Workmen v. Reptakos Brett & Co. Ltd. — (1992) 1 SCC 290
Can the employer cut DA? The Supreme Court set a high bar: respect the minimum wage floor and prove real financial inability.
Quick Summary
The company had a double-linked DA since 1959 (linked to cost-of-living and basic pay). In 1983, it sought to cut/alter this scheme. The Tribunal scrapped the slab system and fixed DA only by index.
The Supreme Court said: you cannot reduce wages/DA to workers’ disadvantage unless you prove two things—(1) current wages are above the minimum wage floor and (2) the company is financially unable to sustain them. That proof was missing. The slab DA should not have been abolished.
Issues
- Can management alter DA to workers’ disadvantage due to alleged over-compensation?
- What is the legal test for cutting wages/DA?
Rules
- Minimum wages are a protected right covering basic needs and welfare; employers unable to pay should not operate.
- Wages can be revised to workers’ disadvantage only if the employer proves wages exceed the minimum level and the firm cannot financially sustain them.
- DA must reflect the current money value of minimum wage components to account for inflation.
Facts (Timeline)
Arguments
Management
- Existing DA over-compensated workers compared to industry.
- Switch to index-only DA to rationalise costs.
- Slab system was outdated and too costly.
Workmen
- Slab DA is part of a settled wage structure for decades.
- No proof wages were above minimum or that the firm was unable to pay.
- DA must track current cost of living, not outdated bases.
Judgment
The Supreme Court held the Tribunal was not justified in abolishing the slab DA. The settled structure, reaffirmed by multiple settlements, could not be cut without strict proof.
Neither the company nor the Tribunal showed that wages exceeded the minimum living standard, or that the company was financially incapable of sustaining the slab DA. Therefore, the disadvantageous revision failed.
Ratio Decidendi
Two-step shield: Employers may not cut wages/DA below the minimum wage components or to workers’ detriment unless they prove (i) present wages exceed the minimum living standard and (ii) genuine financial incapacity to continue them. DA must reflect current value to counter inflation.
Why It Matters
- Protects long-settled wage structures from unilateral cuts.
- Centres the minimum wage floor as a constitutional-welfare safeguard.
- Demands hard evidence of financial inability before any downward revision.
Key Takeaways
- DA must track current cost of living; outdated bases are improper.
- Minimum wage is a floor; cuts need proof of excess + inability.
- Historic, settlement-backed structures carry strong judicial respect.
Mnemonic + 3-Step Hook
Mnemonic: “DA CUT? PROVE 2!”
- Floor Check: Are wages above the minimum living standard?
- Purse Check: Is there real financial inability?
- Only then consider revision; otherwise, keep the settled DA.
IRAC Outline
| Issue | Rule | Application | Conclusion |
|---|---|---|---|
| Could the slab DA be scrapped to align with industry? | Cuts only if wages exceed minimum and firm can’t sustain them. | No proof of excess or incapacity; long-settled scheme existed. | Tribunal erred; slab DA abolition unjustified. |
| How should DA be computed? | Use current money value to offset inflation. | Index-only method ignored settled structure and real value. | DA must reflect present costs; structure protected. |
Glossary
- Dearness Allowance (DA)
- A pay element that adjusts wages for inflation so workers keep purchasing power.
- Minimum Wage Floor
- Baseline income ensuring subsistence and welfare, protected in labour law.
- Financial Inability
- Evidence-backed inability to sustain existing wages; mere assertions don’t suffice.
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