Refusing To Pay Your Salary

What can you do if your employer does not pay your salary or infinitely delays it?

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. We have been getting many such cases recently. We decided to share our best strategies for benefit of all Indians.

Under the Industrial Dispute Act, an employee may file a suit after sending a legal notice for non-payment of salary. One can file a suit under section 33 (c) for the recovery of the money due from the employer. A legal notice for unpaid salary can force the employer to clear the dues

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.

Effective September 11, 2012, the wage ceiling under the Payment of Wages Act, 1936 was increased to an average wage ceiling of INR 18,000 per month pursuant to a notification by the Indian Government. If you are not covered under this act, other remedies are still available.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.(Reference 2 – Section 4 payment of wages Act)

Documents that you keep ready for initiating an action against the employer-

The employer and the employee enter in an employment contract where the employee is required to work or provide services to the employer and the employer is required to provide remuneration for the work or the services offered to him. Non- payment of remuneration by the employer for any work/service received is not just a breach of contract but also a violation of the statutory duty. Technically an occasional failure to pay the salary is a breach of contract but it does not entitle you to resign or claim for constructive dismissal.

♣ Copy of your employment contract- Keep a copy of your employment contract ready which stipulates how much and when the employer was liable to pay you. ♣ Evidence showing you have not received your salary- Keep a copy of your bank account details ready to prove that you have not received your salary

What steps can be taken by employee:

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.

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 span:

• 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. (Reference 3 – Section 33(c)(2) Industrial Dispute Act, 1947)

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.

Steps 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. From expert lawyers, you can file a notice like this for INR 2500 only. You should not pay above INR 3000 in any case.

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. Expert lawyer charges INR 4500 to handle a police complaint matter at present.

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..