All the labour Acts which tell about service conditions of employees are meant only for workers who have no reportee under them. Though the meaning of workman will cover those engaged in supervisory capacity, it will not cover persons having managerial powers. A simple definition of managerial power is the authority to sanction leave, take disciplinary action and appraise the subordinates. Therefore,if your supervisor is entrusted with the above powers, naturally, he should be out of the purview of CLRA Act.
In an arrangement of payroll outsourcing, however, companies are doing it even for Managing Director. There are a lot of companies who engage people on roll of others who are pioneers in outsourcing activities, even in acts of perennial in nature. This extends to sales and business development also. But nobody questions it. Therefore, unless and until the law on Contract labour is enforced properly you are free to deploy any person from Contractors.