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With very few employees aware of their rights under the Indian Constitution and statutes, non-payment of salary is a very common practice in India for employers to their employees, which is especially prevalent when firing employees. The employers carry a notion that the employees don't have any legal knowledge or any resources by which they can file a case against the employer. However, the reality is that there are various things that an employee can do. To safeguard employee rights, multiple legal remedies exist to claim the unpaid salary as well as interest on the same. This article discusses the ways in which the unpaid salary can be recovered from an employer, by the employee and the steps to be taken.
"Non-payment of salary by the employer can be claimed not just by the employee but also by his/her relatives or legal heirs if the employee is deceased,” says Advocate Dheeraj Kumar.
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Section 33C of the Act deals with the recovery of money that is due to be paid to the employee. According to this provision, any employee or someone authorized by the employee, or legal heir in case of the deceased employee can file an application for payment of salary to the appropriate government. On being satisfied that such money is due, the appropriate government issues a certificate for payment of dues. However, if there is a need to compute the amount of money then, it shall be decided by the Labour Court.
"The Industrial Dispute Act shall apply only to industries. Due to the interpretation of the word ‘industry’ by the Supreme Court in the Bangalore Water Supply Case, the list of employees that can file an industrial dispute includes even those that work in Universities, hospitals, municipal corporations, and clubs,” says Advocate Dheeraj Kumar.
If the employer does not respond to the legal notice and does not pay the salary then the employee can take the following steps, after a legal notice is sent to the employer-
1. Approach the Labour Commissioner
The employee can approach the labour commissioner and convey the issue to the commissioner. It is advised that a copy of the legal notice sent to the employer, employment contract, a bank statement is attached to the complaint filed before the labour commissioner. The labour commissioner’s duty is to reconcile the differences between the employer and employee.
2. Approach the Labour Court
If the labour commissioner fails to provide a solution, then the employee can approach the labour court. This suit can be filed under the Industrial Disputes Act, 1947. However, this suit must be filed within 1 year from the date from which the salary is due. The Labour Court has to decide the case within 3 months.
Within a certain period without any extension, the Labour Court decides a timeline. The time frame is around three months, where the Presiding Officer of the certain Labour Court deems it expedient or necessary to do so. The Presiding Officer may for certain reasons in writing actually extend the time frame as he/she deems fit. The Labour Court will also look into the fact whether legal notice for pending payment of provident fund has been sent to the employer.
3. Approach the Civil Court
Employees holding executive or managerial posts can file a suit for non-payment of salary in a civil court, in accordance with the provisions of Civil Procedure Code, 1908. However, it is advised that this should not be the remedy sought by the employee in the first instance.
4. Application in the NCLT
The Insolvency and Bankruptcy Code, 2016 considers employees as operational creditors. Therefore, an application can be filed in the NCLT for the recovery of unpaid salary. However, for the application of the IBC, certain conditions must be met. These are
This application must be accepted or rejected within 14 days by the NCLT. The whole corporate insolvency resolution process must end within 180 days. However, the NCLT may extend this by another 90 days.
Legal notice to an employer for non-payment of salary is to be taken seriously by the employer and the management of the establishment where the employee was working. Notice for payment due can be sent either to the manager or to the person-in-charge of the place or directors of the company where the employee was employed. Legal notice to a company can also be presented in the Court as evidence. Such legal notice sent to a company will act in favor of the employee in the Court of Law.
The advocate fees for legal notice for payment recovery may vary from advocate to advocate. Therefore, the employee can send a legal notice to recover payments.
What to do if your employer refuses to pay gratuity?
Controlling Authority under Section 3 of the Payment of Gratuity Act, 1972 is a quasi-judicial body empowered with disputes that arise when the employer refuses to pay gratuity. In these cases, the employee may make an application under Section 8 to the controlling authority, who decides on the dispute regarding payment of gratuity, after hearing both the employee and the employer.
What is the punishment imposed on my employer if he refuses to pay gratuity?
According to Section 9 of the Payment of Gratuity Act, 1972, the punishment is 6 months to 2 years of imprisonment or fine of Rs 10,000/- to 20,000/- or both. The punishment can be reduced from 6 months if reasons for lesser punishment are recorded in writing.
What is the maximum period that an employer can withhold the salary of employees?
According to the Payment of Wages Act, 1936, if there are 1000 employees in an establishment, the employer must pay the employees before the expiry of the 7th day after the last day of the wage period. In cases of more employees, wages must be paid before the expiry of the 10th day from the previous wage period.
Can a legal notice be sent for non-payment of bonus or EPF amount?
It is a statutory right to receive payment of bonus and EPF. Therefore, a legal notice can be sent for non-payment of bonus or EPF amount or for non-payment of any other perks and benefits, which are statutory obligations or are agreed between the employee and the employer under the employment agreement.
Are contract workers covered under the Payment of Wages Act?
The provisions of the Act are duly applicable to the contract labour employed by any factory or establishment if the employment in which they are engaged is otherwise covered by the Payment of Wages Act.
As per the Payment of Wages Act, what are the procedure and provisions relating to a fine deduction from the pay?
The fines for omissions or commission under the Act have been listed and approved by the Central Government. The fines that can be deducted are only such acts and cannot be more than 3% of wages. The deduction of such amount from the wages must happen within 90 days of the commission or omission of such act.
What penalties can be imposed on employers for contraventions of any provisions of the Wages Act?
Violation of the provisions of the Payment of Wages Act entails a fine of Rs. 1000/- to 5000/- on the employer. On a subsequent conviction, the fine increases to Rs.5000/- to 10000/-. The fine amount is the same, for offences such as deliberate failure to provide information, refusal to maintain registers and for willfully giving false answers. Failing or neglecting to pay wages to any employee punishment of imprisonment not less than one month which may extend up to six months and fine not less than Rs. 2000/- extendable up to Rs. 15000/- may be done. Additional fine up to Rs. 100/- for each day.
Violation of the Minimum Wage Act in regards to minimum wages, working hours and others comes under the Central Act as offences, and there is a penalty of five years imprisonment and fine of Rs. 10000/-, according to Section 22 of the Act.
Do employees get paid when the company goes into liquidation?
In 2011, the Supreme Court of India in an important verdict that seeks to protect the rights of employees held that all wages, salary, and sums due to the payment of pension fund, provident fund, gratuity or any other payment for the welfare of the employee must be priorities if the company goes into liquidation. Moreover, the IBC also recognizes the employee as an operational creditor who can make an application for unpaid salary in the NCLT.