Supreme Court expands employees’ Compensation Act to cover commuting accidents

At a glance

• The Supreme Court of India (Supreme Court) has ruled that accidents occurring during an employee’s commute to or from work can be deemed to arise ‘out of and in the course of employment’ under the Employees’ Compensation Act (EC Act).
• The judgment harmonises the interpretation of the EC Act with Section 51E of the Employees’ State Insurance Act 1948 (ESI Act), treating the latter as a clarificatory provision with retrospective effect.
• The doctrine of notional extension and the requirement of a clear nexus between the accident and employment are reaffirmed.
• The decision has wide-ranging implications for employers, who must now consider commuting risks as part of their occupational safety framework. 

In Daivshala and Ors. v Oriental Insurance Company Limited and Anr., the Supreme Court has significantly expanded the scope of compensable workplace accidents. The case involved a night watchman employed at a sugar factory who suffered a fatal accident while commuting to work. The employee’s family sought compensation under the EC Act, arguing that the accident was employment related. The employer and insurer contended that, as the accident occurred outside the factory premises and before the official start of duty, it did not qualify for compensation. 

Supreme Court’s ruling

The Supreme Court considered whether an accident during an employee’s commute could be said to have arisen ‘out of and in the course of employment’ under the EC Act, thereby entitling the family to compensation. It reviewed the prevailing legal standards under both the EC Act and the ESI Act, both of which require that an accident must arise ‘out of and in the course of employment’ to be compensable. The Supreme Court referred to its earlier decision in Regional Director, ESI Corporation v Francis De Costa, which had held that injuries sustained during commute were not automatically attributable to employment unless the activity was incidental to employment. 

A pivotal change occurred with the introduction of Section 51E to the ESI Act in 2010, which explicitly deems commuting accidents compensable, provided a nexus exists between the time, place, and circumstances of the accident and the employment. The Supreme Court observed that this provision was intended to resolve longstanding ambiguity and to provide a more employee-friendly interpretation of commuting risks. The Supreme Court held that Section 51E is clarificatory and declaratory in nature, intended to resolve ambiguity rather than introduce a new principle. As such, it operates retrospectively, covering accidents that occurred prior to its enactment.

Although Section 51E was inserted into the ESI Act and not the EC Act, the Supreme Court clarified that the same interpretive approach applies. Both statutes use identical language and share the objective of providing social security to employees. The Supreme Court held that the clarified meaning of ‘arising out of and in the course of employment’ should be applied to the EC Act as well, provided a clear nexus exists between the accident and the employment. 

The Supreme Court reaffirmed the doctrine of notional extension, which allows for a flexible, fact-sensitive analysis of whether an accident occurred within an extended area or time related to employment. Previous decisions were cited to support the view that employment-related risks can extend beyond the physical workplace, especially when the activity is necessary or incidental to employment. 

Applying these principles, the Supreme Court found that the deceased employee was commuting to work in a timely manner and that the accident had a direct nexus with his employment. The accident was therefore deemed to have arisen ‘out of and in the course of employment’, entitling the family to compensation under the EC Act. 

Implications

This judgment marks a significant development in Indian labour law by harmonising the interpretation of the EC Act and the ESI Act. The scope of compensable claims under the EC Act now extends to commuting accidents, provided a clear nexus with employment can be established. The EC Act’s wider applicability means that this ruling affects virtually all employers, not just those covered by the ESI Act. Employers are advised to:

• Treat commuting-related risks as part of their occupational safety and health framework.
• Review and update insurance policies to ensure coverage for commuting accidents.
• Maintain robust documentation and preventive measures to mitigate potential liabilities.

The Supreme Court’s decision underscores a purposive and welfare-oriented approach to interpreting employment statutes. By recognising that employment-related risks can extend beyond the physical boundaries of the workplace, the Supreme Court has reinforced the protective intent of labour welfare laws in India. Employers should proactively adapt their policies and practices to align with this expanded interpretation.