Payment of Maternity Benefit to Contractual Employees

With the implementation of the Maternity Benefit (Amendment) Act of 2017, India currently boasts of a far superior system in relation to the provision of maternity benefits, compared to other nations in the world. The amendment, inter alia, increased the duration of maternity benefits to 26 (twenty six) weeks, from the previous period of 12 (twelve) weeks, and also provided for mandatory on-site daycare facilities. Such maternity benefits are provided to a woman who is employed in any establishment, factory, shop, mine or plantation. This article discusses issues relating to payment of such maternity benefits to the employees hired on a contractual basis.

Firstly, to understand what maternity benefits are, we need to examine section 5 of the Maternity Benefit Act, 1961 (the “Act”) which provides that “every woman shall be entitled to, and her employer shall be liable for, the payment of maternity benefit at the rate of the average daily wage for the period of her actual absence, that is to say, the period immediately preceding and including the day of her delivery, the actual day of her delivery and any period immediately following that day.” Further, it also provides that the maximum period for which a woman (having less than two surviving children) shall be entitled to maternity benefits shall be a total of 26 (twenty six) weeks.

Section 3(o) of the Act defines the term “woman” for the purpose of the Act, and the definition extends the benefit to all women employees including those employed through an agency or on a contractual basis. Further, in terms of section 5 of the Act, every woman shall be entitled to, and her employer shall be liable for, the payment of maternity benefit.

Secondly, section 2 (b) of the Contract Labour (Regulation and Abolition) Act, 1970 (“Labour Act”) states, “a workman shall be deemed to be employed as "contract labor" in or in connection with the work of an establishment when he is hired in or in connection with such work by or through a contractor, with or without the knowledge of the principal employer.” Therefore, women employed at any establishment through a contractor or a contractual agency, are considered to be employed on a contractual basis in terms of the Labour Act.

The Supreme Court of India in Municipal Corporation of Delhi v. Female Workers (Muster Roll) and Ors.[1], applied the principles of Article 11 of the Convention on the Elimination of All Forms of Discrimination Against Women, adopted by the United Nations General Assembly in 1979 (“Convention”) and held that women who are muster roll employees are entitled to the maternity benefits. Article 11 of the Convention seeks to eliminate discrimination against women in the field of employment and focuses on preventing discrimination on the grounds of maternity. In the said case, the Apex Court read these principles with the contract of service between the parties, to decide that women employees who are on muster roll on contractual basis, were entitled to all the benefits envisaged under the Act.

While the definition of the term “woman” under the Act includes those employed on a contractual basis, the duration of the contract is also vital in determining the maternity benefits payable to the employee, as an employer is required to pay maternity benefit only while the employer-employee relationship subsists. This position was considered by the Delhi High Court in Artiben R. Thakkar vs. Delhi Pharmaceuticals Science & Research University[2] – where a contractual employee was availing maternity benefits towards the expiry of the contract’s term. The Delhi High Court stated that:

“It is a settled legal proposition that every female employee, whether on muster roll, ad hoc basis, temporary basis or contractual basis shall be entitled to maternity leave… but the benefits ceases with the termination of the employment. If the employee does not have a contract entitling her of a continued employment for a period of time and/or setting forth grounds necessary for termination, and if no discrimination is involved and the law is not violated an employer is entitled to discharge an employer at any time. A contractual job comes to an end with efflux of time and the person holding the post has no right to continue on the post and enjoy its benefits”.

The Delhi High Court held, that while employees on contractual basis are entitled to maternity benefits, however this is only during the period of their contract i.e. the period when the employer-employee relationship subsists, and not beyond that.

Due to the contractual nature of the employment, there have been instances where either the contractor/contractual agency or the principal employer/establishment have had disputes on  who should provide such maternity benefits as the ‘employer’ of the contractual employee. This issue has been dealt with by the Uttarakhand High Court in Kavita Pant vs. State of Uttarakhand and Ors.[3], where the court discussed the applicability of maternity benefits to contractual employees while drawing parallel attention to the position of contractual employees under section 21 of the Labour Act. The said Section states that:

“(1) A contractor shall be responsible for payment of wages to each worker employed by him as contract labour and such wages shall be paid before the expiry of such period as may be prescribed.

(2) In case the contractor fails to make payment of wages within the prescribed period or makes short payment, then the principal employer shall be liable to make payment of wages in full or the unpaid balance due, as the case may be, to the contract labour employed by the contractor and recover the amount so paid from the contractor either by deduction from any amount payable to the contractor under any contract or as a debt payable by the contractor.”  

The Uttarakhand High Court while considering the above, held that:

“not only the woman is an 'employee' through a contractual agency is covered under the benefit of the above Act, but in a given contingency, where these benefits are not being given by the agent or contractual agency, the same are also liable to be paid by the principal employer.”

Therefore, in such a situation where maternity benefits are not being provided to a contractual employee by the contractual agency, then the principal employer must pay such maternity benefit to such employee themselves.

To conclude, maternity benefits are payable to women who are employed on a contractual basis, however, the payment of benefits to contractual employees is limited only to a period until which the employer-employee relationship subsists. Further, such benefit is to be provided by the principal employer in case the contractual agency is not doing the same.

The views and opinions expressed in this article belong solely to the author and do not reflect the position of TLH, Advocates & Solicitors.

[1] AIR 2000 SC 1274

[2] 2019 IX AD (Delhi) 173

[3] 2017 (152) FLR 796