Demonetisation and wages as per labour law

Can an industrial worker, after a month-long toil get his wages credited into his account? Can he be told that he can’t withdraw the cash from his deposit? What does the labour law say on this? The procedure for payment of wages to a worker and the necessity to regulate the same has an interesting history behind it. The Indian industrial workers were told by the colonial government that after the World War I there will be improvement in their conditions of service, and the country was made an independent member of the International Labour Organisation (ILO). But nothing materialised. 

The Royal Commission of Labour (1929) which visited India recorded evidence from the workers and management from different industries. It noticed that the wages of the workmen, besides being abysmally low, were also not been paid on time. The commission observed: “In all cases of deduction we consider that there is strong ground for legislative regulation. In the first place the worker is utterly helpless in the matter. Further, the fact that in many cases the worker’s wages suffice for little more than the purchase of the primary necessities of life makes even a small deduction a definite hardship.” 

It is in this context the colonial government enacted the Payment of Wages Act, 1936. The intention of the Act was to regulate and fix a maximum period for payment of wages. The Act gave the employer the option to pay the wages either daily, weekly or monthly basis and not beyond that. Earlier, workers used to be paid on quarterly or annual basis. Some industries were paying workers in kind and sometimes allowed them to sell the commodities they produced in the market as wages. In order to put an end to this kind of exploitation, section 6 of the Act mandated “All wages shall be paid in current coin or currency notes or in both”. The Tamil Nadu Shops and Establishment Act, 1947 covering the commercial establishments also has an identical provision under section 33 of the Act. Both the enactments barred the employers from making illegal deductions. 

The ILO, in its convention concerning protection of wages (24.9.1952) in Article 3.1 mandated: “Wages payable in money shall be paid only in legal tender, and payment in the form of promissory notes, vouchers or coupons, or in any other form alleged to represent legal tender, shall be prohibited.” The effect of all these is that a worker is guaranteed that his payment will be only in cash or coin and strictly by a legal tender. That was why Karl Marx described the proletariat as a “wage slave”. 

But the later life style of the industrial workers started showing many weaknesses which included addition of spouses. On pay day both wives would appear in front of the factory, waiting to catch hold of her worker husband to pay give her the wage packet. Trade unions were unable to solve these issues nor could they be tackled as a law and order problem. Therefore, the Parliament amended the Payment of Wages Act and section 3(2) was brought in, stating, “Employer may, after obtaining the written authorisation of the employed person, pay him the wages either by cheque or by crediting the wages in his bank account”. From then on, the workers getting their salaries by way of cheque was accepted as a legal tender. 

When the Tamil Nadu government followed suit in crediting salaries of their employees by Electronic Clearance System(ECS), some school managements challenged the same and it was repelled by the court. It was held that the modern technology cannot be thwarted. 

The question now is simple will not denial of withdrawal of their full salary amount to payment of reduced salary which is nothing but a forced labour prohibited by Article 23 of the Constitution.