Pathological Laboratories Covered under Employees' State Insurance Act, 1948 from 2007, Not 2002: SC

In a significant ruling, the Supreme Court of India has settled a long-standing dispute over the coverage of pathological laboratories under the Employees' State Insurance Act, 1948. The judgment delivered by Justices Rajesh Bindal and Hima Kohli on August 2, 2023, clarified that such establishments are covered under the Act from September 6, 2007, and not from November 22, 2002, as previously claimed.

The case in question, Civil Appeal No. 3368 of 2012, involved the Employees' State Insurance Corporation (ESI) and M/s. Endocrinology and Immunology Lab. The Corporation had challenged a Kerala High Court order that allowed the respondent's appeal, asserting that the provisions of the Act would apply to the laboratory from 2007 onwards.

The key issue was whether the respondent establishment could be considered a 'shop' under the 1976 notification issued by the Government of Kerala, which covered establishments with 10 or more employees. The Corporation also relied on a circular dated November 22, 2002, which modified an earlier memo and sought to include pathological laboratories under the definition of 'shop'.

However, the Supreme Court, in its judgment, thoroughly examined the relevant provisions of the Act and the notifications involved. The Court concluded that the establishment in question did not fall within the definition of a 'factory' under Section 1(4) of the Act, as it did not involve a manufacturing process. The Court also found that the term 'shop' was not explicitly defined in the Act and rejected the Corporation's contention based on the 1976 notification.

Bench clarified, "The respondent establishment will not be covered under the provisions of Section 1(4) of the Act as it will not fall within the definition of a 'factory'." The Court further stated, "The argument raised by the appellant that the respondent establishment should be deemed to be covered in terms of the Notification issued on 27.05.1976 read with the Circular dated 22.11.2002 issued by the Corporation, is merely to be noticed and rejected."

The decisive factor came from the Notification dated 06.09.2007, issued by the Government of Kerala, which explicitly included medical institutions, including pathological laboratories, under the ambit of the Act where 20 or more persons were employed. The Court acknowledged that this notification clarified the coverage of the respondent establishment from September 6, 2007.

Supreme Court has put to rest the ambiguity surrounding the coverage of pathological laboratories under the Employees' State Insurance Act, 1948. The ruling will have far-reaching implications for similar establishments across the country and provide clarity on their compliance with the Act.

Date of Decision: August 2, 2023

E.S.I. CORPORATION, REP. BY THE REGIONAL DIRECTOR  vs M/s. ENDOCRINOLOGY AND IMMUNOLOGY LAB