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Non-payment of Salary by an Employer in India

It is generally seen in India that employers deny paying salaries to employees, mainly at the time of firing. Employers take their employees for granted. Generally, employers think that employees don’t have enough options or resources to go against them. But the employers are unaware of the several options that employees have for Non-Payment of Salary that land them in trouble. Though these options are not available in the public domain, and seeking lawyer advice is quite expensive. The Indian Law provides rights to the Terminated Employees.

Non-payment of Salary by an Employer in India

BASIC CONCEPTS OF INDIAN LABOUR LAWS THAT DEALS WITH NON-PAYMENT OF SALARY OR WAGES:

The Payment of Wages Act is an Indian Act that is related to the payment of salary, though this act covers low-wage employees only. 

From 2012, by notification, the Indian Government increases the average wage ceiling of INR 18,000/- per month. In case you’re not covered under this act then, other remedies are available.

Section-4 of the Payment of Wages Act deals with the fixation of the wage period. It states that as per the wages, the period of salary distribution is fixed. The wage period cannot exceed one month.

Requirements for monthly salary distribution:

  1. A person having a wage not more than one thousand shall be paid before the expiry of the 7th day.
  2. A person having a wage of more than INR 1,000/ shall be paid before the expiry of the 10th day.
  3. In case of the termination done by the employer, then the amount shall be paid to the employee before the expiry of the second working day from the day his/her employment is terminated.

Steps for employees for non-payment of salary/wages:

Below are the remedies available for the non-payment of salary by the employer:

Provide details about the Employment Contract and bank statement as proof to the lawyer. Mention the consequences for non-payment of salary and issue the notice to the employer. Many times, the companies clear the due immediately to avoid the litigation process.

2. Labor commissioner:

If the employee is having an issue with the non-payment of salary, then he or she can approach the Labour Commissioner. They will provide the solutions after analyzing the matter. In case of no solution then they’ll hand over the matter to the court. This means that the case against the employer will raise.

3. Industrial Dispute Act:
  • Under Section 33(c) of the Industrial Dispute Act, 1947, an employee can file a suit against the employer for recovery of the dues money.
  • Either the employee himself or anyone else on his behalf can claim the recovery of due money.
  • In case of the death of an employee, either the authorized person or his heirs can claim the recovery of due money by writing to the labor court.
  • After looking into the matter, if the court is satisfied that the money is due, then the court will issue the certificate. Then, the collector will proceed further to recover the money.
  • If the question arises for the amount of money due or amount at which the benefit shall be awarded then it shall be dealt with as per the provisions of this Act.

NOTE: The Labour Court decides the cases within a period not exceeding Three Months. But, the proviso is that if the Presiding Officer deems it necessary to extend the time limit, then by writing he/she may extend such period.

4. Resort to Arbitration:

These days usually Arbitration Clause is present in the agreement. So, in the case of the Arbitration Clause, the employee can proceed further to settle the dispute through Arbitration and Conciliation Act 1996. It is an outside-the-court settlement and saves time.

Law for Executives, Managers, and Others:

Usually, non-payment of salary issue does not happen with the employees who are the executives or managerial level. But, in case, if it happens, then they can file a civil suit against the employer as per the Order 37 of CPC, 1908. This is the faster procedure than the usual procedure in civil courts, called Summary Suits.

Company not paying with fraudulent or dishonest intent:

If the employee is affected by the employer’s fraudulent or dishonest intent following remedies are available:

  1. Under Section 447 of the Companies Act, 2013 punishment for fraud is laid down. Imprisonment for not less than 6 months which may extend to 10 years.
  2. Fine which shall not be less than the amount of fraud which may extend to three times the fraudulent amount.
  3. Other measures mentioned under section 447 of the Companies Act, 2013.
  4. Filing of criminal case under Indian Penal Code.

Steps to recover money:

STEP 1: Sending legal notice through a creditable lawyer is the initial which an employee should take. 

STEP 2: If the above step doesn’t work, then approach to Police Authority and file a cheating case. Prepare a detailed case study with all the proofs related to the case. 

STEP 3: If filing a criminal case is not an option or doesn’t provide a result then one should proceed for a summary suit or labor court. 

Lastly, a smaller number of cases proceed to this last stage, else many of the disputes related to the non-payment of salary are settled at the initial stage only.

There are many cases where employers get away from their employees by not paying them a salary. A recent example of this is Kingfisher Airlines. It shut down its operations and many workers were left unpaid. 

Contacting a good lawyer and playing the psychological game is an essential element to recover the money. The draft of the notice shall be in such a way by which the employer can understand the consequences for not paying the money quickly, and settle the matter at the initial stage only.

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by Priya Singh

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