Introduction:
The Hon’ble Gujarat High Court (“Hon’ble HC”) recently in a judgment titled Surat Municipal Corporation Vs. The Secretary Sudhrai Majdoor Union (Lal Vatva)[1] clarified that employees would not be eligible for overtime wages, when such employees are being paid more than minimum rate of wages and allowances prescribed under the Minimum Wages Act, 1948 (“Act”).
Brief Facts:
The employees in the present case were working in different roles with the fire fighting and emergency department of the Appellant-Municipal Corporation (“Corporation”) in a 24-hour shift. In the year 1989, the Respondent-Trade Union (“Union”) demanded overtime pay for these 24-hour shifts, in response to which the Corporation offered other benefits to the employees such as special longer duty allowances, risk allowances, rent-free housing, and electricity allowances. Such allowances and amenities which have extended to the workers or employees of the Fire Department have not been extended to any other employee of any other Department.
In the year 1993, after various demands from the Union, the employees were given an option to continue with the 24-hour shift working along with all the benefits or a new 8-hour shift without the captioned benefits. However, none of the employees opted for the 8-hour working shift. In the year 1999, the Union demanded 8 hours of work shift, and finally, a consensus was reached between Union and Corporation for a 12-hour work shift, effective from 2001.
In 2002 the Union changed its stance and demanded overtime for any hours worked beyond the standard 8 hour a day shift under the provision of Section 14 of the Act. A settlement was reached between the parties, and 12 hour shift was altered to 8 hour shift with effect from 2017, but no consensus was reached on the issue of overtime.
Hon’ble High Court’s Observation:
Upon deposition of witnesses, it was observed that for the shift of 12 hours, none of the employees were working continuously for 12 hours, and in fact, none of the employees of the Fire Brigade Department were working for more than 8 hours a day.
To answer the question of overtime, the Hon’ble HC relied upon a Supreme Court (“Hon’ble SC”) ruling titled Municipal Council, Hatta Vs. Bhagat Singh and Ors.[2] In this case, the employees demanded overtime under Section 14 of the Act, despite receiving wages above the applicable minimum wages. The Hon’ble SC broke down Section 14 of the Act, holding that to claim overtime, two essential requirements must be fulfilled by the employees: firstly, their wages must be fixed at the prescribed minimum wages under the Act, and secondly, such an employee must work on any day in excess of the number of hours constituting a normal working day. The Hon’ble SC ultimately held that the employees cannot be described as employees receiving a minimum rate of wages fixed under the Act since they are receiving much more, and therefore, Section 14 has no application to them.
Relying upon the Municipal Council Hatta (Supra), the Hon’ble HC held that in the present case also, the employees are being paid more than the minimum wages as stipulated under the Act, and further, there is no proof on record to show that the employee was actually working more than 8 hours a day. Therefore, the Hon’ble HC concluded that the provision to Section 14, which expressly directs payment of overtime to the employees who are getting minimum rate of wages under the Act, does not apply to the present case, and the employees are not eligible to receive any wages for overtime.
Insights for Employers and Employees
The present judgment by the Hon’ble HC makes it abundantly clear that special allowances such as longer duty allowances, risk allowances, rent-free housing, electricity allowances, etc. can be seen as adequate compensation for overtime working by employees, provided that the overall wages and benefits amounts to a sum more than applicable minimum wages. This judgment will further serve as a notable precedent in disputes involving claims for overtime wages by employees earning wages more than minimum wages and highlights.
Authored by Partner Gyanendra Mishra and Associate Maruti Nandan.
[1] 2024 SCC OnLine Guj 3781
[2] (1998) 2 SCC 443