Section 55: Offences by companies

Overview

Section 55 of the Code on Wages, 2019 deals with the responsibility of companies when wage-related offences occur. It clarifies that if a company breaks the rules outlined in the Code (regarding minimum wages, payment timings, deductions, etc.), the people *running* the company can be held accountable, even if they weren't directly involved in the wrongdoing. This section focuses on ensuring accountability within organizations.

Scope and Coverage

• Which employees and establishments are covered: This section applies to *all* companies, regardless of size or sector, covered under the Code on Wages. This includes all workers – skilled, unskilled, temporary, permanent, and contract workers – whose wages are regulated by the Code.
• Any thresholds or exclusions: There are no specific thresholds or exclusions regarding the application of this section to companies. It applies universally to all companies falling under the purview of the Code on Wages.

Key Obligations and Rights

• Main duties of employers: Employers (specifically, those in charge of the company) have a duty to ensure the company complies with all provisions of the Code on Wages. This includes establishing systems to prevent wage-related offences.
• Important rights or protections for employees: While this section directly addresses employer responsibility, it indirectly protects employees by ensuring that companies are held accountable for violations of their wage rights. It reinforces the principle that companies cannot shield themselves from liability by claiming ignorance.

Compliance and Penalties

If a company violates the Code on Wages, the person(s) in charge and responsible for the company’s business will be considered guilty. However, they can avoid punishment if they can *prove* they didn’t know about the offence *and* that they took all reasonable steps (due diligence) to prevent it. If they cannot prove this, they face penalties as prescribed under the Code, which can include fines and, in some cases, imprisonment. Inspections by Labour Officers can lead to the discovery of violations and subsequent legal action.

Practical Examples

• Example 1 from a typical workplace: A factory consistently delays wage payments to its workers. The factory manager, despite knowing about the delays, doesn’t take any action to rectify the situation. Under Section 55, the manager (and potentially other senior officials) could be held liable for the offence, even if they didn’t personally instruct the delay.
• Example 2 for a borderline scenario: A company’s payroll department makes an error resulting in incorrect deductions from employee salaries. The company’s CEO was unaware of this error and had implemented a robust internal audit system to prevent such mistakes. In this case, the CEO could likely prove lack of knowledge and due diligence, and therefore wouldn’t be held liable.