Can Receiving Letters at Work Prove an Employee-Employer Relationship in a Small Firm?

I am running a small firm with negligible business. No registers are maintained, no appointment letters are issued, and there is only one employee. Can receiving letters (from the village or LIC premium) by the employee on the office address establish an employee-employer relationship? Can bearer cheques in the employee's name be given out as a loan to a person who is defying the employee relationship? Are witnesses allowed?

Hello, I have not understood the term "negligible business." We need to know not only the nature of your business but also the number of employees (or people who work at your establishment/elsewhere for you) who you want to be treated as your employees. After you provide the desired information, it will be possible to provide a valid response.

If your operations are at a level that has started to cause worries regarding employer-employee relations or applicability, I appeal to you to consider these people as partners in your progress and treat them appropriately. On a very general level and in the absence of relevant information, I will only say that often and in many instances, the concept of "deemed terms and conditions of employment" is recognized. Watch your step. Be kind to these people. Be a good corporate citizen by complying with all applicable laws, and your business will flourish even more!

Would you kindly describe your situation a little more elaborately so that we may be able to help you better through the forum?

Regards,
Samvedan
July 6, 2008

I had one employee in my office. The firm registered is filing nil sales tax returns for the last 3 years. No appointment letter is given, and no registers are maintained. The employee has sent a legal notice through the labor office claiming to have worked as an employee with us for the last 20 years. He is unsure about which 3 different firms at our office address he worked for, drawing a monthly salary of 2,500. He alleges that we made him sign fake vouchers/blank papers, etc., and that we threw him out without paying his arrears.

He had been coming to our office as a Jhalli worker, gathering delivery challans to be given to transporters and keeping his commission under freight charges. He was likely doing the same with many other traders. During times of rain, heat, etc., he used to sit around our office and sometimes stayed overnight in a separate room with us, which we allowed for security purposes. At the same time, he received letters from LIC, villagers, etc., delivered at our office without objection. He claims to have relatives working around who are ready to give their statements in court as witnesses.

Out of the 3 firms stated by the employee, one firm is not operating from that address and has a turnover of 1-2 lac. The second firm is an HUF firm where no trading takes place but has a savings account from the office address, from which some bearer cheques were issued to him for loans forwarded to him or to withdraw for our personal purposes. The third firm is filing nil sales tax returns for the last 3 years, with no appointment letter issued and no records maintained.

He came around 18 years back, then vanished, and has been coming back for the last 6-7 years. We were willing to pay him some compensation to avoid legal procedures, but he is claiming high compensation of around 35,000. Please advise urgently regarding Delhi labor law/Industrial Act dispute:

1. How much should I pay as settlement charges?
2. How much can the labor office, labor court, deemed employee, labor officer, inspector, etc., ask me to pay up?
3. How strong is my case?

Dear Mr. Azad,

From your post, what I have understood is that you have kept that guy on a part-time basis just for carrying the Challans. He is also carrying out work for other traders. You can easily gather proof of the same and mention that he is not a permanent employee of my firm.

Now comes the question of what he has mentioned in his writ petition filed with the labour department, as your reply will entirely depend on the writ petition filed by that individual.

Hello,

Based on the facts stated, it is clear to me that he is NOT, and was never, in your employment. He is not even a part-time employee but rather a "contractor" who simply visited the establishment to collect papers for delivery to specified individuals, even if this was done daily.

What you are facing is a typical old trick played by some out-of-work union leaders (joining hands with some officials from the labor department) to instill fear of the law and authorities in order to coerce an employer into either granting employment with compensation to the complainant or reaching a financial settlement where both parties benefit.

The processing of the dispute by the authorities will likely proceed as follows:

1. You will be called to the Labor Commissioner's office multiple times and may be pressured or even intimidated to reach a "settlement." It is important not to give in.

2. After several visits, the matter may be taken up for conciliation as per the Industrial Disputes Act. During subsequent meetings, you may be warned about potential heavy costs if the matter goes to court, encouraging you to "settle." Again, it is crucial not to yield. The conciliation stage is a formal part of dispute resolution where the outcome is either a compromise or referral to court for judicial resolution.

3. If you stand your ground, the authorities will eventually have to refer the matter to court. At this point, the initiative shifts, and it becomes a legal battle. This scenario is advantageous to you, saving time and ensuring any expenses are directed towards legal representation rather than those attempting to exploit you. Additionally, the opposing party must consider lawyer fees, altering their strategy.

I strongly support this approach as the fundamental principle in judicial determination stipulates that the burden of proof lies with the accuser. If the worker alleges he was employed by you, it is his responsibility to substantiate the claim. If the evidence is against him, you have nothing to fear.

Finally, should you wish to settle to avoid further entanglement and are prepared to incur expenses, consider engaging a competent labor advocate to ensure any generated documentation is robust. Refrain from compromising before the matter is referred to court for judicial determination.

I trust this addresses your query.

Cheer up; this is a routine matter.

Regards,
Samvedan
July 7, 2008