Supreme Court: Inclusion of Allowances in Overtime Pay for Factory Workers

Quick Summary: The Supreme Court has decided that certain extra payments should be part of the calculation for overtime wages. This decision came after a disagreement between the Union of India and factory workers about what counts as "ordinary rate of wages."

Background of the Case

In this case, the Union of India challenged a decision by the High Court of Madras from November 30, 2011. The High Court had overturned an earlier decision by the Central Administrative Tribunal (CAT) from December 24, 2010, which had supported the government's view on how wages should be calculated.

What's the Issue?

The main issue was whether extra payments like House Rent Allowance (HRA), Transport Allowance (TA), and others should be included in the "ordinary rate of wages" for calculating overtime pay under Section 59(2) of the Factories Act, 1948.

"The exclusions that are sought to be made by the appellants are not permissible." - Respondents' Lawyer

Government's Standpoint

The government argued that only basic pay and dearness allowance should be considered for overtime calculations. They referred to several letters and official notes from different ministries to support their position.

Key Dates:
1959: Initial clarification by the Ministry of Defence.
2000: Ministry of Labour included travel allowance in basic wage calculations.
2002-2009: Various notes excluded compensatory allowances from overtime calculations.

Employees' Argument

The employees argued that all extra payments should be included in the overtime calculations. They pointed out that the Ministry of Railways included these allowances, showing inconsistency in government policy.

"The 1948 Act, being a beneficial legislation, should be given liberal construction in favor of the employees."

Supreme Court's Judgment

The Supreme Court, led by Justice Rajesh Bindal, rejected the appeal by the Union of India. The Court agreed with the High Court's decision, stating that the extra payments should be included in the calculation of overtime wages.

Key Points:
The Court emphasized the direct interpretation of Section 59(2).
It noted that executive instructions cannot override the law.
The decision aligns with the aim to protect workers from being taken advantage of.

Summary of the Verdict

The ruling is a significant win for employees, ensuring that their overtime pay reflects all parts of their wages. This judgment reinforces the protective nature of the Factories Act, safeguarding workers' rights against inconsistent interpretations by different government bodies.