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

Mr. Sameer, an employee at a technology firm named “Innovate Tech Solutions Pvt. Ltd.” in the city of Anandpur, found himself in a perplexing situation. His employer had failed to deduct and deposit the mandatory “State Professional Levy” from its employees’ salaries since 2019. Recently, it seems the state tax authorities sent a notice to the company for this default. In response, the company informed its employees that it would be deducting the entire arrears, from 2019 to the current year, as a single lump sum from their upcoming month’s salary. This has caused significant concern among the employees, who are now questioning the legality of such a retrospective, lump-sum deduction.

Advice in such cases

When faced with an employer attempting to recover past statutory dues in a lump sum, it is important to understand the legal framework governing such actions. Here is some general advice:

• Review Your Employment Agreement: Check your contract for clauses related to statutory deductions. While most contracts will state that such deductions will be made, they rarely specify how arrears due to the employer’s default will be handled.
• Understand the Employer’s Liability: The primary responsibility to deduct the State Professional Levy at the prescribed time and deposit it with the government lies with the employer. Their failure to do so is a default on their part.
• Challenge the Lump-Sum Deduction: A lump-sum deduction of a significant amount can be challenged under the Payment of Wages Act, 1936, which regulates deductions from an employee’s salary. Deductions must be authorised and cannot be arbitrary. Forcing employees to bear the brunt of the employer’s past negligence in one go can be contested.
• Negotiate a Payment Plan: As a collective group, employees can approach the management to negotiate a more reasonable repayment schedule, perhaps in small, manageable monthly instalments, if it is determined that the liability can indeed be passed on to them.
• 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

The legality of this situation is governed by several statutes rather than a single law. The key legal provisions include:

• The relevant State Professional Tax/Levy Act: Each state has its own act (e.g., The Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975). These acts make the employer the agent responsible for deduction and payment. They also specify penalties for the employer’s failure to do so. The act will clarify whether the tax liability can be recovered from the employee retrospectively.
• The Payment of Wages Act, 1936: Section 7 of this Act lists the permissible deductions from wages. Any deduction that is not authorised under this Act is illegal. While taxes payable by the employee are a permitted deduction, a large, retrospective deduction due to the employer’s error could be challenged as an unauthorised deduction.
• The Industrial Disputes Act, 1947: If the unilateral deduction affects a group of workmen, it could be considered an adverse change in the conditions of service, potentially leading to an industrial dispute.

If you are the complainant

If you are an employee (the complainant) in this scenario, here are the steps you should consider taking:

• Send a Formal Written Objection: The first step is to formally write to your HR department and management. Clearly state your objection to the proposed lump-sum deduction, citing the employer’s past negligence and the financial hardship it would cause.
• File a Complaint with the Labour Commissioner: You can file a complaint before the authority appointed under the Payment of Wages Act, challenging the deduction as illegal. This is an effective and relatively swift remedy.
• Issue a Legal Notice: Through a lawyer, you can send a formal legal notice to your employer, demanding they cease the illegal deduction. This often prompts the employer to reconsider or negotiate.
• Form a Collective: Unite with other affected colleagues. Collective action is always more powerful and can lead to a quicker resolution. You can collectively negotiate or take legal action.
• 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 a victim of such an arbitrary action by an employer, your focus should be on protecting your rights and finances. Here’s what to do:

• Preserve All Evidence: Keep copies of your employment contract, all salary slips, and any email, letter, or notice from the employer regarding this deduction. This documentation is crucial for any legal proceeding.
• Do Not Resign in Haste: Avoid making any rash decisions like resigning from your job. Your legal rights as an employee are best protected while you are still in employment.
• Document Financial Hardship: If the deduction is made, document the financial difficulties it causes you. This can be used to demonstrate the unreasonableness of the employer’s action.
• 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

It is important to understand that this is a civil and labour dispute, not a criminal matter. The police have no jurisdiction in such cases. If you approach a police station, they will rightly refuse to register an FIR (First Information Report). They will advise you to approach the Labour Court, the office of the Labour Commissioner, or a civil court for resolution. This issue does not constitute a criminal offense like cheating (Section 316 of the Bharatiya Nyaya Sanhita, 2023) or criminal breach of trust, as it stems from a statutory compliance failure rather than a fraudulent criminal intent.

FAQs people normally have

What evidence is required?

To effectively challenge the employer’s action, you will need the following evidence:

• Your appointment letter or employment contract.
• Salary slips from the past period (to show the levy was not deducted) and the current salary slip (showing the lump-sum deduction).
• Any written communication (email, memo, notice) from the employer about their intention to deduct the arrears.
• A copy of the relevant State Professional Levy Act, which can be easily found online.

How long will the investigation take?

This is not a police investigation. The timeline depends on the legal path you choose:

• Complaint to the Labour Commissioner: The proceedings under the Payment of Wages Act are relatively fast. A resolution can be expected within a few months to a year.
• Civil Court Case: If you file a suit in a civil court for an injunction and recovery, the process can be much longer, potentially taking several years to reach a final decision.
• Negotiation: Direct negotiation with the employer, especially if done collectively with other employees, can be the fastest way to resolve the issue, often within weeks.

Advocate Sudhir Rao, Supreme Court of India