Section 2 Wages – crew

3.2.1 General comments on wages

In addition to the obligations under Section 1 of this Rule, the shipowner is obliged by the terms of a crew contract or by applicable law to pay sick wages to an injured or sick crew member or wages to his estate if he dies. The cover for such payments is defined in this section.

3.2.2 Crew contract must be approved

A crew contract often specifies the extent of the wages to be paid and the period during which such payment should be made. As is clear from Rule 10 Section 2 (c), any crew contract must be submitted to the Club for approval. This is essential to help the Member avoid unusually burdensome terms but also in line with the concept of mutuality.

3.2.3 Extent of cover

The wages to be compensated under this section are those the Member is obliged to pay for under the terms of the contract of employment on account of illness, injury or death. When applying for compensation, the Member should present a log extract showing when and for what reason the crew member signed off. A copy of the monthly wages account should be submitted to prove the extent and nature of wages paid.

Overtime wages are not compensated whilst the arrival on board of a substitute is awaited for a crew member who has signed off for medical reasons. The reason is that most probably there has not been such an increase of the Member’s overall costs which is a requirement for compensation according to the principles of Rule 8 Section 2. Before the substitute arrives, the Member saves the costs of his wages but has instead to pay the overtime. The question of compensation only arises when the Member is obliged by law or contract to pay wages as well as overtime on the basis of the same event.

A crew member may be covered by a social insurance scheme under which he is compensated for wages during illness or injury. This should be checked by the Member before any wages are paid. The Member’s obligations should be reduced by any payment under such an applicable scheme.

Only payment of wages made by the Member is compensated. As appears from comments to Rule 2, a crew member cannot apply to the Club for the payment of wages.

A Member sometimes has to pay social costs and vacation compensation based on sick wages. Such additional charges are not covered.

While being away from the ship on account of injury or illness, a crew member is often entitled to maintenance in the form of a daily sum so as to compensate him for the free meals and lodging available on board. These are not wages in the sense of this clause. Maintenance paid can, however, be compensated under Rule 3 Section 1 (b).

3.2.4 To whom should compensation for wages be paid?

When paying compensation for wages to the estate of a deceased crew member, it is important to check carefully that payment is made to the legally entitled heirs. Members should not rely indiscriminately on crewing agencies for such payments and are advised to consult the Club before payments are made. The Club will then make the necessary inquiries through its local correspondent or lawyers. They will draft a suitable release against which payment can be made. Payment made to a wrong party without the Club having been consulted will not be compensated.

3.2.5 Payment of wages at total loss and CTL

As appears from the second part of this section, cover is provided for the contractual or legal obligation to pay wages to the crew after the entered ship has become a total loss, a CTL or suffered a major casualty. The Member should immediately inform the Club of any such occurrence, especially if the ship is not entered for Hull insurance with the Club.

3.2.6 Common Law liability to pay wages

Under Rule 3 Section 1 (f) a Member is covered for his obligation to pay wages based on a Common Law liability provided that the Member has not chosen to remain uninsured for the obligation to pay wages by excluding Rule 3 Section 2.

3.2.7 U.S. penalty wage claims

Under U.S. law a shipowner is obliged to pay a crew member all of his wages within strict time limits. The obligation is not confined to U.S. flag ships but also applies to foreign ships calling at U.S. ports. Failure to comply with the obligation may result in the imposition of a penalty of two days’ wages for each day payment was withheld. In addition to wages due and penalty wages, a court may award damages for emotional distress, punitive damages and damages for lost future income, which could increase a shipowner’s exposure significantly.

Similar penalties may be imposed upon shipowners where there is more than one contract applicable to the terms of employment and where wages are paid according to the contract which produces the lowest wages. The articles signed may call for wages pursuant to the ITF (International Transport Workers’ Federation) scale, whereas the crew member is paid wages below that standard on the basis of an individual employment contract.

Penalty wages and other consequences of a Member not complying with the obligations under U.S. or other applicable law with regard to due payment of wages are neither covered under this clause nor under Rule 7 Section 6. Failure to arrange suitable wage payment routines within the Member’s organisation may imply negligence at a management level and is excluded under Rule 11 Section 1.

3.2.8 Employment indemnity

Criminal activities are as a general rule not covered nor indeed insurable. There may, however, be circumstances where a crew member has been questioned, detained and arrested and subject to criminal prosecution for carrying out their lawful duties in full compliance with their employer’s instructions and in the interest of good seamanship. Under such circumstances the Member in his capacity as employer should ensure that adequate legal representation is obtained to protect the interests of the crew member. Based on the merits of the individual case the Club may be sympathetic if a fine or prosecution is confirmed to be the direct result of the crew member carrying out lawful duties in full compliance with their company’s instructions.