training, community necessities, recreation purposes, nutritious food for children of employees, part-time employment for housewives, etc.
Benefits for the employer
With the employees getting benefits from such a fund, the employers also get additional benefits since the fund acts as a morale booster for the employees. This will automatically increase efficiency and production and will be beneficial for the employer.
Apart from that, it will lead to refinement in the relationship between employer and employee and better understanding between the two.
Establishment and constitution of the board
The State Government of Tamil Nadu shall establish a board by the name of the Tamil Nadu Labour Welfare Board under Section 4 of the Act. It is a body corporate, has a perpetual succession and common seal, and has the power to sue and be sued.
Further, Section 5 provides for the constitution of the board. It will consist of a chairman and various other members to be appointed by the government. A chairman will be the minister-in-charge of labour, and in addition, there will be a prescribed equal number of representatives of employees and employers, members of state legislature, and such other prescribed numbers of officials and non-officials.
Members: Their appointment and disqualification
Section 6 lays down that the appointment of chairman and the members, as mentioned above, will be notified in the Tamil Nadu Government Gazette. The members of the board other than the official members will be appointed for a period of three years and can be re-appointed as well. However, they are required to continue as members until the successors are appointed. The proviso to Section 7 also clarifies that a member of state legislature will cease to be a member of the board when he ceases to be a member of the state Legislature.
Further, Sections 8 and 9 of the Act talks about disqualifications, removal by the government and resignation by members. A person will be disqualified from being a member of the board if any of the following happens:
- He is or becomes an officer or servant of the board or
- He is or becomes an undischarged insolvent or
- He is or becomes of an unsound mind
- Convicted by a criminal court for an offence involving moral turpitude, unless the conviction is set aside or
- He is or becomes in arrears of any sum due to the board.
Further, Section 8(2) states that the government may also remove any member from the office if he has become subject to any disqualifications as mentioned above or gets absent without the board’s consent from three consecutive board’s meetings.
Furthermore, Section 9 talks about the process through which a member can resign from office. Any representative, any member of the State Legislature, or any non-official member appointed as a member of the board may resign by giving notice in writing to the government. His position will be deemed to be vacated when such a resignation is accepted by the government. Any casual vacancy for a member has to be filled as soon as possible, and such an appointed person will hold office for the remaining period.
Functions of the board
The Board, which is constituted under this Act, has to perform the major function of administering the labour welfare fund that is constituted under this Act. Apart from this, it has to perform various other functions as well, as has been mentioned below. The same is given under Section 12 of the Act.
As per Section 13, the board also has to exhibit the notice inviting claims by employees, their heirs, or any legal representatives for any payment that is due to them on the notice board of the establishment in which it was earned and in the Tamil Nadu Government Gazette after receiving any unpaid accumulation from the employer. The fund amount that has been received has to be deposited in the Reserve Bank of India or State Bank of India or any corresponding new bank and those accounts have to be operated by the board as per Section 19.
Further, as per Section 18, the board can borrow any amount as required for the purposes under this Act based on the previous sanction by the government and subject to such conditions.
Any act which is done by the board under this Act will not be invalidated merely because of any vacancy or defect in the constitution of the board, in the appointment of any member of the board, in any act or proceeding that is not affecting the merits of the case. The same is given under Section 11 of the Act.
Power of government under the Act
Section 2(f) of the Act states that the word “government” in the Act means the State Government of Tamil Nadu. There are various provisions mentioning the powers and duties of the government under this Act. Few of these are:
- Firstly, the government was responsible for constituting the Labour Welfare Fund, which was the sole purpose of this Act.
- The government, along with the employer and employees is also responsible for contributing to the fund.
- The government has to appoint the members of the board and has the power to remove any member as well.
- As per Section 16, the government may make grants and advance loans to the board when deemed necessary under this Act.
- The application of the fund by the board has to be specified by the government in order to promote the welfare of the workers.
- The government has to sanction the borrowing of the money by the board.
- As per Section 19, the government has to place the accounts of the board and the audit report before the State Legislature and cause the accounts to be published and copies to be available on sale at reasonable prices.
- As per Section 20, the government has the power to give directions to the board in connection with the expenditure from the fund.
- The government also has to approve the appointment of the Secretary who will be the Chief Executive Officer of the Board.
- The government can also appoint inspectors and define the local limits within which they can exercise their powers according to Section 22.
- As per Section 25, the government has to credit the leave salary and pensionary contribution in the account of the board.
- The government may also call for records of the board for inspection and can also supervise the working of the board according to Section 27.
- As per Section 36, the government may also supersede the board for a period not exceeding six months if it is of the opinion that the board is unable to perform, has made default in performing the duties, or has exceeded or abused its powers.
- The government may also extend the period of this supersession or reconstitute the board.
- As per Section 37, the government may even delegate its powers, except to make rules under Section 41.
- The government may exempt any establishment from all or any of the provisions of this Act by notification on this behalf.
- The government has the power to make rules under Section 41 of the Act and as a result of which we have the Tamil Nadu Labour Welfare Fund Rules, 1973.
Offences and Penalties
Section 29 talks about the penalty for obstructing the inspection that is being done by the inspector or failure to produce the documents, records or register. The penalty for the first such offence is imprisonment, which may extend to three months, or a fine, which may extend to five hundred rupees or both and in case of such subsequent offence, with an imprisonment which may extend to six months or fine which may extend to one thousand rupees or both. If the offender is sentenced to fine only, then it should not be less than fifty rupees. The court should take cognizance of such offences under this Act only after the sanction in writing by the Secretary. Cognizance has to be taken by the court only when the complaint is made within six months from the date on which such offence has been committed, as per Section 32.
Further, a penalty has also been prescribed for non-compliance of the directions of the board under Section 34. If any person wilfully fails to produce a document or furnish any information as required by the board, he will be punishable in case of the first offence with imprisonment, which may extend to three months or a fine, which may extend to five hundred rupees or both, and in the case of the subsequent offence with imprisonment, which may extend to six months or a fine, which may extend to one thousand rupees or both. Furthermore, as per Section 39, no legal proceedings will lie against anyone if an act is done in good faith.
Overview of the Tamil Nadu Labour Welfare Fund Rules, 1973
The Tamil Nadu Labour Welfare Fund Rules, 1973 deals with the procedure that has to be followed or enlists the guidelines that must be taken into account while applying the Act. It deals with the rules regarding:
- Payments made by employers for unpaid accumulations and other fines,
- Mode of such payments,
- Rate of contributions made by the employer and employee and the government,
- Quorum and meetings of the board,
- Powers of the Secretary,
- Budget of the board,
- Audit of accounts and publication of the annual report,
- Remission of penalty,
- Methods of voting,
- Duties and functions of the committee,
- Powers of the inspectors,
- Maintenance of registers by the employers
Relevant judgements
General Manager, India Cements v. Subramanian N.S., 1997
Facts of the case
In this case, the petitioner was a public utility service and the respondents were members of the worker’s union. They issued a strike notice to the petitioner. Conciliation proceedings were initiated, wherein it was contended that the union had no representative capacity. The petitioners also issued a notice and pointed out that the strike was illegal and unjustified, and they proposed to deduct eight days of wages. To this end, the workmen cleared that the absence was not for an unreasonable cause. The appellate authority confirmed the order of authority and held that the strike was illegal. In response to this, a revision petition has been filed before the Hon’ble Madras High Court.
Issue raised
Was the strike legal, and whether the deducted amount, which is credited by the management in the fund, is enough to say that there is no unjust enrichment on the part of management.
Judgment
The court ordered that the workmen should be reimbursed with the seven days wage cut and directed the management to refund the same to them. The management is now at liberty to withdraw the amount from the fund and refund the same to the workmen within two months.
The Railway Employees v. The Joint Commissioner of Labour, 2010
Facts of the case
In this case, a writ petition was filed for the writ of certiorari in which a communication sent by the Labour Department was challenged by the workers for stalling the application of a certified standing order to the workers. It was contended that since the petitioner society was a multi-state co-operative society registered under the Multi-State Cooperative Societies Act, 1984, provisions of the Standing Orders Act will not apply.
Issue raised
Whether the communication was legally valid and the petitioners society was obliged to have certified the standing orders for their establishment?
Judgement
The court held that the contentions raised by the petitioner society cannot be accepted and, hence, dismissed the writ petition on non-joinder of parties as well as on merits. It was dismissed with a cost of ₹5000. Since the petitioners were not present before the court, the court directed them to credit the said amount to the Tamil Nadu Labour Welfare Fund created under the Tamil Nadu Labour Welfare Fund Act, 1972, within a period of four weeks.
Conclusion
The Act, being welfare legislation, has helped streamline the labour laws in India. It has proved to be an effective legislation by providing financial support for the labourers and their dependents and it has efficiently worked for the betterment and welfare of the labourers. There is a need in every state to come forward and constitute such funds and boards by drafting such legislation. To make it more meaningful, committees should be set up in all the states to look after the workforce and implement these acts to advance help and security for them.
Frequently Asked Questions (FAQs)
Where is this Act applicable?
This Act is applicable only in the State of Tamil Nadu, as per Section 1(2) of the Act.
What is the purpose of creation of this fund?
The fund was created in order to promote the welfare of the labour force and assure social security for them.
Who all can contribute to this fund?
As per Section 15 of the Act, contributions have to be made by the employee, employer, and the government.
Who will be responsible for maintaining the fund?
The board that is constituted under Section 5 of the Act will be responsible for the administration of the fund.
Is the contribution useful only for an employee?
The contributions in the fund can be used for the welfare of the employees and their dependents.
Labour welfare is a part of which list in the constitution?
It is a part of List III, i.e., concurrent list under Schedule 7 of the Constitution which enables both the central and state government to make laws on the subject matter.
Who is known to be the pioneer in the field of Indian labour welfare?
Dr. BR Ambedkar is known to be a pioneer for the welfare of Indian labour.
When was the Tamil Nadu Labour Welfare Board constituted?
It was constituted by the government of Tamil Nadu in 1971.
What is the main purpose of constituting the board?
The main function of the labour welfare board is to administer the labour welfare fund constituted under this Act.
Under which section the Tamil Nadu Labour Welfare Rules, 1973 were made?
Section 41 of the Act gives powers to the state government to make rules for carrying into effect the provisions of the Act.
What is the role of inspectors under the Act?
The provision for inspectors is given under Section 22 of the Act. They are appointed to examine and inquire for ascertaining that the provisions of the Act are complied with by the employers and employees.
References
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