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CHAPTER - H
FIXATION OF MINIMUM RATES
OF WAGES
CHAPTER II
FIXATION OF MINIMUM RATES OF WAGES
2.1. THE GENERAL SCHEME OF THE MINIMUM WAGES ACT, 1948
The Minimum Wages Ad, 1948 [herein after referred to as the Ad]
aims at making provision for the statutory fixation of minimum rates
wages in a number of industries wherein ‘sweated’* 1 labour is most
prevalent or where there is a big chance of exploitation of labour. The
Ad requires the Central and State Governments to fix within a specified
period the minimum rates of wages payable to employees in the
scheduled employments.2
The objed of the Ad was dealt with by the Supreme Court in Y.A.
Mamarde v Authority under the Minimum Wages Act.3 The Court
observed that the object of the Act as stated in the preamble is to
provide for fixation of minimum wages in certain employments to
1 ‘Sweating’ is a relative term and it is difficult to define it precisely. From its original meaning of sub- contrading, it came to imply wages “wary much lower than the normal rates prevailing through-out the country” (Evidence of Mr. Wolf before the Cave Committee in reply to Question No. 94;Cmd. 1645/1922 H.M.S.O England). The 5* Report of the Select Committee of the House of Lords on the Sweating System, stated “Although we cannot assign any exact meaning to ‘sweating’ the evils known by that name are shown in the foregoing pages cf the Report to be:
(1) A fitArfunflHi 1n th/» nyopggrtipg f>f the wnrirem nr diaperyortiMiate In the wntfedone.
(2) Excessive hours of wock.(3) The unsanitary state of the houses in which wotk is carried on. (5* Report, 1890. pp 1052-
1053.)
2 Sec. 5 of the Minimum Wages Act, 1948.3 (1972) 2 SCSI 108.
22
prevent exploitation of ignorant or less organized or less privileged
members of society by the capitalist class, The Directive Principles of
State Policy direct the State to endeavour to secure to all workers,
agricultural industrial or otherwise not only bare physical subsistence
but a living wage and conditions of work ensuring a decent way of life
and full enjoyment of leisure. The Directive Principles lay down the
foundation of appropriate social structure wherein the labour will have a
place of dignity legitimately due to it in view of its contribution to the
progress of the national economic prosperity.3®
There is a provision in the Act for addition of employments to the
schedule annexed to the Act.4 The Act also provides for the setting up
of machinery for the fixation, revision and co-ordination for the minimum
wages.5
The Act prescribes no principle for fixing the minimum rates of
wages. It only lays down the procedure, which is designed to lead to a
rate, which the scheduled employers must pay. The Act is not intended
to apply only to the industries in which labour is unorganized. There is
no reference in the Act to the organization of labour or to the stage such
organization has reached. The mere fact that the words “certain
* Id. atU2.4 Sec. 27 of the Minimum Wages Act, 1948.5 Provision has been made for appointment of Advisory Committees and Advisory Boards, the latter for co-ordination work of foe Advisory Committees. The Committees and Boards will have equal representation of employers and workmen. Except on initial fixation of minimum wages, consultation with the Advisory Board will be obligatory on all occasions of revision.
23
employments” are used in the heading and the preamble of the Ad
does not imply that the intention was to legislate only in resped of some
employments.6 The word “certain” in the preamble refers to the proviso
to Section 3 (1 A) of the Ad.68 From the proviso to Sedion 3 (1 A) it is
clear that the Ad cannot be extended to apply to any employment in
which there are in the whole State less than 1,000 employees. There is
no other indication as to the limit imposed on the operation of the Ad.
The legislature intended to apply the Act to all employments having
more than 1,000 employees in a particular State and that it, while
immediately applying the provisions of the Ad to the employments
mentioned in the Schedule, permitted future application of the Ad to
other employments satisfying the condition of the proviso to sedion
3(1 A) at the discretion of the appropriate Government.7 The proviso
speaks about the total number of persons employed in any schedule
employment in the whole State and in respect of individual schedule
6 The Preamble provides that “ An Act to provide for fixing minimum rotes of wages in certain Employments.”H Sec. 3 (1A) of the Minimum Wages Act provides that notwithstanding anything contained in subsection (IX the appropriate Government may refrain from fixing minimum rates of wages in respect of any scheduled employment in which there are in the whole State less than one thousand employees engaged in such employment, but if at any time the app. Govt comes to a finding after such inquiry as it may make or cause to be made in fins behalf that the number of employees in any scheduled employment in respect of which it has refrained from fixing mwwnnwn rates of wages has risen to one thousand or more, it dull fix minmum rates of wages payable to eo^loyees in such employment as soon as after such finding.7 Edward Cotton Mills V State of Ajmer. AIR. 1953 Ajmer, 65.
24
employments; even if one person is employed the Act is made
applicable.8
Speaking on the Constitutional validity of the Act, the Supreme
Court held that the Act does not violate the fundamental rights
guaranteed under Art. 19 (1) (f) and (g) of the Constitution and on the
other hand, it fulfils in part at least the obligations of the State under the
Directive Principles of the State Policy.9 The Act ensures not only
physical subsistence but also the maintenance of health and decency
as is conducive to the general health of public. This is one of the
directive principles of State Policy embodied in Article, 43 of the
Constitution. In order to protect labourers against exploitation, it is
absolutely necessary to impose restrictions upon the freedom of
contract of employers. Individual employers might find it difficult to carry
on business on the basis of minimum wages fixed under the Act, but
this must be entirely due to economic condition of those employers.
That cannot be the reason for striking down the law as unreasonable
and repugnant to Article 19 (1) (g) of the Constitution. The restrictions
imposed by the Act are not unreasonable restrictions within the
meaning of Article 19(6) of the Constitution.10
* Ram Kumar Mi jra V State of Bihar. 1984 (2) SCC 451.9 T.O. Lakshmaiah Setty & Sons, Adorn VState afAJ1. & another. 1981 UC 690. (A.P.) (D.B.)10 Bijay Cotton Mills VState of Ajmer. A.IR. 1955 (S.C.) 33.
25
Clause (e) of Section 2 of the Act defines an employer to mean
any person who employees, whether directly or through another person,
or whether on behalf of himself or any other person, one or more
employees in any scheduled employment in respect of minimum rates
of wages have been fixed under this Act. According to the definition, it
also includes, among other cases, a person appointed by a local
authority for the supervision and control of employees in the case of any
schedule employment under such local authority.
A person employing persons in any scheduled employment is not
an employer within the meaning of the Act, unless, in respect of that
employment, minimum wages have been fixed under the Act.11
Under sec. 2 (i) of the Act ‘employee’ means any person who is
employed for hire or reward to do any work, skilled or unskilled, manual
or clerical, in a scheduled employment in respect of which minimum
rates of wages have been fixed; and includes an out-worker to whom
any articles or materials are given out by another person to be made up,
cleaned, washed, altered, ornamented, finished, repaired, adapted or
other wise processed for sale for the purposes of the trade or business
of that other person where the process is to be carried out either in the
home of the out-worker or in some other premises not being premises
under the control and management of that other person ; and also
11 Nathuram Shukkt V State ofMJ>. 19601 LL.J. 784. (M.P) S
26
includes an employee declared to be an employee by the appropriate
Government; but does not include any member of the Armed Forces of
the Union.
The definition includes an out-worker preparing goods at his own
house and supplying them to the employer. Added to this the
appropriate Government is vested with an important weapon, i.e. to
declare any person as an employee who may not strictly satisfy the
conditions laid down in the definition.
Whenever any question arises as to whether a person is an
employee or not under the Act, the judiciary must keep in mind the
purpose and object of the legislation, instead of strictly confining to the
tests laid down in the definition.12 The legislature undoubtedly intends to
apply the Act to those industries or employments in which, by reason
such as unorganized labour or absence of machinery for regulation of
wages, the wages are very low.13
Under Sec. 2 (h) “Wages” means all remuneration, capable of being
expressed in terms of money, which would, if the terms of the contract
of employment, express or implied, were fulfilled, be payable to a
person employed in respect of his employment or of work done in such
u In Haryana Unrocognued School! Association V State of Haryana (1996 4 SCC. 225), it was held that die teachers employed in Private Educational Institutions are not employees within the deftmtion of‘Employee’ under the Act13 Prabhat Enlarging Works VPA. Bagmare. 1985 L1C 1185 (Bom).
27
employment, {and includes house rent allowance}, but does not
include -
(i) the value of—
(a) any house-accommodation, supply of light, water, medical
attendance, or
(b) any other amenity or any service excluded by general or
special order of the appropriate Government;
(ii) any contribution paid by the employer to any Pension Fund or
Provident Fund or under any scheme of social insurance;
(iii) any travelling allowance or the value of any travelling
concession;
(iv) any sum paid to the person employed to defray special
expenses entailed on him by the nature of his employment; or
(v) any gratuity payable on discharge;
This definition is similar to that of the term 'wages’ as defined in
the Payment of Wages Act, 1936. The definition under the Act
connotes only the wages payable under the terms of contract of
employment between the employer and employee. No reference is
made with regard to the definition of the term ‘minimum wages’ nor
one can find any reference to the criteria to determine the minimum
rates of wages under the Act. It is this area, which has created an
28
unending controversy all these decades. Some concrete efforts could
have been made at least subsequently to end the controversy by
introducing the suitable amendment to the definition of the term
‘wages’ under the Act.' But so far no such move was initiated in this
regard.
2.1.1. FIXATION OF MINIMUM RATES OF WAGES
Sec. 3 of the Act provides that the appropriate Government shall,
in the manner hereinafter provided -
(a) fix the minimum rates of wages payable to employees
employed in an employment specified in Part I or Part II of the
Schedule and in an employment added to either Part by
notification under Sec. 27;
Provided that the appropriate Government may, in respect of
employees employed in an employment specified in Part II of the
Schedule, instead of fixing minimum rates of wages under this clause
for the whole State, fix such rates for a part of the State or for any
specified class or classes of such employment in the whole State or
part thereof;
(b) review at such intervals as it may think fit, such intervals not
exceeding five years, the minimum rates of wages so fixed
and revise the minimum rates of wages, if necessary.
29
Provided that where for any reason the appropriate Government has
not reviewed the minimum rates of wages fixed by it in respect of any
scheduled employment within an interval of five years, nothing
contained in this clause shall be deemed to prevent it from reviewing
the minimum rates after the expiry of the said period of five years and
revising them, if necessary, and until they are so revised the minimum
rates in force immediately before the expiry of the said period of five
years shall continue in force.
Undoubtedly the appropriate Governments are given wide
discretionary powers under the provision. Often the majority of the
State Governments have failed miserably in revising the minimum
rates of wages within an interval of five years. Some kind of rigidity,
one can find in these provisions, which in turn may adversely affect
the interests of labour. For example, the appropriate Government
enjoys the power to fix and revise the minimum rates of wages for the
employees in respect of the employments specified in Part I and Part
II of the Schedule. The maximum time limit to revise the minimum
rates of wages fixed shall not exceed five years. For the reasons best
known to the appropriate Government the revision exercise has never
taken place within the interval of five years in majority of the cases.14
14 It is evident from the aotiflcgtioce faring the mitmnmn rate of wages Issued by the appropriateGovernments from time to tmw.
30
Hence it is relevant to quote the following observation made by the
Kerala High Court in Association of Planters of Kerala v State of
Kerala15 in this regard:
“ A failure to fix or revise minimum wages was not only a
statutory violation but is a breach of fundamental right enshrined in
Art. 23 of the Constitution. A duty is cast upon the State by provisions
of the Act and Article 23 to fix and revise the minimum rates of wages.
The continuance of rates of wages since seven years, which would be
less than the minimum payable is illegal and workers are entitled to
retrospective fixation or revision from the date it is due for revision.”
Under Sub Sec. (2) of Sec. 3 of the Act, the appropriate
Government may fix—
(a) a minimum rate of wages for time work;
(b) a minimum rate of wages for piece work;
(c) a minimum rate of remuneration to apply in the case of
employees employed on piece work for the purpose of
securing to such employees a minimum rate of wages on a
time work basis;
(d) a minimum rate to apply in substitution for the minimum
rate which would otherwise be applicable, in respect of
overtime work done by employees.
iS 1996 UC 2091 (Ker).
31
Sub Sec. (2A) of Sec. 3 of the Act provides that, where in respect of
an industrial dispute relating to the rates of wages payable to any of the
employees employed in a schedule employment, any proceeding is
pending before a Tribunal or National Tribunal under the Industrial
Disputes Act, 1947 or before any like authority under any other law for
the time being in force or an award made by any Tribunal, National
Tribunal or such authority is in operation, and a notification fixing or
revising the minimum rates of wages in respect of the scheduled
employment is issued during the pendency of such proceedings or the
operation of the award, then, notwithstanding anything contained in the
Act, the minimum rates of wages so fixed or so revised shall not apply
to those employees during the period in which the proceedings is
pending and the award made therein is in operation or, as the case may
be, where the notification is issued during the period of operation of an
award, during that period; and where such proceeding or award relates
to the rates of wages payable to ail the employees in the scheduled
employment, no minimum rates of wages shall be fixed or revised in
respect of that employment during the said period.16
In other words the proviso provides that if the notification fixing or
revising the minimum rates of wages is issued during the pendency of
18 Sec. 3 (2A) was subetituted by tht Minimum Wages (Amendment) Act of 1967.
32
any proceeding before the said authorities, such notification shall not
come into operation. However in either cases the powers of the
Government to fix or revise the minimum rates of wages comes to stand
still. The super session of the pendency of proceedings and award
relating to the rates of wages for employees in respect of a schedule
employment over the statutory powers of the appropriate Government
may not sound valid, in the event if the authorities under the Industrial
Disputes Act, 1947 passes an award fixing the rates of wages below the
statutory minimum wages. Holding that Section 3 (2A) of the Act is
violative of Article 14 of the Constitution, the Bombay High Court in
Engineering Workers Union V Union of India17 observed that the
question here is what should the labour do, when merely because of the
pendency of an industrial dispute relating to rates of wages or the
operation of an award, it has to undergo the hardship of not getting the
statutorily notified benefit of a minimum wage and this for the mere
reason that an industrial dispute is pending or it is subject to the
operation of an award, the termination of which is some distance away.
Having regard to the fact that the concept of minimum wage is a well-
established concept, there seems to be no option but to quash the
impugned provision. It is not proper that any class of workmen taken by
the sweep of the impugned provision should be deprived of the benefit
1991 LIC 455 (Bom).
33
of a statutorily notified minimum wage. The device of severability
cannot be applied to this case for the impugned sub-section is so
inextricably beyond redemption that the said doctrine is of no assistance
to redeem anything from out of the debris. Section 3 (2A) of the Act is
violative of the equality clause of the Constitution viz Article 14 and is,
therefore, void. It shall not be applied to the detriment of workmen.18
Under Cl. (a) of sub sec. 3 of Sec.3, the appropriate Government
may fix different minimum rates of wages for-
(i) different scheduled employments;
(ii) different classes of work in the same scheduled employment;
(iii) adults, adolescents, children and apprentices;
(iv) different localities;
Under Cl. (b) of sub sec. 3 of Sec. 3 the appropriate Government
may also fix the minimum rates of wages by any one or more of the
following wage-periods, namely
(i) by the hour,
(ii) by the day,
(iii) by the month, or
ii Id at 458-459.
34
(iv) by such other large wage - period as may be prescribed;
and where such rates are fixed by the day or by the month, the manner
of calculating wages for a month or for a day, as the case may be, may
be indicated.
2.1.2. MINIMUM RATES OF WAGES
Sec. 4 of the Act provides that any minimum rates of wages fixed or
revised by the appropriate Government shall consists of-
(i) a basic rate of wages and a special allowance at a rate to
be adjusted, at such intervals and in such manner as the
appropriate Government may direct, to accord as nearly as
practicable with the variation in the cost of living index
number applicable to such workers (herein after referred to
as the ‘cost of living allowance’); or
(ii) a basic rate of wages with or without the cost of living
allowance, and the cash value of the concessions in respect
of supplies of essential commodities at concession rates,
where so authorized, or
(iii) an all inclusive rate allowing for the basic rate, the cost of
living allowance and the cash value of the concessions, if
any.
35
The Bombay High Court in Sri Champawate Yantramg Audogik
Sahakari Samstha Maryadit Bead v State of Maharastra19 observed that
the concept of minimum wages in terms of Sec. 4 of the Act consists of
two components. The first one is the basic rate of wages and the
second one is the special allowance at a rate to be adjusted at certain
intervals. The Legislature has evolved a mechanism under which
certain procedure was prescribed for fixing the basic rate of minimum
wages and addition of that wage by Special Allowance linked with the
cost of living was left to be determined by the authorities under the Act
and this procedure was accorded judicial approval by the Supreme
Court in Hydro Engineers (P) Ltd. V Workmen.20
V
2.1. 3. PROCEDURE FOR FIXING AND REVISING THE MINIMUM RATES
OF WAGES
The Act under Sec. 5 provides two methods for fixing the minimum
rates of wages in respect of any scheduled employment for the first time
under the Act or revising the minimum rates of wages so fixed.
Linder the first method, the appropriate Government may appoint
as many committees and subcommittees as it considers necessary to
hold enquiries and to advise it in respect of such fixation or revision, as
191993 n LL.J. 843 (Bom). 20 AIR 1969 SC 182.
36
the case may be.21 In the later case, the appropriate Government may
publish its proposals by notification in the Official Gazette for the
information of persons likely to be affected thereby to enable them to
make representations, within two months from the date of the
notification, after which the proposals will be taken into consideration.22
If the appropriate Government proposes to revise the minimum rates of
wages by the notification method, it shall consult the Advisory Board
constituted under Section 7 of the Act.
The appropriate Government shall fix or revise the minimum rates of
wages in respect of each schedule employment after considering the
advice of the committee or all the representations received by it before
the date specified. Minimum rates of wages so fixed or revised should
be notified in the official Gazette. The minimum rates of wages so fixed
or revised shall come into force after the expiry of three months unless
the notification provides otherwise.23
The appropriate Government need not follow the procedure
prescribed in Sec. 5 in case of fixation of the cost of living allowance. It
can fix the cost of living allowance on the basis of data available with it
without resorting to the procedure prescribed under the said Section.
n CL (a) Sub Sec. (1) of Sec. 5 of the Minimum Wages Act, 1948. 23 Id. at CL (b) Sub Sec. (1) of Sec. 5. n Id. at Sec. 5 (2).
37
2,2. PRINCIPLES OR CRITERIA APPLIED IN MINIMUM WAGE FIXATION
The Minimum Wages Act does not contain any clue as to the
principles, criteria or norms to be followed in the fixation of minimum
rates of wages. Each enquiry committee appointed under the Act is
thus left free to choose for itself, what principles or standards it will
follow. The ILO Convention on the Minimum Wage-Fixing Machinery,
1928, does not indicate the level at which minimum wages should be
fixed or the criteria that should govern such fixation. Since, however the
very purpose of creating a minimum wage-fixing machinery is to ensure
the fixation of minimum rates of wages in trades or part of trades in
which wages are “exceptionally low,” the inference would be logical that
minimum wages should be fixed at a level well above that which is
sought to be done away with and that it should not be below the
average prevailing level of wages.
The I.L.O. Recommendation No. 30 (1928) concerning the
Application of Minimum Wage-Fixing Machinery throws, some direct
light on the problem. It provides that the wage-fixing authority should
“take account of the necessity of enabling the workers concerned to
maintain a suitable standard of living” and that for that purpose regard
should “primarily” be had “to the rates of wages being paid for similar
work in trades where the workers are adequately organized and have
concluded effective collective agreements” or, if no such standard of
38
reference is available, to the general level of wages prevailing in the
country or in the particular locality.”24 Thus these recommendations lay
special emphasis on enabling workers to maintain a suitable standard of
living, the criterion employed for the purpose being comparison with
wages paid for comparable work under effectively negotiated collective
agreements, since the very preamble to the Constitution of I.L.O.,
declares that, “the provision of an adequate living wage” is an important
requirement for improvement of the conditions of labour so urgently
needed, it would appear that the object of minimum wage fixation
should be to ensure such a living wage to the workers concerned.
The ILO Convention No. 131 of 1970 concerning minimum wage
fixing with special reference to developing countries provide elements
that are to be taken into consideration in determining the level of
minimum wages. They are (a) the needs of workers and their families,
taking into account the general level of wages in the country, the cost of
living, social security benefits, and the relative living standards of other
social groups and (b) economic factors, including the requirements of
economic development, levels of productivity and the desirability of
attaining and maintaining a high level of employment.25
24 Article m of ILO Recommendation No. 30 of 1928. B Article 3 ofILO Convention No. 131 of 1970.
39
However, the practice followed by the enquiry committees
appointed under the Act was not a consistent approach with regard to
the application of any criteria or norms pertaining to the quantification of
minimum rates of wages. This is evident from the information available
through the reports of the high power committees and Commissions
appointed by Government of India from time to time and also from the
decided cases. The first Committee to go into the aspect of
investigation of the norms or criteria followed by the enquiry committees
appointed under the Act in fixing the minimum rates of wages was the
One Man Committee appointed by Government of India to study the
working of the Minimum Wages Act in 1966. The One-Man Committee
in its report has drawn pointed attention to the extremely low rates of
minimum wages fixed in some employments in certain States, and
observed: "These rates cannot be considered by any standards to be
just and fair.”26
Hence it is relevant to have a look at comparable wage rates fixed
under the Act and the money earnings of workers in manufacturing
industries in 1967 as shown in the Table I below, since the same trend
of distinction is continued even today.
24 One Man Committee Report on the Working of the Minimum Wages Act, 1948, New Delhi: Government of India, Ministry of Labour (1966) at 266.
40
Table I: Lowest daily rates of wages fixed under the Minimum Wages Act and the Daily
earnings in Manufacturing Industries in some States as on 1967.
Lowest daily rates wider the Minimum Wages Act as on 30.9.1968. Per Capita Earnings inManufacturing
Industries as on 1967.
Employment Rate State Annual DailyEarnings Earnings
1 2 3 4 5
1. Wooten Carpet making 0.62 Madras 2244 7.48
2. Tobacco Manufactories 0.87 West Bengal 2176 725
3. Rice, Flour and Dal Mills 1.12 Orissa 2001 6.67
4. Stone Breaking and Stone Crushing 0.75 - Do - 2001 6.67
5. Plantations 1.00 Uttar Pradesh 1922 6.41
6. Oil Mills 1.12 Kerala 1700 5.67
7. Road Construction 0.81 Mysore 1760 5.87
8. Agriculture 0.75 Mysore 1760 5.87
9. Lac Manufactories 0.97 MadhyaPradesh
2363 7.88
10. Agriculture 0.90 -do- 2363 7.88
Source: For Col. 2: Indian Labour Statistics, 1968, pp. 80-87 For Col.4: Indan Labour Statistics, 1968, p. 56.
It goes without saying that the very low wage rates in the
unorganized sector as shown in above Table, could not have been fixed
on the basis of any calculation of needs, however moderately these
might have been assessed.
41
The One-Man Committee examined the criteria and factors taken
into account by enquiry committees and State Governments in the
various States in fixing the minimum rates of wages under the Act. In
some States the factors that have been taken into account by the
enquiry committees were27:
(i) the normal needs of the worker and his dependants,
(ii) the capacity of the industry to pay,
(iii) the existing wages reckoned on an employment-cum-area
basis,
(iv) the minimum wages fixed by neighbouring States in like
employments,
(v) the place of the industry in the economy of the region or State,
(vi) the needs of the developing economy, and
(vii) the national income
The One-Man Committee, after examining the replies of State
Governments and the reports of enquiry committees, concluded as
follows: “When confronted with the question of capacity of the industry
to pay they have invariably watered down their standard and their
17 Id. at 222.
42
recommendations represent a compromise between conflicting interests
rather than a scientific attempt to determine a minimum standard.”28
It is obvious that though some of the enquiry committees
pretended to pay lip service to high-sounding principles and criteria in
fixing the minimum rates of wages under the Act, all that they did in
practice was to examine the prevailing rates of wages in the
employment itself and sometimes also in similar employments in the
unorganized sector.28® The suggestion in the I.L.O. Recommendation
No. 30, that regard should primarily be had to the rates of wages being
paid for similar work in trades “where the workers are adequately
organized and have concluded effective collective agreements" is not
one that can be followed in the unorganized sector in India as workers
in this sector are practically nowhere organized and collective
agreements are wholly non-existent and till today the situation is similar
and remains unchanged.
The National Commission on Labour, dealing with the criticism
that the Act does not define the term “minimum wage”, reported that
“our examination has revealed that neither the advisory committees set
up under the Act nor the State authorities in charge of minimum wage
fixation have followed a uniform set of principles while fudng or revising
2828a
Id. at 233. Ibid
43
wage rates. They have mostly been going by their own assessment
over which the prevailing rates of wages have a firm hold.”29
Comparison with the prevailing rates of wages in the scheduled
employments may be said to fulfill (even that only to a limited extent)
the third of the four criterion enunciated by the I.L.O. Recommendation
for guidance in the fixation of minimum wage rates. The second,
namely capacity to pay, is given some perfunctory consideration, but
though the level of minimum wages is not consciously set by any
positive findings regarding capacity, it is obvious that it is the criterion of
capacity to pay, that stands in the way of the enquiry committees’
raising wage levels to those corresponding to needs.
However, a change in the attitude of the enquiry committees
appointed under the Act, with regard to fixation of minimum wages can
be found in later 1980s.30 The Sub-Committee of the Parliamentary
Consultative Committee for the Ministry of Labour (Gurudas Das Gupta
Committee) in its Report (1988) on the problems of unorganized
workers in agriculture sector noted that the West Bengal Government
fixed minimum wages on the assumptions of (a) consumption of food
equivalent of 2200 calories per unit per day (b) 3 adult consumption
units in a family (c) consumption of 72 yards of clothing a year per
29 Report of the National Commission on Labour, New Delhi: Government of India, Ministry of Labour (1969) at 233.30 This is evident from the enquiries revealed before the National Commission on Rural Labour
(1991).
44
family and (d) an amount equivalent to 25 per cent to cover housing,
fuel, light, medical and educational expenses. The Sub-Committee felt
that minimum wages should be linked to the movement in Consumer
Price Index Number for cost of living element and also revised every
two years or on a rise of 50 points in the Consumer Price Index.31
The National Commission on Rural Labour, (1991) in order to
ascertain the factors that are taken into consideration for determination
of minimum rates of wages by the appropriate Governments under the
Act, set up a Study Group on Wages. The enquiries revealed that the
Government of India (Ministry of Labour) in fixing the minimum rates of
wages for the employments falling in its purview has taken the following
namely, (a) the family consisting of 3 adult consumption units (b) the
food requirement of 2400 calories in rural areas and 2100 calories in
urban areas per day per unit (c) clothing, shelter, fuel and light,
education etc. Thus the minimum wage as notified by the Ministry of
Labour, Government of India for unskilled employments in 1990 was
Rs. 15 per day. Accordingly the Ministry has advocated to all States
that the minimum wage should not be less than Rs. 15 per day in
199032
31 The Report of the National Commission on Rural Labour, New Delhi: Government of India, Ministry of Labour (1991) at 180.32 Ibid
45
The Commission’s further enquiries revealed that the State of
Punjab, which has the highest per capita national income, has
determined the minimum wage basing on political considerations. The
State of Tamil Nadu has taken into consideration the prevailing wage
rate in the same or similar employments. There is however, no exact
explanation as to how the minimum wage for unskilled labour in
Maharashtra is determined. The Government of Karnataka has taken
the basic needs of an individual workman into consideration. The
Government of Bihar has taken the prevailing wage rate and other
conditions of service, the minimum rates of wages fixed in other States
for such employments and the minimum rates of wages fixed for similar
categories of employees in other employments. The Government of
Orissa has followed the practice of fixing the minimum wages basing on
poverty line criteria.33
Finally, the Commission observed that it becomes clear that the
Government of India and the State Governments, who must determine
minimum wages under the Act, are generally not clear in their own
minds on what it is that they must do. In fact, in some States the
position could be more confusing.34
3334
Ibid.Ibid
46
It is axiomatic to note that the enquiry committees and State
Governments in various States have taken some set of factors into
account in fixing the minimum rates of wages under the Act, which in
fact are the factors that were exactly prescribed by the Committee on
Fair Wages in order to arrive at the Fair Wage.35 Further the Supreme
Court in number of cases categorically held that the capacity of the
employer to pay the minimum wages fixed under the Act is not a
relevant factor.36
The only relevant consideration for fixing the minimum rates of
wages is the minimal requirements of the workers concerned, i.e. the
minimum needs of the worker and his family. Since the Act aims at
making provision for the statutory fixation of minimum rates of wages in
employments wherein ‘sweated’ labour is most prevalent or where there
is a big chance of exploitation of labour. Accordingly the main thrust of
the Act must be aimed at securing a sustenance wage, which keeps the
exploited labour above the starvation level.
55 Report of the Committee on Fair Wages, New Delhi: Government of India, Ministry of Labour (1949) pare 15.34 See Bijay Cotton Mills v State of Ajmir, AIR 1955 SC 33: Unichoy v State of Kerala, AIR 1962 SC 12. Chandra Bhavan Boarding & Lodging v State of Mysore, AIR 1970 SC 2042.
47
2. 3. NEEDS CRITERIAN AND THE JUDICIAL RESPONSE
Only very few cases came before the High Courts and the
Supreme Court, wherein the judiciary had an occasion to touch upon
the aspect of the norms or criteria followed with regard to fixation of
minimum rates of wages by the appropriate Governments under the
Act. The first and perhaps the only case that stood before the Supreme
Court in this context was from the State of Kerala and that decision has
remained as the ‘law of the land.’37 The facts of the case are as follows:
The Government of Kerala appointed a Committee in exercise of its
powers conferred by cl. (a) of sub-sec. (1) of S. 5 of the Act to hold
enquiries and advise the Government in fixing minimum rates of wages
in respect of tile industry. The committee was constituted under S. 9 of
the Act, and the said Committee has submitted its report on March 30,
1958.
The Committee in its Report has accepted the observation of the
Fair Wages Committee that the minimum wage “must provide not
merely for the bare subsistence of life but for the preservation of the
efficiency of the workers." Then it examined the food requirements of
the employee on the basis of three consumption units recognized in Dr.
Aykroyd’s formula. It then adopted the assessment made by the
Planning Commission in regard to the requirements of the employees in
17 Unichoy, Supra.
48
cotton textiles and placed the employee’s requirement at a per capita
consumption of 18 yards per unit, then it took into account the
requirement of housing and it held that the additional requirements for
workers for fuel, lighting and additional miscellaneous items of
expenditure should generally be fixed at 20 percent of total wage.38 The
Committee was conscious that it had to approach the problem from the
point of view of the minimum needs of workers in order to maintain a
subsistence standard, and so it enumerated the requirements of
workers in that behalf as food, clothing, fuel, lighting and other
miscellaneous items.
The Kerala Government considered the report and issued a
notification on May 12, 1958, prescribing the minimum rates of wages.
This was challenged by the employer directly under Article 32 of the
Constitution before the Supreme Court. Rejecting the contention of the
employer, it was held that, it is already seen what the Act purports to
achieve is to prevent exploitation of labour and for that purpose
authorizes the appropriate Government to take steps to prescribe
minimum rates of wages in the scheduled industries. “In an under
developed country, which faces the problem of unemployment on a very
38 The IS*1 Session oflndian Labour Conference, (1957) ha* approved the same noma to be followed as guiding principles for the Committees under the Minimum Wages Act, 1948. (The function of Indian Labour Conference is to “advice the Government of India on ray matter referred to it for advice, taking into account suggestions made by the provincial government, the States and representatives of the organizations of workers and employers”).
49
large scale, it is likely that labour may offer to work even on starvation
wages. The policy of the Act is to prevent the employment of such
sweated labour in the interest of general public and so in prescribing the
minimum wage rates the capacity of the employer need not be
considered. What is being prescribed are only the minimum wage
rates, which a welfare State assumes every employer must pay before
he employs labour”.39
Further the Court examined the components of a minimum wage in
the context of the Act by making a reference to the Report of the
Committee on Fair Wages. In this regard the Court reproduced the
following from the Report of the Committee on Fair Wages: “The
evidence led before the Committee on Fair Wages showed that some
witnesses were inclined to take the view that the minimum wage is that
wage which is essential to cover the bare physical needs of a worker
and his family, whereas the overwhelming majority of witnesses agreed
that a minimum wage should also provide for some other essential
requirements such as a minimum of education, medical facilities and
other amenities. The Fair Wage Committee came to the conclusion that
a minimum wage must provide not merely for the bare subsistence of
life but for the preservation of the efficiency of the worker, and so it must
also provide for some measure of education, medical requirements and
39 Vide: Crown Aluminium Works v Their Workmen. 1958 SCR 651 relied on.
50
amenities.” The concept about the components of the minimum wage
thus enunciated by the Committee Fair Wages has been generally
accepted by industrial adjudication in this country. Sometimes the
minimum wage is described as a bare minimum wage in order to
distinguish it from the wage structure which is ‘subsistence plus’ or fair
wage, but too much emphasis on the adjective “bare” in relation to the
minimum wage is apt to lead to the erroneous assumption that the
maintenance wage is a wage which enables the worker to cover his
bare physical needs and keep himself just above starvation. That clearly
is not intended by the concept of minimum wage. On the other hand
since the capacity of the employer to pay is treated as irrelevant it is but
right that no addition should be made to the components of the
minimum wage which would take the minimum wage near to the level of
the fair wage, but the contents of this concept must ensure for the
employee not only his sustenance and that of his family but must also
preserve his efficiency as a worker. The Act contemplates that minimum
wage rates should be fixed in the scheduled industries with dual object
of providing sustenance of the worker and his family and preserving his
efficiency as a worker. It is impossible to accept the argument that the
wage structure ultimately recommended by the Enquiry Committee is
anything higher than what the Enquiry Committee thought to be the
minimum wage-structure. Therefore we are not prepared to hold that
51
the notification, which is in conformity with recommendations of the
Enquiry Committee, has prescribed wage rates, which are higher than
the minimum wage structure, if that be so, failure to take into account
the capacity of the industry to bear the burden can introduce no infirmity
either in the recommendations of the Committee or in the notification
following upon them.40
Indeed this was the beginning wherein the enquiry committee
appointed under the Act, has adopted the approved nones for the
purpose of fixation of minimum rates of wages and more interestingly,
the same were categorically approved by the apex Court.
In W.C.F. Federation v State of Kerala41, while dealing with the
question of fixation of minimum rates of wages under the Act, the Kerala
High Court held that, the only relevant consideration for the fixing of
minimum wages under the Act, is the minimal requirements of the
workers concerned. A fair wage is the demand and the destination. Its
upper limit is the “living wage”. The minimum wage is the lower limit of
the fair wage. It represents the limit below which the wages shall not be
allowed to drop. In other words the prescription of minimum wages puts
a floor under wages as the prescription of maximum hours puts a ceiling
on the hours of work. The capacity to pay does not enter into the
40 Supra n. 37at 1641 AIR 1968 (Ker) 19.
52
picture. It is not a relevant factor for fixation of minimum wage under
the Minimum Wages Act.42
Further the Court reiterated the apex Court observation in Crown
Aluminium v Their Workmen43 that, “there is one principle which admits
of no exceptions. No industry has a right to exist unless it is able to pay
its workmen at least a bare minimum wage. It is quite likely that in
under-developed countries, where un-employment prevails on a very
large scale, unorganized labour may be available on starvation wages.
But the employment of labour on starvation wages cannot be
encouraged or favoured in modem democratic welfare state. If an
employer cannot maintain his enterprise without cutting down the wages
of his employees below even a bare subsistence or minimum wage, he
would have no right to conduct his enterprise on such terms.” Under
Sec.3 different minimum rates of wages may be fixed for different
localities. Such minimum wages represent payments below which the
wages shall not fall. The only rational basis for a variation therefore, will
be the difference in the needs of the workers in the localities concerned.
The minimum needs of workers depend not merely on nutritional
*l Id. at 20.45 Supra n. 39 at 652.
53
necessities but also on the standard of life to which they have been
accustomed.44
Speaking on the powers of the appropriate Government with
regard to fixation of minimum wages under Sec. 5 of the Act, the
Supreme Court in Chandra Bhawan Boarding & Lodging v Sfafe of
Mysore46 held that, “Minimum wage does not mean a wage just
sufficient for bare sustenance. At present the conception of a minimum
wage is a wage, which is somewhat intermediate to a wage, which is
just sufficient for bare sustenance and a fair wage. That concept
includes not only the wage sufficient to meet the bare sustenance of an
employee and his family, it also includes expenses necessary for his
other primary needs such as medical expenses, expenses to meet
some education for his children, and in some cases transport charges
etc.”
The issue of fixation and quantification of minimum rates of wages
under the Act once again came up before the Kerala High Court in
Kerala Hotel & Restaurant Association v State of Kerala.46 The
Appellants contended that the enquiry committee appointed under
Section 9 of the Act, exceeded its jurisdiction when it fixed, not the
minimum, but if at all, only 'fair1 wages.
44 Supra n. 41 at 20.45 Supra n. 36.46 UC 1989 Ker. 1065.
54
The Committee collected materials through questionnaires,
visited several places and inspected several establishments, collected
evidence from employers, employees and trade unions, and held
discussions on the subject and prepared its report. The report shows
that after considering the service conditions and the nature of the
employment, the employees were divided into seven categories and
further sub-divided into 4 to 6 grades and different posts are included
under different grades. The Committee referred to the concept of
minimum wage as explained in several decisions of the Supreme Court,
in the report of the Fair Wage Committee and then fixed the wages with
reference to the materials collected and the evidence available. In
calculating the family budget, the earlier method of calculation based on
the food needs as recommended by Dr. Aukroyd was followed. A
catalogue of the balance diet of ordinary food used for labourers
submitted by the State Nutrition office was also considered. The
expenses of 2900 calories of balanced diet were calculated; and the
price of wearing apparel and the house rent calculated at Rs. 25/- per
month were also taken note of. Accordingly fixed the minimum rates of
wages amounting to Rs. 989/- per month.47
The Court held that it is too late in the day to enter into a long
discussion on the concept of minimum wages or fair wages as these are
47 Ibid.
55
no longer res Integra, concluded as we are by the decisions of the
Supreme Court in Unichoy V State of Kerala48 and in Chandra Bhawan
Boarding and Lodging V State of Mysore49 and other decisions.
Further it was observed that the Committee has given good
reasons for arriving at the figure of 2900 calories. Dr. Aykroyd
recommended 2700 caloric food for an ordinary worker. The Labour
Secretaries Committee on the basis of the recommendation of the
Nutrition Advisory Committee in the year 1967, recommended that an
ordinary labour requires 2800 calories of food, 3000 calories required
for an employee doing heavy work. After considering all these facts the
Committee recommended that an employee in this industry require a
diet of 2900 calories and 5600 calories for 2 consumption units, which
include wife and two children. It is thus clear that the Committee can fix
minimum wages not only for bare sustenance but also taking into
account the expenses necessary for other primary needs as well.50
Finally the Court held that the minimum wage is not mere
“maintenance wage” enabling the worker to cover his bare physical
needs and keep himself just above starvation. It should ensure not only
his sustenance and that of his family but also to preserve his efficiency
as a worker. It has, therefore, to provide for some measure of
Supra.50 Supra n. 46 at 1072.
56
education, medical requirements and other necessary amenities. The
capacity of the employer to pay has no relevance in the concept of
minimum wages. The contention that minimum wage has to be co
related to bare sustenance cannot be accepted. Minimum wage is bare
wage with a plus element. In this case we are satisfied, that the
Committee has fixed only minimum wages and not fair wages and have
not exceeded their jurisdiction.51
On the whole it is interesting to note that the Kerala Government
has followed the well-recognized norms in the area of quantification of
minimum rates of wages under the Act and the judiciary with out any
exceptions approved the same.
Further it is interesting to observe the next set of decisions
rendered by the Bombay High Court with regard to quantification and
fixation of minimum rates of wages by the appropriate Government
under the Act.
In Mumbai Kamagar Sabha v State of Maharashtra52 the
Petitioners contended that the report of the enquiry committee fixing the
minimum rates of wages for the Printing Industry is an unreasoned
document and that many factors taken into consideration by the
committee were extraneous to the object of fixation of a minimum wage.
51 Ibid.51 1991 LIC 1150 (Bom).
57
After perusing the report of the committee, the Court observed that, the
concept of minimum wage as recorded in the report was with full of
contradictions since the same is described as if it were a bare
subsistence wage. Accordingly the Court struck down the notification,
on the ground that the minimum requirement of food, clothing, medicine
and housing of a press worker has not taken into consideration by the
enquiry committee appointed under the Act. In the absence of such a
consideration of the requirements, which go into the making of a
minimum wage, it cannot be said that the committee has formulated
what can be under stood as a ‘minimum wage’ as contemplated by the
Act and directed that the revision exercise has to be carried out by the
State in the light of the observations made and also to issue a fresh
notification.53
Similarly in Mumbai Kamgar Sabha v State of Maharashtra54, the
petitioners challenging the notification revising the minimum rates of
wages for the persons employed in Shops and Commercial
establishments, contended that the concept of minimum wage is a well
defined one and this has been brought out in several decisions of the
Supreme Court and the enquiry committee had made basic errors while
trying to comprehend what a minimum wage amounted to, without
s Id. at 1151.54 1991 11C 1147 (Bom).
58
giving reasons as to why particular figures were accepted as the
minimum wage for different classes of employees working in different
regions.55 The Court held that there is no doubt that the enquiry
committee being cognizant of different factors, went into the formulation
of a minimum wage for workmen in different classes and regions but
awareness of the factors, which goes to the moulding of a minimum
wage is only one part of the task. The other, and more important, is as
to how the said factors are to operate in a given set of conditions. The
Committee has shown an awareness of the features to be taken into
consideration while devising a minimum wage. These are in the nature
of assumptions such as the size of a standard family of a workman, the
caloric requirement of workman, requirement for the purposes of
clothing, house rent, fuel, lighting and the like items. But the Committee
has not worked out these items into monetary terms for the different
regions. In relation to food, what it had to do was to find out what
materials were consumed by workmen employed in shops and
commercial establishments in different regions. Next, it had to find out
what the cost of the cereals, pulses and other items of food worked out
to. After this, a figure in terms of money should have been worked out
to fit minimum stipulated by Dr. Aukroyd. The clothing requirement per
family consisting of four individuals has been taken at 72 yards. But the
35 Id. at 1148.
59
quality of cloth and the price thereof has not been stated. In relation to
rent, the figures given by the State from its Housing Department have
been accepted. But how these figures apply in different regions
remains unexplained. The last item allegedly taken into consideration is
the price of fuel and lighting etc. For this purpose a flat rate of 20 per
cent of the wages has been assumed. But how such items, like fuel
and lighting would cost in different regions is not explained. The task
entrusted was not to arrive at mutually acceptable figure, but to give a
report which would be a reasoned one and therefore acceptable and fit
for being notified as the minimum wage for the employees engaged in
shops and commercial establishments.56
Further it was observed that, it is coming across second time a
notification of the State Government accepting the minimum wage
proposed by a Committee presided over by a layman assisted by
representatives of the employer and the employees. With respect to
this practice, they seem to do little more than to take a trip around the
State, collect memoranda from different organizations and produce an
unreasoned document, which is easily acceptable by the Government.
The better alternative would be to appoint an expert to work out a
minimum wage for an industry, the workmen of which the State
Government believes, deserve protection in the matter of a minimum
56 Ibid
60
wage. Accordingly the notification was struck down with a direction to
issue a fresh notification in the light of the directions made there
under.57
The interesting aspect from all these decisions, is that the judiciary
have given due regard and recognition to the question of definition of
the term ‘minimum wages’ and the ‘criteria’ for determining the minimum
rates of wages under the Act by insisting, the “needs” criterion.
Though there are no set of norms prescribed by the Act with regard
to quantification of minimum rates of wages that are to be fixed, yet the
judiciary has given paramount importance to the ‘needs’ criterion,
particularly the food requirement. Invariably, it has relied on the
definition of term ‘minimum wages’ as defined by the Committee on Fair
Wages, 1949.
Coming back to the preliminary question i.e. why the majority of
States have not followed the exact and uniform criteria in their approach
in fixing the minimum rates of wages under the Act, though the ‘needs’
criterion did exist in their agenda, they have totally failed to adhere to
any set of standards in aniving at the quantum of ‘needs’ criterion.
Even the organized trade unions either in respective States or at the
Central have failed to take up the cause in this regard baring a few
exceptions. How far the Governmental pronouncements have
Ibid57
61
influenced in tackling this fundamental problem is discussed in the next
chapter.