SC Clarifies Section 59(2) of the Factories Act – Overtime includes HRA, TA and Other Allowances.

House Rent Allowance, Transport Allowance, Clothing and Washing Allowance and Samily Family Allowance.

Judgment dated 20.1.2026 of the Supreme Court in Civil Appeal NO.5185-5192 of 2016 of Union of India and others   Vs.  Heavy Vehicles Factory Employees Union and another

As observed by the High Court, the core of the controversy rested upon the interpretation of Section 59(2) of the Factories Act, 1948, which defined the “ordinary rate of wages” as basic wages plus “such allowances” as the worker for the time being is entitled to. The High Court has rightly opined that it is well-settled principle of statutory construction that the Legislature never wastes its words. Notably, when the statute provides for only two specific exclusions: bonus and wages for overtime work, in the absence of any formal rules governing the exclusion of other entitlements, the Executive cannot, through a mere Office Memorandum, read additional exclusions into the Act that the Legislature did not contemplate. The High Court further noted that the employees had been in receipt of overtime allowances calculated by including HRA, TA, SFA, etc., for a considerable duration. The sudden exclusion of these allowances via the Office Memorandum dated 26.06.2009, lacks legal authority and is contrary to the literal mandate of Section 59 of the 1948 Act.