K.T. Sangameswaran

Bank employees term it unconstitutional

CHENNAI: Is fixing of ceiling on wages of employees for entitlement to bonus in the Payment of Bonus Act legal or illegal? This is to be decided by a Division Bench of the Madras High Court, which has reserved orders on an appeal preferred by an association of employees of a nationalised bank, which has said that fixing a ceiling is unconstitutional.

The UCO Bank Employees Association, Tamil Nadu, had moved the Madras High Court stating that from the definition of the term ‘employee’ in the legislation it was clear that with the increase in wages of employees to compensate the rise in prices, lakhs of employees in the country working even in class III and IV categories would go out of the purview of the definition.

As a result, bonus, which was considered a deferred wage and profit-sharing became meaningless even for the two categories. Since the wages of employees in the country fell short of living wage standard and the industry made profits, a part of which was due to the workers’ contribution, it was fair and just that no ceiling was imposed on wages with regard to entitlement of bonus.

By an order dated July 5, 2002, a single Judge dismissed the writ petition stating that Parliament was well aware of the grievances of the persons concerned. It increased the ceiling limit then and there. The Judge held that Section 2 (13) of the Act, which defined an employee, was constitutional and valid in law.

Challenging this, the association preferred appeal stating that the single Judge had erred in not considering the “arbitrary and discriminatory aspect” of the impugned provision of the legislation and that there were no guidelines for exercise of the power vested in Union Labour Ministry to raise the ceiling. The ceiling had no rational nexus to the object sought to be achieved by the Act. The limit fixed was violative of Article 14 of the Constitution.

In the written arguments, P. Wilson, Assistant Solicitor General of India, submitted that the definition of an employee had undergone gradual amendments in 1985, 1995 and the latest in 2007. By an ordinance last year, the salary limit had been revised to Rs.10,000 from Rs.3,500.

He said Section 2 (13) brought in definition of an employee only for the purpose of classifying employees who were entitled to receive the bonus. The definition without the ceiling would be very wide and exhaustive. The legislation being one on social security of the working class, the Centre from time to time had power to calculate the ceiling taking into account the economic situation, living index and revision of pay scales.