Legal rights that employee enjoy for the Nonpayment of salary by the employer

This article was written by Akanksha Saxena a 2nd year law student of University of Petroleum and Energy Studies.

Introduction

An employer hires an employee to employ his skills for the completion of projects, time not being a factor of concern, that is, an employee can work for months, days, years on salary basis (bonus and commissions are contingent). It is the legal and contractual obligation of the employer, to pay all his employees the agreed salary. There are certain circumstances under which an employer fails to pay the salary for a specific period, and the employee, in such a case may decide to compromise and understand, and thereby continue his work. But when the employer refuses to pay, the employee has certain legal rights, enforceable against the employer to get his salary.

If the employer fails to pay the agreed salary/wages then the employee may file a civil law suit or may approach the government agencies which are concerned with the rights of workers. There are certain institutions and tribunals which look into such matters.

Basically, an employee may claim his money/salary/wages in these ways:-

Employment is a mutual relationship wherein the employer and the employee enter into a contract and both decide to serve each other. The employee has to work and in return the employer has to pay for the work. If the employer refuses to pay, then it is the violation of contract and will be termed as breach of contract by the employee. He may file a suit, in the employment tribunal or civil court according to his status of employment, citing breach of contract.

If there has been failure to remunerate an existing employee, then a claim may be made within three months from the date of failure of payment before the employment tribunal. But if the employment has been terminated then a civil case may be instigated against the employer within 6 years from the date of breach of contract. The remedy court can provide the order for specific performance by the employer, so that he pays off the agreed salary. The court or tribunal under whom the case is filed may instruct the employer to pay the salary agreed in the contract, along with extra suit damages and other expenses incurred.

Another way is filing a claim in the employment tribunal on the grounds of “unlawful deduction of wages” which renders a speedy justice without even the employment being terminated (but such a claim should be filed within 3 months of breach of contract). Here wages not only include salary but also,

• Commission and bonus
• Statutory sick pay
• Holiday pay
• Statutory maternity, paternity and adoption pay
• Notice pay

Sometimes however, conditions like insolvency may plague the employer, and because of which he becomes unable to pay the wages of employees. In this case,  administration is taken away from the employer and the administrator now decides what is to be done with the business. If the business is sold, then the employees’ contractual rights are transferred and the new employer deals with the things. But if the business is not sold, then, the employee becomes the preferential creditor in terms of his salary for 4 months, and so the contract accordingly proceeds and the salary is compensated. But if there is a lack of funds then the employee is reimbursed from the National Insurance Fund (NIF). But to claim money from NIF, the employer must be insolvent and your employment should also have been terminated. When the employer is a partner in a partnership or a sole trader, then the circumstances are different. Then the employee needs to initiate personal proceedings against the employer since they are not legal entities.

These rights and remedies are only available to those individuals who are considered as employees under law i.e. independent contractors who are deprived of their payment do not have all these rights. They can initiate only breach of contract, whereas lawfully accepted employees have other remedies as well.

Conclusion

There exists a contractual relationship between the employer and the employee. If either of the party fails to perform his obligation then, one party has certain rights against the other party. Here the issue addressed was nonpayment of wages/salary by the employer. We see that the employee has got certain legal rights through which he can extract his salary. But not everyone is entitled to these rights. For enforcing these rights one must come under the purview of such rights. The employee has got certain rights, such as, to file a civil law suit, bring a claim before the employment tribunal, etc. but he should be very careful and thoughtful while opting for any of these remedies because filing a law suit requires money, since hiring a lawyer requires fees. So the suit should be to reimburse money and not to engulf it. Same is with the claim before tribunal, one should analyze whether the claim is worth it or not. It should not be like one is investing more money in the suit and in turn getting less of it. The claim should also be reasonable, one must ensure that the suit gets sufficient reimbursement.