What can you do if your employer does not pay your salary or infinitely delays it?
Employer must pay interest if salary is delayed: HC
The employer must pay a reasonable interest if a payment, due to the employee, is made late, the Bombay High Court has held.
Whether the service contract of the employee provides for payment of interest is immaterial, said the division bench of Justices Anoop Mohta and C L Pangarkar.
Petitioner Yuvraj N Rodye was working with the Maharashtra State Electricity Board since 1975.
In 1989, Royde became entitled for arrears of salary from August 1975 onwards.
However, for no justifiable reason, the payment was delayed. It was only in September 1994 that he was told to collect his dues.
He received the amount, but applied for getting interest for the period of delay.
It is quite common in India for employers to deny salary to employees, especially at the time of firing them. They think that employee’s have no options or the resources to pursue a case against an employer. In reality, there are several things an employee can do that can land an employer in real trouble. However, the knowledge regarding the same is not available in public domain and lawyer’s advice come costly.
There are several legal process that can be followed by an employee to recover salary or wages. The first step that we recommend is sending a good notice from a credible lawyer who has a track record of doing such matters. However, before we tell you more about that, let us get you introduced to some basic concepts in Indian labour laws that deal with the issues of non-payment of wages or salary.
India has an entire law on payment of salary called Payment of Wages Act, though it does not apply to all levels of employees. It usually applies to low-wage blue caller workers.
Let’s see what the Payment of Wages Act has to say in this matter.
Section 4 of the payment of wages Act states –
Fixation of wage period every person responsible for the payment of wages under Section 3 shall fix periods in respect of which such wages shall be payable. No wage period shall exceed one month.
Monthly Salary Distribution Requirements:
- A person is working in an establishment with a wage not more than one thousand, the wage to the particular person shall be paid before the expiry of the seventh day.
- A person with the wage of more than one thousand shall be paid before the expiry of the tenth day.
- If the employee is terminated by the employer the wages earned by him shall be paid before the expiry of the second working day from the day his employment is terminated.
What steps can be taken by employee:
If your employer is not paying your salary, you can get these remedies.
A) Approach Labour Commissioner:
If an employer doesn’t pay up your salary, you can approach the labour commissioner. They will help you to reconcile this matter and if no solution is reached labour commissioner will hand over this matter to the court whereby a case against your employer may be pursued.
B) Industrial Dispute Act:
- An employee can file a suit under Section 33(c) of Industrial Dispute Act, 1947 recovery of money due from an employer.
- When the salary is due from the employer, the employee himself or any other person authorized by him in writing on his behalf can claim recover money.
- In case of the employee death, the authorized person or heirs make an application to the labour court for recovery of money due.
- The court will further issue a certificate on being satisfied that the salary is due and the collector shall proceed to recover the same.
- If any question arises as to the amount of money due or as to the amount at which such benefit should be computed, it would be computed according to rules under this Act.
Labour Court Time Line:
Cases have to be decided by such labour court within period not exceeding Three Months provided that where the presiding officer of a labour court considers it necessary or expedient so to do, he may for reasons to be recorded in writing, extend such period by such further period as may he think fit.
What about executives, managers and those who earn above INR 18,000 a month?
If you are manager or executive level employee, you can file a case against the company in the civil court under order 37 of Court of civil procedure. This is faster than the usual slow procedure in civil courts, called a summary suit. It is quite effective, but should not be pursued as a first resort. There are easier things at your disposal as well. Out of 100 cases, maybe 5-7 requires such effort. However, many lawyers are quick to jump to this. Before opting for this, ask your lawyer to exhaust other means.
What if company is not paying with a fraudulent or dishonest intent?
If an employee is affected by the company’s fraudulent activities, then he may seek some strong actions.
The following remedies would be available in such cases:
Employer Fraud Punishment:
- Section 447 of Companies Act, 2013 lays down punishment for fraud.
- Person shall be liable for imprisonment not less than 6 months which may extend to 10 years.
- Fine not less than amount involved in fraud which may extend upto three times of the fraud amount.
- Subsequent measures can be taken under Section 447 of the Act.
- An employee can also file a criminal case against the company under Indian Penal Code.
First Step To recover unpaid salary
Step 1: We strongly recommend sending a legal notice enumerating all the actions that you may take from a credible lawyer. Before going to a lawyer, ensure that they have some track record in doing such work.
Step 2: If this does not work, approaching police for a cheating case, where there is enough evidence for such fraud, is critical. At this stage, it is important to prepare a detailed case file to give to police, and your lawyer should assist you in this. A majority of such complaints are not accepted due to weak drafting and lack of prima facie evidence. This is where a good lawyer can make a lot of difference.
Step 3: Where criminal case is not an option, or does not produce results, we recommend going for a summary suit or labour court, as the case may be. In our experience of handling such matters in large numbers, we can say that not more than 10% of such disputes need to go to this stage if the matter was handled well in earlier stages. Challenge is that lawyers are more comfortable and earns more money at this stage, so if they don’t have your interest in mind they might hurry to this stage.
Important things to keep in mind when you are trying to recover your unpaid salary
The notice is a very important psychological tool, and getting the salary in less time is a psychological game. If the employer understands the consequences quickly, he will settle before you need to go to court, which keeps costs low as well. However, only a few lawyers do this kind of work because it may not be very profitable for them.
There are many cases in India where employer does not pay salary for a month or couple of months and easily get away with the same. A good example is of Kingfisher Airlines. When it shut down its operations, many workers were not paid their dues.