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Wednesday, February 29, 2012

Overtime wages payable only on basis & DA – Ruling of Kerala High Court.


Section 59 of the Factories Act lays down that where a worker works in a factory for more than 9 hours in any day or more than 48 hours in any week, he shall, in respect of the overtime work, be entitled to wages at the rate of twice his ordinary rate of wages. Section 59(2) stipulates that ordinary rate of wages means the basic wages + such allowances, including cash equivalent of the advantage approving through the concessional sale to workers of food grains and other articles, as the worker is for the t ime being entitled to, but does not include bonus and wages for overtime work.

The division bench of Hon’ble High Court of Kerala has considered what constitutes ordinary rate of wages as defined under Section 59(2) of the Factories Act in the case of V.E.Jossie and others Vs. Flag Officers, Commanding in Chief, Novel Base and another, 2011 (3) CLR 2011.

The Respondent was paying overtime Wages including HRA, Travelling Allowances, Small family Norms allowance and CCA. The Respondent by an order dated 23.07.2009 informed that the employees are not entitled to overtime on the above four items. The decision of the respondents was challenged before the Central Administrative Tribunal (CAT) and the Tribunal upheld the action of the Respondent. The workmen challenged the orders of the CAT before the Hon’ble High Court of Kerala. The Division Bench of the High Court also upheld the orders of the CAT. The Hon’ble High Court observed as under:

·               We are therefore of the view that the ordinary rate of wages referred to in Sub-section (2) does not take in compensatory and Incentive Allowances. In fact unless the standard rate of wages is understood as not including the above incentives, the rate of overtime wages will also keep on varying for different employees of the same grade in different stations. Section 59(2) doesnot visualise such discrimination among employees. In order to have uniform rate of overtime wages payable to the same category of employees, the original rate of wages also should be the same, which includes only salary and allowances for the for the work. Obviously, compensatory allowances and allowances in the nature of incentives are not covered under Section 59(2) of the Act. We donot find any ground to deviate from the view taken by the Tribunal.

·               Senior Counsel contended that the action of the respondents in recalling the benefits through the impugned orders is a violation of Section 9A of the Industrial Disputes Act, 1947. What is stated in Section 9A is that employers should not recover the benefits covered by Schedule 4 of the Act without notice to the employees. However, what was find in this case is that the respondents were only making a correction of the mistake they have committed by giving overtime wages on inadmissible allowances which is a violation of Section 59(2) of the Act. Section 9A of the Act refers to the steps that an officer should take before withdrawal of eligible benefits otherwise enjoyed by the employees which includes allowances. Notice u/s 9A need be issued only if the overtime allowance withdrawn was on eligible rate of wages. A mistake can always be corrected at any time and in this case, what is done is correction with future effect. The inadmissible benefits granted to the employees after July, 2009 only is proposed to be recovered. So much so, we donot find any violation of Section 9A of the ID Act because respondents have not taken any decision adverse to the terms of employment including eligibility for Overtime Allowance. We therefore, donot find any merit in this contention also.