A piece rated employee is also covered under ESI

E.S.I. Corporation vs M/S Hindustan Milkfood  Manufacturing Ltd and others, it is held that the principal employer is liable to pay ESI contribution for the piece-rated employee as they are also covered under the ESI Act.

In this case, the employees were employed through a contractor and worked for several years, i.e. 1972-1983 on contract basis for the principal employer. Once the work is done for which they were appointed, the employees used to submit their bill and employer paid their wages on a piece rate basis. On inspection, the Employees State Insurance (“ESI”) Authority raised a demand of ESI contribution upon the principal employer and accordingly, Employees Insurance Court Patiala held that the employer is liable to pay contribution of piece rated employees as the piece rated employees are also come under the definition of employee as per Section 2(9) of the ESI Act.

The principal employer filed a petition challenging the demand of the ESI Authority before the High Court. The High Court reversed the order of the Employees Insurance Court holding that piece rated employees are not covered by the ESI Act.

Aggrieved by the decision, the ESI Authority then challenged the order of the High Court by filing an appeal to the Supreme Court. The counsel for the Respondent argued that the employees do not fall within the definition of ‘employee’ under the Section 2(9) of the ESI Act as the payment was made on piece rate basis.  The Supreme Court held that the finding of the High Court cannot be said to be in accordance with law as it seems the High Court gave its decision without examining evidence and reasoning given by ESI Court. The Supreme Court also held that the mode of piece rate payment is covered under the definition of ‘wages’ in Section 2(22) of the ESI Act. Accordingly, the Supreme Court set aside the order of the High Court and allowed the appeal. Thus, the Supreme Court has confirmed the order passed by ESI Court, Patiala i.e. principal employer to remit ESI contribution in respect of contract workers and piece rated workers.

A piece rated employee is also covered under ESI


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