The role of a legal representative in place of a deceased employer

The Union Ministry of Labour and Employment introduced the Code on Wages in 2019, thereby repealing age-old laws like The Payment of Wages Act, 1936; The Minimum Wages Act, 1948; The Equal Remuneration Act, 1976 and The Payment of Bonus Act, 1965;

The definition of ‘employer’ in the repealed Acts differed and the scope of definition of employer was limited, especially in the first three Acts. Additionally, the Payment of Bonus Act, 1965 recognizes the role of legal representative of the deceased employer under Section 2(14).

Scope of definition of Employer

With the introduction of the Code, the legislature has aspired to expand the scope of the term "employer" under Section 2(l), which has swept doors open for broad based application of the Code.

Section 2(l) of the Code, under clause (iv), provides that the legal representative of the deceased employer shall also be given the same status as that of an employer. It was important for the legislature to include legal representatives under the ambit of employer, as to hold the employer responsible even after his/her death because of his/her influential position in all the establishments.

Liability of an Employer

Employers, by virtue of their qualifications and experience, acquire certain rights and privileges which they possess during their lifetime and certain obligations which they must fulfil towards the employees of the establishment. Due to the authority held by the employer, the death of the employer shall not bring an end to the duties and responsibilities possessed by them. Employees of such establishments and the livelihood of the families of the employees working in such establishments depend solely upon such employment and needs to be secured.

The same view was upheld in Rasulbhai Pirbhai Shaik v. Jasumatiben Indravadan Trivedi and Ors. wherein the Gujarat High Court held that the claims made by the employer are not of personal nature and such claims can also be granted after the death of the employer if the rights on the industrial establishment still remain in the hands of the heir or the legal representative. The mere change in the name of the employer would not change the nature of the dispute.

In view of the aforesaid scenario, employers' liability cannot be put to an end once he/she dies. Hence, the Code entrusts such a responsibility to the legal representative of such a deceased employer with the duty of fulfilling all pending obligations of the employer by impersonating his actions with the same level of authority and power, after his death. Before renouncing his duty as an employer, the legal representative must set free all the pending obligations of the deceased employer and then only his duty as an employer will come to an end, in case she/he does not wish to continue.

Scope of definition of Legal Representatives

The definition of legal representative draws its meaning from Section 2(11) of the Code of Civil Procedure (CPC), 1908 and is provided as under:

“Legal representative” means a person who in law represents the estate of a deceased person and includes any person who intermediates with the estate of the deceased and where a party sues or is sued in a representative character the person on whom the estate devolves on the death of the party so suing or sued.

The High Court of Madhya Pradesh in Kalyanmal Mills Ltd v. Volimohammed and Anr. further interpreted the definition of legal representative, “as a person, who in law represents the estate of a deceased person but, also includes any person who intermeddles with the estate of the deceased, although such intermeddle may not in law represent the estate of a deceased person.”

In Custodian of Branches of Banco v. Nalini Bai Naique, the Supreme Court of India expanded the definition of legal representative as defined under Section 2(11) of the CPC thus:

“Appointment of Legal Representative is not restricted to the legal heirs of the deceased but it also extend to the other people who are competent to inherit the property of the deceased and she/he shall also ensure that the estate of the deceased is represented in proper manner. The Legal representative can be executors and administrators as well who is in the possession of the estate of the deceased. In the absence of fraud or collision, the bona fide possessor of the estate or the bona fide heir of the estate can also become the Legal Representative.”

Thus, legal representative, in its broadest sense, means one who stands in place of, and represents the interests of another. By the definitions mentioned above, it also stands clear that legal representatives have an inherent interest in the estate owned by the deceased employer. In turn, they are also expected to fulfil certain liabilities towards the employees of the establishment.

Liability of legal representative as an employer

There are no specific boundaries defining the power and the role of legal representatives, but it is evident that they have the duty to perform the tasks with the intent of better administration of the roles administered to the employer. In certain cases, the legal representative is also expected to protect the company’s assets and facilitate legal transaction. The legal representative is also authorized to execute all the actions related to perform general administration of the company and transactions and such action shall not exceed the nature and scope of that company’s business. He cannot merely waive off his responsibility as an employer on the grounds of non-dependency on the deceased employer.

The legal representative must also ensure peace at the workplace, including protection of the workplace from unnecessary litigation. It shall also be the duty of the legal representative to execute all his responsibilities to avoid intervention of other administrative or judicial authorities. Further, the legal representative of a deceased employer is also responsible for payment of dues like minimum wages and bonus to the employees and other benefits which they are entitled to get for past and future work.

Penalties and punishment for non-fulfilment of duty

In case of non-fulfilment of obligations and duties, the employer and its legal representative in case of his death, shall also be subject to punishment and penalties laid under Section 54 of the Code. Under this provision, the employer is held liable for payment of fine of ₹50,000 in case he does not pay the appropriate wage to the employee and in case of repetition of the same offence within 5 years of the first commission for every subsequent commission, he may be imprisoned for a period which may extend to 3 months or with fine which may extend to ₹1 lakh or with both.

In a case where the employer does not comply with any other provision mentioned under the Code, he shall be punishable with a fine which may extend to ₹20,000. In cases where the employer repeats the same offence within five years from the commission of the first offence, he can also be subject to imprisonment for a term which may extend to one month or with fine which may extend to ₹40,000, or with both. It has also been provided that if an employer fails to comply with any provision of the Code or in the alternative, contravenes any provision of the Code, such an employer shall be burdened with a fine of ₹20,000 and for any subsequent commission within five years of the commission of the first offence, the employer shall be imprisoned for a period of one year or a fine of ₹40,000 may be imposed upon him. The Code also provides for such other punishment for improper maintenance of records or offences by companies, etc.

Rights of Legal Representatives

There is no doubt about the fact that upon the death of the principal employer, the legal representative of such an employer substitutes himself with that of an employer in the establishment. Legal representatives have also been given certain rights as individuals after taking up the responsibility of the deceased employer. In Prem Singh v. Savitri Devi & Ors, the High Court of Rajasthan opined that the legal representative could urge all contentions which the deceased could have urged except only those which were personal to the deceased. However, it is also important to ensure that the legal representative does not deviate from the principles carried on by the deceased employer.

Conclusion

The inclusion of legal representative under the definition of employer is an important step taken by the legislature while enacting The Code on Wages, 2019. The primary intention of legislature behind the amalgamation of the repealed acts is “to seek to regulate wage and bonus payments in all employments where any industry, trade, business, or manufacture is carried out.” By including ‘legal representative’ under the definition of the employer, the employees have been given an opportunity to enforce their rights and claim their share of money in case of death of the principal employer.

Legal representatives cannot turn their back on employees when it comes to fulfilling any conditions which the principal employer was obligated to fulfil in case he/she was alive. In case of non-fulfilment of any duty which the legal representative is supposed to do, he will be subjected to the same punishment as the principal employer would have in case of non-fulfilment of such duty. Thus, the expansion of the definition of employer can be seen as a welcome move that protects the rights of the employees in the establishment.

Plash Mittal is an advocate practicing employment, banking and commercial laws in Delhi. Saloni Jha is a law student studying at Amity Law School, Amity University, Noida.

Disclaimer: The views and opinions expressed in this article are those of the authors' and do not necessarily reflect the views of Bar & Bench.