Supreme Court Upholds Inclusion of Allowances in Overtime Wage Calculations, Executive Instructions Cannot Override Factories Act, 1948, Rules Supreme Court
In a landmark judgment, the Supreme Court of India has ruled in favor of including compensatory allowances such as House Rent Allowance (HRA), Transport Allowance (TA), Small Family Allowance (SFA), and Clothing and Washing Allowance (CWA) in the calculation of overtime wages under Section 59(2) of the Factories Act, 1948. The apex court dismissed the appeals filed by the Union of India challenging the High Court's decision, which had set aside the Central Administrative Tribunal's earlier order.
The Supreme Court bench, comprising Justices Rajesh Bindal and Manmohan, firmly stated that executive instructions or Office Memorandums lacking statutory force cannot override or restrict the benefits provided under the Factories Act. The court emphasized the necessity of interpreting beneficial legislation in favor of workers to prevent exploitation and ensure equitable treatment in employer-employee relationships.
The dispute arose when the Union of India argued that various compensatory allowances should not be included in the "ordinary rate of wages" for calculating overtime wages, relying on several Office Memorandums issued by different ministries. However, the Supreme Court rejected this argument, affirming that the plain language of the statute must be adhered to, which mandates the inclusion of such allowances unless specifically excluded, such as bonuses and wages for overtime work.
The court reiterated the principle that statutory provisions cannot be overridden by executive instructions, citing precedents like the Rajasthan State Industrial Development & Investment Corporation case and the Gujarat Mazdoor Sabha case. The judgment also criticized the Ministry of Defence's attempt to interpret the law differently from the Ministry of Railways, highlighting the inconsistency in the application of the law across different government ministries.
The decision is seen as a significant victory for labor rights, as it reinforces the protective intent of the Factories Act, ensuring that workers receive fair compensation for overtime work. The ruling underscores the importance of adhering to legislative intent and statutory language, providing clarity on the issue of wage calculations for overtime work.
Bottom Line:
Interpretation of "ordinary rate of wages" under Section 59(2) of the Factories Act, 1948 - Compensatory allowances such as HRA, TA, SFA, and CWA are to be included for calculating overtime wages; executive instructions or Office Memorandums cannot override statutory provisions.
Statutory provisions: Factories Act, 1948 Sections 59(2), 64, 65
Union of India v. Heavy Vehicles Factory Employees' Union, (SC) : Law Finder Doc id # 2841343
