The Liability of an Employer in case on an Industrial Accident

An accident, often causing serious job-related injuries, usually happens on a work site, such as a factory floor or a construction site. There are just as many causes of industrial accidents as there are types. The broad category of industrial accidents covers anything from small cuts and bruises to huge disasters that affect a large population of people.

Causes of industrial accidents can be broken down into two broad categories: unsafe conditions and unsafe acts. The causes of industrial accidents that pertain to unsafe conditions can include insufficient workspace lighting, excessive noise, slippery or unsafe flooring, extreme temperature exposure, inadequate protection when working with machinery or hazardous materials, unstable structures, electrical problems, machine malfunction or failure, and more. The causes of industrial accidents that involve unsafe acts can include actions or failures to act which result in injury. This can be a result of employee negligence but employers, organizations, and product manufacturers can also be liable for the causes of industrial accidents.

The causes of industrial accidents can occur in the environment around the workplace or within the work environment. External causes of industrial accidents may include fires, chemical spills, toxic gas emission or radiation. The causes of industrial accidents in these cases might include organizational errors, human factors, abnormal operational conditions, natural forces, software or component failures, and outside interference. Internal causes of industrial accidents can involve equipment or other work related tangibles, harmful materials, toxic chemicals, and human error.

There are several ways that a worker can be injured in the work environment; Injuries that result from the causes of industrial accidents can include any one or combination of the following occurrences: falls, being struck by objects in motion, slides and cave ins, structure collapse, being trapped in or by an object, overexertion or strenuous physical actions, exposure to temperature extremes, electrical accidents, radiation exposure, and the inhalation, ingestion, or absorption of harmful substances. These industrial accidents can result in a number of injuries including superficial injury, fractures, sprains and strains, amputation, concussion, internal injury, poisoning, infection, and death.

The causes of industrial accidents are numerous. There are several cases where employee negligence is a factor in industrial accidents. As a general rule, worker’s compensation laws protect employers from lawsuits brought by injured employees. There are cases where an employer can be held liable for worker injuries if they had knowledge of unsafe conditions and failed to act in order to prevent injury. Injured workers may also be able to seek compensation for their injuries from the makers of faulty or dangerous industrial products.

When is prosecution likely?

  • In case of accidents or dangerous occurrences, especially a major accident. Eg: Accident causing loss of limb, fatal accident.
  • Where the lacunae are so obvious that the concerned Government Official has to take cognizance. Eg: Non-compliance in a Hazardous Process.
  • When a fatal / major accident occurs and there are lacunae relating to compliances in the factory, prosecution is almost certain

The Gujarat High Court has held that a prudent Industrialist should know that a worker can possibly turn up for work drunk. Therefore, it is the responsibility of the Industrialist who is “more mature and educated” to ensure that no worker is allowed to work in the factory premises in a drunken state. Therefore, even in case of negligence or misconduct of a worker, an employer is liable for accidents.

Liability of Employer under Factories Act, 1948

Under the Maharashtra Factories Rules, 1963, Rule 115 deals with accidents. The said Rule 115 has a Schedule appended to it, which Schedule lists various kinds of accidents and dangerous occurrences. Item 1(a) of the Schedule reads “Accidents which cause death to any person or are of a serious nature.” Also, as per Item 3(e), collapse of a wall forming part of a factory or within the compound or cartilage of a factory constitutes a ‘dangerous occurrence’, whether or not they are attended by personal injury or disablement.

As per Rule 115, in case of an accident or a dangerous occurrence in a factory which causes death or is of a serious nature, the following steps need to be taken:

a) Within 4 hours of the accident, the Manager of the factory has to send a notice of the happening of the accident and / or occurrence by telephone, special messenger or telegram to the Factory Inspector and the Administrative Medical Officer, Employees’ State Insurance Scheme (if ESI is applicable to the factory). Where the accident has cause death, or is likely to cause death, then such a notice needs to also be sent within 4 hours of the occurrence of the accident to :

  • The District Magistrate or Sub-Divisional Magistrate
  • The Officer-in-charge of the nearest police station
  • The nearest relatives of the injured or deceased person.

There is no set format for the above notice. The notice may contain information of the happening of the accident and may mention, in case of death of persons in the factory due to the accident, how many such persons have died.

Penalty for Contravention: Section 92 of the Factories Act gives the general penalty for contravention of the Act and Rules. The Section states that the occupier and manager of the factory shall each be guilty of an offence and punishable with imprisonment for up to two years or with fine up to Rupees 1 lakh or with both. Therefore, failure to send notice of the fatal accident in 4 hours and written report within 12 hours as mentioned above can lead to prosecution of the occupier and manager of the factory.

Under the Factories Act, 1948, an occupier has been defined as a person who has ultimate control over the affairs of the factory. A notice is required to be given to the chief inspector of factories, disclosing the name of the occupier, at least 15 days prior to the commencement of the operations of the factory. In a landmark case JK Industries Ltd and others v. Chief Inspector of Factories and Boilers and others, 1997 I LLJ 722 (S.C. 2J), the Supreme Court noted that where a company owns or runs a factory, it is the company that has ultimate control over the affairs of the factory and would therefore be the occupier.

However, since a company is a legal abstraction, it can act only through its directors, who are the directing mind and will of the company and are the centre of its personality. The court went on to say that the word “ultimate” in common parlance means last or final. There is a vast difference between a person having ultimate control of the affairs of a factory and one who has immediate or day-to-day control over the affairs of the factory. The manager or any other employee, of whatever status, can be nominated by the board of directors of the owner company to have immediate or day-to-day or even supervisory control over the affairs of the factory. However, the ultimate control over the affairs of the factory will always be with the board of directors of the company and cannot be vested in any other person, without completely transferring the control over the factory to the other person.

The Supreme Court in John Donald Mackenzie v. Chief Inspector of Factories, Bihar, 1961 II LLJ 412 (S.C. 3J) had held that unless it is shown that by the execution of a document or passing a resolution, ultimate control over a factory was completely transferred by the owner to another person, such person is not the occupier of the factory.

In a scenario where there has been no board resolution nominating one of the directors to act as the Occupier of a factory; in light of the case laws we can come to the conclusion that the entire Board of Directors shall be deemed to have ultimate control over the affairs of the Company and can be held liable for any offence u/s 92 of the Factories Act, 1948.

Liability under Employees Compensation Act, 1928

The Act deals with compensation for workers who are injured in the course of duty. The scheme of the Act is not to compensate the worker in lieu of wages. The general principle is that a worker who suffers an injury in the course of his employment, which results in a disablement, should be entitled to compensation and in the case of a fatal injury his dependants should be compensated. Under the Employee’s Compensation Act, it is the employer who is responsible to pay compensation (as opposed to the employees State insurance. Establishments to which the Employees’ State Insurance Act applies, the liability to pay compensation is on the ESI corporation).

The compensation to be paid by the employer for injuries caused depend on extent of the disablement suffered by the worker; more severe disablements naturally receive higher compensation.

This has been categorised as follows:

1) Death;

2) Disablement

(a) Permanent total disablement;

(b) Permanent partial Disablement

(c) Temporary disablement-

(i) Temporary total disablement;

(ii) Temporary partial disablement.

Wages are the basis for amount of compensation paid. Two workers earning different salaries therefore will get different amounts of compensation even though the injury they suffered might be identical. Compensation under this Act is calculated on the basis of the monthly wage received by the worker. According to this Act it is the amount of wages which would be payable for a month’ service – i.e. irrespective of whether the worker is paid on a daily, weekly or piece rate basis.

Further responsibilities of the employer under Employees Compensation Act, 1928

a) Employer shall send a written report to the Commissioner within 7 days of occurrence of any fatal accident failing which the employer may be held liable for fine amounting to Rs. 5000/-

Liability under Fatal Accidents Act, 1855

As per Section 1A of the Act, whenever the death of a person shall be caused by wrongful act, neglect or default, and the act, neglect or default is such as would (if death had not ensued) have entitled the party injured to maintain an action and recover damages in respect thereof, the party who would have been liable if death had not ensued, shall be liable to an action or suit for damages, notwithstanding the death of the person injured and although the death shall have been caused under such circumstances as amount in law to felony or other crime.

Under the Act a suit for damages can be instituted by wife, husband, parent and child, if any, of the deceased person. Under the Act compensation awarded for loss of dependency is worked out by applying the principle of multiplier is a part of damages “proportioned to the loss resulting from the death”;

Liability under Common law

If bodily harm or death of an employee is caused by another employee during the course of his employment, employer can be held vicariously liable, under the respondeat superior doctrine, for negligent acts or omissions by their employees in the course of employment. For an act to be considered within the course of employment it must either be authorised or be so connected with an authorised act that it can be considered a mode, though an improper mode, of performing it. A tort can be instituted against the employer by the legal heirs of the deceased for seeking adequate damages on the ground of loss of livelihood.