If you are stuck in such a situation, here is what to do.

Ms. Priya Sharma recently started a new job at a promising educational consultancy firm, ‘Bright Future Advisors’, in the city of Anandpur. A few months into her role, during the onboarding process, she was asked to fill out a form with her and her family’s details, which she was told was for company insurance purposes. There was no discussion about costs, policy terms, or how any payment would be handled.

To her shock, she recently received an automated message informing her that a sum of ₹4,800 would be deducted from her salary each month, starting immediately, for this insurance policy. Already managing tight finances due to pre-existing personal loans, this unexpected deduction caused her immense distress. When she approached the Human Resources department for clarification, their response was dismissive, stating, “you should have enquired about the details.” They claimed she could neither cancel the policy nor get a refund for any deductions, despite her having no memory of signing any document authorising such a significant monthly deduction.

This raises a critical legal question: Can an employer unilaterally deduct a portion of an employee’s salary for an insurance policy without their explicit, informed consent and a signed agreement? The situation Priya faces is not just unethical but also legally questionable under Indian law.

Advice in such cases

If you find yourself in a similar predicament, it is crucial to act methodically and protect your rights. Here are the steps you should consider:

• Review Your Employment Agreement: Carefully examine your appointment letter and employment contract. Look for any clauses that mention mandatory insurance policies or authorise the company to make such deductions. The absence of such a clause strengthens your case significantly.
• Formal Written Communication: Draft a formal email or letter to the HR department and senior management. Clearly state that the deduction was made without your consent, you were not informed of the costs, and you did not sign any document authorising it. Request an immediate stop to the deductions and a full refund of the amount already debited. This creates a formal record of your protest.
• Gather All Documentation: Collect all relevant documents, including your employment contract, salary slips (showing the deduction), the message or email informing you of the deduction, and your written communication with HR.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

Applicable Sections of Law

Several Indian laws protect employees from unauthorised salary deductions:

• The Payment of Wages Act, 1936: This is a key legislation. Section 7 of the Act specifies the permissible deductions an employer can make from an employee’s salary. While deductions for insurance premiums are allowed, it is only permissible “with the written authorisation of the employed person.” Without your explicit written consent, such a deduction is illegal.
• The Indian Contract Act, 1872: For any contract, including an insurance policy agreement, to be valid, there must be “free consent” (Section 14). Consent is not free if it is caused by coercion, undue influence, fraud, or misrepresentation. Since the terms were not disclosed, and no clear consent was taken, the validity of this ‘agreement’ is highly questionable.
• Bharatiya Nyaya Sanhita, 2023 (BNS): If the company’s actions involve deliberate deception to cause financial loss, it could potentially attract provisions of the BNS. For instance, if it can be proven that the company dishonestly induced you into this, it might constitute cheating under Section 316 of the BNS.

If you are the complainant

As the person taking action against the employer, you have several avenues:

• File a Complaint with the Labour Commissioner: You can approach the office of the Labour Commissioner in your jurisdiction. They are empowered to adjudicate on matters related to illegal wage deductions under the Payment of Wages Act.
• Send a Legal Notice: Through a lawyer, you can send a formal legal notice to your employer. This notice will outline your grievances, cite the relevant laws being violated, and demand immediate corrective action (stopping deductions and refunding the amount). This often prompts companies to resolve the issue to avoid litigation.
• File a Civil Suit: You can file a suit in a civil court for the recovery of the illegally deducted money, along with compensation for the mental and financial harassment caused.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

If you are the victim

As the victim of such an unauthorised action, your immediate steps should focus on evidence preservation and formal communication:

• Document Everything: Keep a detailed record of every conversation, including the date, time, and name of the HR person you spoke with. Follow up verbal conversations with an email summarizing the discussion.
• Put it in Writing: Do not rely on verbal assurances or dismissals. Your primary mode of communication with the company regarding this issue should be email to create a paper trail.
• Request Policy Documents: Formally request a copy of the insurance policy that has been taken out in your name and the consent form you allegedly signed. Their inability to provide a signed consent form is strong evidence in your favour.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

How the police behave in such cases

Approaching the police for what appears to be a service or employment dispute can be challenging. Initially, the police might view this as a civil matter and direct you to the Labour Court or a civil court. They are often hesitant to register a First Information Report (FIR) in such cases. However, if your lawyer can frame the complaint effectively, highlighting elements of cheating, fraud, or criminal breach of trust under the Bharatiya Nyaya Sanhita (BNS), the police are obligated to register an FIR and investigate. A well-drafted complaint is key to prompting police action.

FAQs people normally have

What evidence is required?

To build a strong case, you will need the following evidence:

• Your appointment letter or employment contract.
• Salary slips from before and after the deduction started.
• Bank account statements reflecting the reduced salary credit.
• Any email, SMS, or letter from the company about the deduction or the insurance policy.
• Copies of all written communication you have sent to the company protesting the deduction.
• The insurance policy document, if the company provides it to you.

How long will the investigation take?

The timeline for resolution can vary greatly depending on the path you choose:

• Legal Notice: A company might respond and resolve the issue within 15-30 days of receiving a legal notice.
• Labour Commissioner: Proceedings before the Labour Commissioner are relatively faster than courts and can be resolved within a few months to a year.
• Civil Court: A civil suit is a lengthy process and can take several years to reach a final verdict due to procedural delays.
• Police Investigation: If an FIR is filed, the investigation under the Bharatiya Nagarik Suraksha Sanhita (BNSS) has timelines, but practical delays can extend the process.

Advocate Sudhir Rao, Supreme Court of India