sofiabhambri
- Mar 11, 2021
- 16 min read

Minimum Wages and Financial Capacity of Employer

Introduction

In India, till now, there is no uniform and comprehensive wage policy for all sectors of the economy. Wages in the organized sector are determined through negotiations and settlements between employer and employees. However, in unorganized sector, where labour is vulnerable to exploitation, due to illiteracy and having no effective bargaining power, minimum rates of wages are fixed or revised both by Central and State Governments in the Scheduled Employments falling under their respective jurisdictions under the provisions of the Minimum Wages Act, 1948 was enacted to regulate payment of minimum wages to employees. The act is legally non-binding, but statutory. Payment of wages below the minimum wage rate amounts to forced labour. Wage Boards are set up to review the industry’s capacity to pay and fix minimum wages such that they at least cover a family of four’s requirements of calories, shelter, clothing, education, medical assistance, and entertainment.

Our Indian Constitution has accepted the concept of a social welfare State, i.e., a State which renders social services to the people and promotes their general welfare. Thus, from various provisions contained in the Constitution, it can be easily understood that the Indian Constitution gives a strong base for social security and fair wages. This is reflected in the Preamble, Fundamental Rights and Directive Principles of State Policy.

Fundamental right is enshrined in part III from article 12 to 35 of the Indian Constitution. At the time when the constitution was being prepared by the constituent assembly, they in order to save the interest of the citizen to live with dignity and independently have inserted these rights and named it fundamental right. The fundamental rights are being borrowed by the US constitution. But our fundamental rights are much wider than that of US. Currently they are six in numbers. Because one of the rights “Right to property” has been deleted and moved to because a legal right by 44th amendment 1978.

Part IV of the Indian Constitution deals with Directive Principles of our State Policy (DPSP).

The provisions contained in this Part cannot be enforced by any court, but these principles are fundamental in the governance of the country and it shall be the duty of the State to apply these principles in making laws.

Indian Constitution has accepted the concept of a social welfare State, i.e., a State which renders social services to the people and promotes their general welfare. Thus, from various provisions contained in the Constitution, it can be easily understood that the Indian Constitution gives a strong base for social security and fair wages. This is reflected in the Preamble, Fundamental Rights and Directive Principles of State Policy.

Constitutional perspectives on labour wages in India

FUNDAMENTAL RIGHTS-

Fundamental Rights are needed to protect the rights of the people against encroachment of the power delegated to the Government by the people. There are limitations upon all the powers of the Government including the legislative powers and they are essential for the preservation of public and private rights in every sphere.

In landmark judgment of Maneka Gandhi v. Union of India, Bhagwati, J, speaking about the importance of the Fundamental Rights, observed that “Fundamental Rights represent the basic values cherished by the people of this country since the ancient times and they are calculated to protect the dignity of the individual and create conditions in which every human being can develop his personality to the fullest extent”.

ARTICLE 14:

This Article embodies the idea of equality expressed in the Preamble.

It declares that, ‘the State shall not deny to any person equality before law or the equal protection of the laws within the territory of India’. The concept of ‘Equality before law’ means that among equals the law should be equal and should be equally administered, that the like should be treated a like. For example, the right to sue and be sued, to prosecute and be prosecuted for the same kind of action should be the same for all citizens of full age and understanding without distinction of race, religion, wealth, social status, or political influence.

In the case of Anwar Ali Sarkar V. State of West Bengal, Court pointed out that expression, equal protection of law is corollary to equality before law. There appears to be some truth because nobody can think of violation of equal protection of law unless equality before law is violated.

In D.S. Nakarra v. Union of India, the Supreme Court ruled that “the fundamental principle is that Article14 prohibits class legislations but permits reasonable classification for the purposes of legislation which must satisfy the twin tests of classification, mentioned below;

It should be based on a reasonable differentia which distinguishes person or things that are grouped together for those that are left out of the group.

That the differentia must have a rational nexus to the object sought to be achieved by the statute in question.

So, government can make special provision for setting minimum wages for class of workers for their upliftment and livelihood.

Article 15:

This article embodies, Prohibition of discrimination on grounds of religion, race, caste, sex or place of birth.

Article15(1) specifically bars the State from discriminating against any citizen of India on grounds only of religion, race, caste, sex, place of birth or any of them. However, under Article15 (3), the State is not prevented from making any special provision for the women and children.

The object of Article15 (3) is to strengthen and improve the status of women. Art 15(3) thus, relieves the State from the bondage of Article15 (1) and enables it to make special provision to accord socio-economic equality to women. Further, the scope of Article15 (3) is wide enough to cover the entire range of State activity including that of employment.

In the case of Government of Andhra Pradesh v. P.B Vijay Kumar, the Supreme Court ruled that under Article15 (3), the State may fix a quota for the appointment of women in the Government services.

Also, a rule saying that all other things being equal, the preference would be given to women to the extent of 30% of the posts was held valid with reference to Article15 (3). The Court has also emphasized that an important limb of the concept of gender equality is creating job opportunities for women. Making special provisions for women in respect of the employment or posts under the State is an integral part of Article15 (3). To say that under Article15 (3), job opportunities for women cannot be created would be to cut at the very root of the underlying inspiration behind this Article. This power conferred by This power conferred by Art 15(3) is not whittled down in any manner by Article16.

Article 19: Protection of certain Rights regarding Freedom of Speech, etc:

In Express Newspapers v. Union of India, the Supreme Court observed that there is a close relationship between the right to carry on trade and wages payable to the employees in a trade or industry. Too high wages may affect the economic viability of an industry, but too low wages may amount to exploitation of human labour. Therefore, a balance has to be drawn between the two conflicting values. The Supreme Court has held that the technique of appointing a wage board consisting equally of the representatives of the employers and workmen with a few neutral members and a neutral chairman for fixing wages in an industry according to factors laid down and according to natural justice, does not amount to an unreasonable restriction on trade and commerce.

Art.19 (1) (g) and 19 (6) demand that in fixing Living wage or Fair Wage or minimum wage, industry’s ‘capacity to pay’ is an essential ingredient.

Gratuity being a reward for good, efficient and faithful service for a considerable period, there could be no justification for awarding it when an employee resigns only after three years of service except under exceptional circumstances. Accordingly, a provision of law proving for gratuity in such a case amount to an unreasonable restriction under Article19 (6) on the employer’s right to carry on

business and would be liable to be struck down as unconstitutional.

However, in the case of Bakshish Singh v. Darshan Engineering Works, the Court observed that the obligation of the employer to pay gratuity to the employee on his resignation or retirement after a continuous service of five years has been held to be a reasonable restriction in the public interest on the employers’ right to carry on trade. The court has justified it as a welfare measure in the interest of the general public to secure social and economic justice to workmen to assist them in their old age and to ensure them a decent standard of life on their retirement. In the case of Jalan trading Co v. D.M. Aney the court observed that a statutory obligation to pay the statutory minimum bonus by the employers to the workmen even when the employer sustained loss, has been held to be reasonable and in the public interest, as this is in the implementation of the Directive Principles State Policy in Arts.39 and 43 (providing for living wage, etc for workers) of the Constitution. What is sanctioned by the Directive Principles cannot be regarded as unreasonable or contrary to the public interest in the context of Article19.

Article 21: Protection of Life and Personal Liberty:

Article21 of the Indian Constitution lays down that, ‘no person shall be deprived of his life or personal liberty except according to the procedure established by law’.

A very fascinating development in the Indian Constitutional jurisprudence is the extended dimension given to Article21 by the Supreme Court in the post Maneka Gandhi case era.

The right to life enshrined in Article21 has been liberally interpreted to mean something more than mere existence or animal existence. It therefore, includes all those aspects of life which go to make a man’s life meaningful, and worth living.

Right to Livelihood-

In the case of Board of Trustees of the Port of Bombay v. Dilip kumar

R. Nandakarni, by defining the word “Life” in Art 21 in a broad and expansive manner, the Supreme Court held that “Right to Life” guaranteed by Article21 includes the “Right to Livelihood”.

Further, the Court has said in Olga Tellis v. Bombay Municipal Corp, a case which was brought by pavement dwellers to resist eviction from their habitat by the Bombay Municipal Corporation that, the Right to livelihood is born out of the Right to life, as no person can live without the means of living, that is, the means of livelihood.

Deprivation of livelihood would not only denude the life of its effective content and meaningfulness but it would make life impossible to live. And yet, such deprivation of life would not be in accordance with the procedure established by law, if the Right to livelihood is not regarded as a part of the Right to life.

Economic Rights:

In Air India Statutory Corp v. United Labour Union, by reading Article 21 along with the Preamble to the Constitution and several Directive Principles, the Supreme Court has ruled that Social justice, right to economic justice, right to economic equality, Economic empowerment of the weaker sections of the society constitute Fundamental rights. The aim of social justice is to attain substantial degree of social, economic and political equality. Social justice and equality are complementary to each other.

Right to live with Human Dignity:

In Maneka Gandhi’s case, the Court held that ‘the Right to live is not merely confined to physical existence, but it includes within its ambit the Right to Live with Human dignity’.

Similarly, in People’s Union for Democratic Rights v. Union of India, the Court held that non-payment of minimum wages to the workers employed in various Asiad projects in Delhi was a denial to them of their Right to live with Human dignity and violative of Article21 of the Indian Constitution.

Health and labour:

Occupational accidents and diseases remain the most appalling human tragedy of the modern industry. Health hazards by the workers in the Asbestos Factories were brought to the attention of the Supreme Court in CERC v. Union of India. After taking note of the case in which, it has been held that the right in Article21 includes the ‘Right to live with human dignity’, the Supreme Court held that the ‘Right to Health, Medical aid to protect the health and vigour of a worker while in service or post retirement’ is a Fundamental Right under Article21 read with the Directive Principles in Articles 39(1), 41, 43, 48A, and all related Articles and Fundamental Human Rights to make the life of the workman meaningful and purposeful with dignity of the person.

DPSP-:

Part IV of the Indian Constitution deals with Directive Principles of our State Policy (DPSP). The provisions contained in this Part cannot be enforced by any court, but these principles are fundamental in the governance of the country and it shall be the

duty of the State to apply these principles in making law.

In Minerva Mills vs Union of India, the question before the court was whether the directive principles of State policy enshrined in Art IV can have primacy over the fundamental rights conferred by Part III of the Constitution. The court held that the doctrine of harmonious construction should be applied because neither of the two has precedence to each other. Both are complementary therefore they are needed to be balanced.

Article 39 (a) states that the citizens, men and women equally, have the right to an adequate means to livelihood. No one can be deprived of it.

Article 42-

It provides for provision for just and humane conditions of work and maternity relief.

ARTICLE 43: LIVING WAGE, ETC., FOR WORKERS

The State shall endeavour to secure, by suitable legislation or economic organisation or in any other way, to all workers agricultural, industrial or otherwise, work, a living wage, conditions of work ensuring a decent standard of life and full enjoyment of leisure and social and cultural opportunities and, in particular, the State shall endeavour to promote cottage industries on an individual or co-operative basis in rural areas.

ARTICLE 47: Duty of the state to raise the level of nutrition & the standard of living & to improve Public Health

The State shall regard the raising of the level of nutrition and the standard of living of its people and the improvement of public health as among its primary duties and, in particular, the State shall endeavour to bring about prohibition of the consumption except for medicinal purpose of intoxicating drinks and of drugs which are injurious to health.

Constitutional Validity of the Minimum Wages Act, 1948

The concept of Minimum Wages was first unrolled by International Labour Organization in 1928 with reference to remuneration of workers in those industries where the, level of wages was substantially low and the labour was vulnerable to exploitation, being not well organised and having less effective bargaining power.

The Minimum Wages Bill was introduced in the Central Legislative assembly on 11 April, 1946 to provide for fixation of minimum wages in certain employments. The Minimum Wages Bill was passed by the Legislature and came into force on 15th March, 1948 giving both central and state government right to fixation of wages. It is an important act concerning labour laws in the country. The Act is legally not binding but statutory.

Wage Boards are set up to review the industry’s capacity to pay and fix minimum wages such that they at least cover a family basic requirement. The Act applied to certain employments (listed in the Schedule). The appropriate government may add any employment to the list if there are 1000 workers are working in that state.

On the following grounds the constitutional validity of The Minimum Wages Act, 1948 was

Challenged-:

• The Act was unreasonable-

The Act was said to be unreasonable as it somewhere interfered with the provisions of Article 19(1)(g) of The Constitution which guarantees freedom to trade and business. It was also said that this Act would create problems for individual employees.

• The Act Violates article 14 of The Constitution-

It was said that the provisions of this Act also violate Article 14 of The Constitution which provides for equality before the law.

• Notification fixing different rates of minimum wages for different localities is discriminatory-

Where the fixation of rates of wages and their revision were manifestly preceded by a detailed survey and enquiry and the rates were brought into force after a full consideration of the representations which were made by a section of the employers concerned, it would be difficult in the circumstances to hold that notification which fixed different rates of minimum wages for different localities was not based on intelligent differentia having a rational nexus with the object of the Act, and thereby violated article 14 .

Sanctity of The Minimum Wages Act-

It was said that as the above Act violates Article 14 and 19(1)(g) of The constitution, they cannot be termed to be proper.

LANDMARK JUDGEMENTS-

In the case of “BIJAY COTTON MILLS LTD V. THE STATE OF AJMER”

The Constitutional validity of this Act was challenged on the ground that it violates the guarantee of freedom of trade or business etc., envisaged by Article 19(1)(g) of the Indian Constitution. whether they offend fundamental rights guaranteed under Art. 19(1)(g) - 19(6)-Minimum Wages Act, 1948, sections. 3,4 and 5-Appropriate Government-Fixing minimum rate of wages.

It was held that , the restrictions imposed upon the freedom of contract by the fixation of minimum rates of wages though they interfere to some extent with the freedom of trade or business guaranteed under Art. 19(1)(g) of the Constitution are not unreasonable and being imposed in the interest of general public and with a view to carry out one of the Directive Principles of State Policy as embodied in Art. 43 which talks about living wages in the Constitution are protected by the terms of clause (6) of Art. 19. It can thus be said that the provisions of the Act are bound to affect harshly and even oppressively a particular class of employers, who for purely economic reasons are unable to pay the minimum rate of wages fixed by the authorities, but have absolutely dishonest intention of exploiting their workers.

The fact that employer might find it difficult to carry on business on settled principle cannot be a sufficient reason for striking down the law itself as unreasonable. The poverty of labourers is also a factor to be taken into consideration while determining the question whether a particular provision is in the interest of the general public.

Thus, by following case and judgements explained below constitutional validity of the act would be determined.

(A): The act is not unreasonable:

One of the directive principles of the state policy embodied in Article 43 of the constitution talks about securing living wages to labourers which not only ensure bare physical subsistence but also health and decency is important for public interest.

Its although true that individual employers might find it difficult to carry on the business on the basis of minimum wages fixed under the Act but this must be not be the entire premise and reason to strike down the law itself as unreasonable.

In the case of Shamrao V. State of Bombay it was held that “The restrictions, though they interfere to some extent with the freedom of trade or business guaranteed under Article 19(1)(g) of the constitution, are reasonable and, being imposed on the general interest of the general public, are protected by the terms of the clause (6) of the article 19.”

Another important judgement that favours and supports the constitutional Validity of the Minimum Wages Act,1948 is, V. Unichonoy V. State of Kerala, facts were, that, can a state be prevented from making any law, in the interest of general public, where it creates restrictions and interferes to some extent with the freedom of trade or business guaranteed under Article 19(1)(g) , of the Constitution of India, and it was held that , “ Fixation of minimum wages is for preservation of public order , and if no minimum wage is fixed then it shall lead to arbitrariness by the employers and that shall lead to clashes of interest between employer and labour which shall cause friction in society”.

(B) The Act does not violate Article 14 of the Indian Constitution:

The case Bhikusa Yamasa Kshatriya vs Sangammar Akola Bidi Kamgar Union, on a careful examination of the various of the Act and the machinery setup by this Act, Section 3(3)(iv) neither contravenes Article 19(1) of the constitution nor does it infringe the equal protection clause of the constitution. The Courts have also held that the constitution of the committees and the Advisory Board did not contravene the statutory provisions in that behalf prescribed by the legislature.

Further, in C.B. Boarding & Lodging, Re V. State of Mysore & Others it added to the above-mentioned case that, nor the reason that two different procedures are provided for collecting information.

Notification fixing different rates of minimum wages for different localities is not discriminatory:

As pointed out by one of the India’s Union Labour and Employment Minister Shri Mallikarjuna Kharage, “The variation of minimum wages between the states is due to differences in socio-economic and agro-climatic conditions, prices of essential commodities, paying capacity, productivity and local conditions influencing the wage rate. The regional disparity in minimum wages is also attributed to the fact that both the Central and the State Governments are the appropriate Governments to fix, revise and enforce minimum wages in Scheduled employments in their respective jurisdictions under the Act”.