Can Contract Workers Form a Union in a Production Company? Seeking Guidance and Implications

Union Formation in a Production Company

Please guide me on whether a production company with 80% contract labor and 20% workers on the company's payroll can have contract workers form a union within the company. What would be the implications if a union is formed in this scenario?

Additionally, please advise on the actions the company can take if they do not wish for a union to be established on their premises.

Regards,
Hem Dev Thapar

Please call all the contractors and instruct them to advise their workers. The workers are employees of the contractors. If the workers are interested in starting a union, they have the full right to organize it in the office premises of the contractor and not on the PE's premises.

Please ensure that you do not directly pay anything to the workers of the contractors, and any dues to be paid should only be through the contractors.

Regards

Thank you very much for the guidance. Could you please let me know what the difference is in organizing a union in a PE's premises or a contractor's premises?

Can anyone please let me know the definition of the minimum number of members in a UNION? I am confused whether it is 7 members, 10% of the total strength of workers in the company, or 10% of the total (staff + workers) in the company.

Regards,
Hem Dev Thapar

According to you, 80% of the workforce is on contract, and 20% are on the company's payroll. This is not correct. You cannot engage contract workers in permanent work. Permanent work is defined as working for more than 110 days in a year. The labor department, the authorities responsible for issuing licenses, will not permit you to engage contract workers in permanent work. Even if you and the contractors have licenses, if the government prohibits using contract labor for routine or permanent work, the contracts between your management and the contractors are considered invalid, and the workers must be treated as your employees. Contract workers have the right to form a union and raise disputes claiming that the contracts are invalid, supervisors are under management control, work is permanent, and they have worked for more than 240 days without a break. While the Supreme Court has ruled that contract or casual workers cannot demand to be made permanent, if the court deems the contracts invalid, management will have no choice but to make them permanent employees.

In your situation, it will be challenging for your management to defend your case with a 20:80 ratio of permanent to flexible workers.

Regards,
G.K. Manjunath
Senior Manager - HR

I fully agree with what Mr. Manjunath said. Contract labor is allowed to be employed only in jobs that are of a seasonal nature. If you are using contract labor in regular production jobs that are of a perennial (continual) nature, then the law prohibits you from engaging them. That is why it is called the Contract Labor (Regulation and Abolition) Act. The Act itself has been enacted to prohibit employers from engaging contract labor in production jobs.

Employer-Employee Relationship

Secondly, another point that the Supreme Court has held is that in order to claim permanency, there must be an employer-employee relationship. To establish this, it is important to determine whether you are exercising direct supervision and control over the employees of contract workmen.

In your case, it seems that your officers (or supervisors) are the ones giving directions to these "contract workers" to perform certain functions. This implies that you have exercised supervision and control over them, and therefore an employer-employee relationship is established between your organization and them. Thus, the contract will be labeled a "sham" contract, and you will be bound to take them onto your payrolls.

Termination and Union Formation

If they have not worked for 240 days, then you have little hope of terminating the entire contract by simply issuing a letter to the contractor. It is important to re-strategize the entire process and proceed accordingly. This requires thorough research and development and the intervention of management.

There is also no question of your liking or disliking the formation of a union by the workers; it is their right. Any effort made by management to prevent the formation of a union will be taken seriously by the authorities, and it carries its own ramifications; so be careful about it.

Regards,
Balaji