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Key Takeaways

  • The Supreme Court, in a recent judgment, declared that when appointment is done fraudulently and the actions taken by the company are justified and legal, the company has the right to terminate the workers.
  • Employee fraud is something very common in all parts of the world and it causes financial and reputational loss to the organization.
  • There aremany legislations in place to provide benefits to the employees but this is wrongly used by people to gain favour and get jobs.
  • The article discusses the types of employee frauds and the legislations in India that provide benefits to the workers.


Workers/employees are the ones who are responsible for the working of any company or organization. The ones employed in the public sector more than the private sector are responsible for a larger population being dependant on their actions. Various ministries/departments, as well as their affiliated and subordinate offices, hire casual workers for labour that is casual, seasonal, or intermittent. They are hired based on the needs of various offices. There is no specific legislation that governs the hiring of casual labour. The Central Government, on the other hand, has set instructions on the recruitment of casual workers on a daily wage basis. Despite this, there is no centralised data on casual labour.

The Supreme Court ruled in Royal Western India Turf Club Ltd. v. ESI Corporation and Ors. that Section 2(22) of the ESI Act covers casual employees hired for a few days on a permanent job, and that wages as defined in Section 2(22) and wage period as defined in Section 2(23) do not exclude wages paid to casual workers. They cannot be denied access to the Act's beneficial provisions. Employees' employment for the day of racing, which is a recurring activity of the Appellant Club, is covered by the Act, Rules, Regulations, and notifications, and as a result, they are entitled to the benefits of the Act.

Using 2020 population numbers, which result in an estimate of 473 million workers, roughly 118 million workers in India are informally employed, accounting for around 25% of the overall workforce, while somewhat more than half of the workforce (246 million) is self-employed. Non-regular employment is slightly more common among women than it is among males. According to the ‘Report to the Nations: Southern Asia Edition’, in Southern Asia, 69% of the employees in organizations that found employee fraud were terminated and 22% were permitted to resign. This is an effective way to curb this practice from taking place at the work place.

BCCL v. Workmen

The Supreme Court, in the recent judgment of Employers In Relation to the Management of Bhalgora Area of M/S Bharat Cooking Coal Ltd. v. Workmen Being Represented by Janta Mazdoor Sangh,observed that public employment gained by fraudulent practices cannot be allowed as acceptable in the court of law. Public employment is for social welfare and it is an important source of social mobility and should be protected from such kinds of fraudulent practices that tend to corrupt the selection process into employment.

The Management of Bhalgora Area of Bharat Coking Coal Limited (BCCL) had terminated 38 workmen since their appointment was done dishonestly. They had secured the position with the help of a Dealing Assistant and a Personnel Manager of the BCCL. When the matter was taken before the Central Government Industrial Tribunal, the management failed to show how the appointment was done by manipulation, so the Tribunal ordered for reinstating the workmen with 50% back wages. On appeal, the Single-judge bench of the High Court set aside the Tribunal’s decision but it was restored by a division bench by an intra Court appeal.

The Supreme Court upheld the decision of the Single bench with the observation that the evidence produced before the Court were sufficient to justify the action taken against the illegal appointment of the workmen. Disciplinary action had been taken against the two employees who had manipulated the appointment of the workmen and the management cannot be made to suffer due to the actions of those employees.The Court stated that the workmen were not mentioned in the lists sponsored by the jurisdictional Employment Exchange and were beneficiaries of a fraudulent practice which was ignored by the Single judge. The workmen had taken a contradictory stand at different stages, which suggests that their appointment was not bonafide and the appointments were done in contravention to the requirements of 1959 Act.

Employee Fraud

Employee fraud is one of the most costly hazards that businesses face, but many wait until they have been victimised before implementing the full fraud controls that are required to prevent it. Every area provides opportunity for employees to steal, yet it's been commonly stated that senior personnel commit a disproportionate amount of theft, and that accounting and finance employees are the most frequent offenders.

Asset Misappropriation: The word asset misappropriation refers to a wide range of employee fraud activities. Simply put, insider fraud is the stealing of corporate assets by a company employee. It includes cases of cheque forgery, cheque kiting, cheque tampering, theft from the inventory or cash theft. There are also expense reimbursement fraud, procurement fraud, payment fraud and compensation fraud that takes place from the benefits that are given to the workers.

Vendor Fraud:Employees operating alone or in conjunction with vendors can commit vendor fraud. Vendors can potentially commit this form of fraud on their own. By creating a bogus vendor or manipulating the account of an actual vendor, an employee creates false payments to himself/herself using the organization's vendor payment system. When an employee accepts (or asks for) payments from a vendor in exchange for a benefit, he or she is involved in a bribery scheme. In order to charge the company for more goods than it ships or to charge a larger price than agreed, a vendor pads invoices. To make things easier, they sometimes provide pricing and budget information to vendors.

Accounts Fraud:Accounting fraud is committed by an employee who manipulates a company's accounts to cover up theft or steals using the company's accounts payable and receivable. Employees in positions where they have access to a company's accounts with little or no scrutiny are more likely to be implicated in this form of fraud. Embezzlement, showing personal expenses as organisation expenses, writing double cheques, etc.are some common methods of committing this fraud.

Payroll Fraud:Payroll fraud occurs when money is taken from a company's payroll system. It's one of the most common types of employee fraud, occurring in 27% of organisations and lasting an average of 36 months, according to the ACFE. As a result, it's a substantial danger, particularly for small organisations with fewer controls.

Legislations for Workmen/Employees

Casual Labourers (Grant of Temporary Status and Regularization) Scheme of Government of India, 1993 was launched by the government. According to the plan, all casual labourers who have worked for at least 240 days and have provided a continuous service of at least one year will be granted temporary status. Casual labourers with temporary status would be entitled to benefits such as:

  • Daily wages based on the minimum pay scale for a matching group ‘D' official, including DA, HRA, and CCA.
  • For each year of service, benefits of increment at the same rate as a Group ‘D' employee would be taken into account while computing pro-rata earnings.
  • Casual or other types of leave, with the exception of maternity leave, will be allowed on a pro-rata basis at the rate of one day for every ten days worked.
  • Maternity leave for female casual labourers will be permitted, just as it is for regular Group ‘D' employees.
  • After their regularisation, 50 percent of the service given while on temporary status would be credited toward retirement benefits.
  • Casual labourers would be treated on par with temporary Group ‘D' employees for the purposes of contribution to the General Provident Fund and would also be eligible for the grant of festive advance/flood advance under the same conditions as temporary Group ‘D' employees after three years of continuous service following the conferment of temporary status.
  • They will only be eligible for productivity linked bonus/ ad-hoc bonus at the rates applicable to casual labourers until they are regularised.

The Workmen's Compensation Act, 1923

The Act provides compensation to workmen or their dependents in case of accidents arising out of or in the course of employment. Workmen may die or be permanently or temporarily disabled as a result of such accidents. It also covers compensation for occupational diseases, or diseases obtained as a result of one's job. The Act establishes a detailed list of people who fall under the category of "dependents" as well as a procedure for calculating compensation in various situations. As a result, the Act is a comprehensive piece of legislation that addresses all aspects of compensation and related difficulties.

The Employees State Insurance Act, 1948

Employee benefits such as sickness benefit, maternity benefit, disablement benefit, medical benefit, and funeral benefit are all covered by the Act. Medical benefits are also extended to the employee's family members, and the funeral benefit is provided to the eldest surviving family member or, in his absence, to the person who really incurs the funeral expense. It should be mentioned that under this Act, all benefits are provided in cash. The Act also establishes a Corporation, a Committee, and a Council, among other things, to carry out the Act's provisions.

Legislators also passed the Employees' Provident Fund and Miscellaneous Provisions Act, 1952, the Employees' Provident Fund and Miscellaneous Provisions (Amendment) Act, 1996, the Payment of Gratuity Act, 1972, and the Unorganised Workers Social Security Act, 2008 keeping in mind the social security rights of the workers.

The Payment of Wages Act, 1936

This Act was enacted in response to the significant injustice that was being done to employees in terms of salary payment. Wages were refused or delayed, unreasonable deductions were made, severe fines were enforced, and payment was frequently done in kind rather than cash. As a result, the Act was enacted to govern the payment of wages by enacting laws such as determining who is responsible for such payments, establishing wage periods, and determining when wages are paid, among other things. It allows for approved deductions from earnings as well as the imposition of fines in specific circumstances. Non-compliance with the Act's rules might result in sanctions for the employer.

The Minimum Wages Act, 1948

The purpose of this Act is to give minimum wages to workers in the jobs listed in Schedule I of the Act, such as working in a rice mill, flour mill, or dal mill, or working in a tobacco factory, among other things. The Act gives the competent government the authority to set minimum salaries and to adjust them on a regular basis. It also establishes a provision for overtime pay. Employer non-compliance with the provisions might result in penalties under this Act.

The Payment of Bonus Act, 1965

The Payment of Bonus Act of 1965 authorises the payment of bonuses to employees in certain establishments having a workforce of 20 or more people, on the basis of profits or output or productivity, and for other purposes. Section 10 of the Act mandates every industry and business should pay a minimum bonus of 8.33 percent to the employee. Under Section 31 A of the Act, the maximum bonus, including productivity-linked bonuses that can be paid in any accounting year, cannot exceed 20% of an employee's salary/wage.

The Equal Remuneration Act, 1976

Equal compensation for equal work is guaranteed under the Constitution, as stated in the Fundamental Rights and State Policy Directive Principles. The Act mandates that men and women be paid equally for performing the same or similar work or the employer would be fined. As a result, it eliminates discrimination against women in the payment of wages.


Workers or employees are entitled to several benefits but the ones who have gained the position by fraudulent means should not be given those benefits since the position is not rightfully theirs. This makes an imbalance of power in the society which is not acceptable. There are benefits that are given to the employee before termination such as a notice period, but these benefits should not be extended to those who were engaged fraudulently or who were caught committing a fraud because that would be gross injustice and unfair.

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