Supreme Court Ruling on Contract Laborers
Applying tests laid down by precedents for determining whether a contract laborer is a direct employee, the Supreme Court has set aside the award of a Labor Court which had directed reinstatement of retrenched workers. The bench of Justices R F Nariman and Vineet Saran was dealing with an appeal filed by Bharat Heavy Electronics Ltd, which contended that the workers were not its direct employees but were contract laborers, and hence were not "employees" within the meaning of the UP Industrial Disputes Act.
Tests for Determining Direct Employment
To decide the appeal, the bench referred to the test laid down by the Supreme Court in General Manager, (OSD), Bengal Nagpur Cotton Mills, Rajnandgaon v. Bharat Lala and Another (2011) 1 SCC 635, which is as follows: Two of the well-recognized tests to find out whether the contract laborers are the direct employees of the principal employer are: (i) whether the principal employer pays the salary instead of the contractor; and (ii) whether the principal employer controls and supervises the work of the employee.
Understanding "Control and Supervision"
The expression "control and supervision" in the context of contract labor was explained by the Court in International Airport Authority of India v. International Air Cargo Workers' Union as follows: "If the contract is for supply of labor, necessarily, the labor supplied by the contractor will work under the directions, supervision, and control of the principal employer, but that would not make the worker a direct employee of the principal employer if the salary is paid by a contractor, if the right to regulate the employment is with the contractor, and the ultimate supervision and control lie with the contractor.
The principal employer only controls and directs the work to be done by a contract laborer when such labor is assigned/allotted/sent to him. But it is the contractor as employer, who chooses whether the worker is to be assigned/allotted to the principal employer or used otherwise. In short, the worker being the employee of the contractor, the ultimate supervision and control lie with the contractor as he decides where the employee will work, how long he will work, and under what conditions. Only when the contractor assigns/sends the worker to work under the principal employer, the worker works under the supervision and control of the principal employer, but that is secondary control. The primary control is with the contractor."
Supreme Court's Decision
Applying the test, the bench held that the workers were not direct employees. It was held that test No. 1 is not met as the contractor pays the workmen their wages. Secondly, the principal employer cannot be said to control and supervise the work of the employee merely because he directs the workmen of the contractor 'what to do' after the contractor assigns/allots the employee to the principal employer. Supervision and control of the principal employer are secondary in nature, as such control is exercised only after such workman has been assigned to the principal employer to do a particular work.
Arguments and Conclusion
On behalf of workmen, it was argued that although the contractors were changed many times, the laborers remained the same. However, the Court found that there was no evidence to the effect that contractors were frequently changed. The Labor Court's award and the High Court's approval of the same were termed "perverse" and set aside.
From India, Pune
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3180Applying tests laid down by precedents for determining whether a contract laborer is a direct employee, the Supreme Court has set aside the award of a Labor Court which had directed reinstatement of retrenched workers. The bench of Justices R F Nariman and Vineet Saran was dealing with an appeal filed by Bharat Heavy Electronics Ltd, which contended that the workers were not its direct employees but were contract laborers, and hence were not "employees" within the meaning of the UP Industrial Disputes Act.
Tests for Determining Direct Employment
To decide the appeal, the bench referred to the test laid down by the Supreme Court in General Manager, (OSD), Bengal Nagpur Cotton Mills, Rajnandgaon v. Bharat Lala and Another (2011) 1 SCC 635, which is as follows: Two of the well-recognized tests to find out whether the contract laborers are the direct employees of the principal employer are: (i) whether the principal employer pays the salary instead of the contractor; and (ii) whether the principal employer controls and supervises the work of the employee.
Understanding "Control and Supervision"
The expression "control and supervision" in the context of contract labor was explained by the Court in International Airport Authority of India v. International Air Cargo Workers' Union as follows: "If the contract is for supply of labor, necessarily, the labor supplied by the contractor will work under the directions, supervision, and control of the principal employer, but that would not make the worker a direct employee of the principal employer if the salary is paid by a contractor, if the right to regulate the employment is with the contractor, and the ultimate supervision and control lie with the contractor.
The principal employer only controls and directs the work to be done by a contract laborer when such labor is assigned/allotted/sent to him. But it is the contractor as employer, who chooses whether the worker is to be assigned/allotted to the principal employer or used otherwise. In short, the worker being the employee of the contractor, the ultimate supervision and control lie with the contractor as he decides where the employee will work, how long he will work, and under what conditions. Only when the contractor assigns/sends the worker to work under the principal employer, the worker works under the supervision and control of the principal employer, but that is secondary control. The primary control is with the contractor."
Supreme Court's Decision
Applying the test, the bench held that the workers were not direct employees. It was held that test No. 1 is not met as the contractor pays the workmen their wages. Secondly, the principal employer cannot be said to control and supervise the work of the employee merely because he directs the workmen of the contractor 'what to do' after the contractor assigns/allots the employee to the principal employer. Supervision and control of the principal employer are secondary in nature, as such control is exercised only after such workman has been assigned to the principal employer to do a particular work.
Arguments and Conclusion
On behalf of workmen, it was argued that although the contractors were changed many times, the laborers remained the same. However, the Court found that there was no evidence to the effect that contractors were frequently changed. The Labor Court's award and the High Court's approval of the same were termed "perverse" and set aside.
From India, Pune
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