Contract Labor Dilemma: Can Contract Employees Claim Permanency? Seeking Proof and Insights

Dear all, I am working for a company where contract labor is prevalent. Can anybody let me know whether a contract employee can claim permanency? Can anybody provide me with supporting proof, please?

Thanks & regards,
H. Rao

Contract laborers can claim permanency if:

1) The contract is a sham, bogus, or camouflaged. This means either:
a) The contractor does not hold a valid license.
b) It is merely a paper arrangement, but you directly pay the laborers of the contractor.
c) You have direct supervision and control over the contract laborers.

2) Contract laborers can claim pay and benefits similar to those of your regular employees if:

a) In the same company, the set of regular employees is also engaged in the same type and nature of job carried out by the contract laborers.

3) The contract can be abolished if:

a) The state/central Contract Labor Advisory Board finds that the jobs carried out by contract laborers are of a perennial nature, and in the surrounding area and in similar industries, the same kind of jobs are being done by regular employees. The Board can issue a notification abolishing contracts in the entire industries of the region.

In such a case, the absorption of the existing contract laborers is not automatic. However, you will not be able to continue the jobs with contractors/contract laborers.

I hope this information is helpful.

Regards,
Shailesh Parikh
Vadodara, Gujarat
[Phone Number Removed For Privacy Reasons]

Contract workers can ask to become permanent if they have been working continuously for 240 days without any break. According to the law, they can request to be considered for permanent employment. Therefore, with the concern of management and the HR head, the principal employer should ensure that every contract worker receives a minimum 1-month break from their work.

Thanks,
Ranjana C

The relevant law that deals with the service conditions of contract labor is the Contract Labour (Regulation & Abolition) Act, 1970. Section 10 of the Act provides for the abolition of contract labor if they are engaged in work of a perennial nature or in work that should be done by regular workmen. However, it is the appropriate government that alone is competent to notify the abolition of contract labor in an industry. But mere abolition of contract labor does not entitle the contract labor to claim permanency in the employment of the principal employer. They have to raise their claim before the authorities under the Industrial Disputes Act, 1947. Even then, they can succeed only if the contract is a sham or not genuine but only a paper arrangement to hide the real employer, i.e., the principal employer. Thus, there is no law entitling the contract labor to permanent employment in the principal employer's company. However, the principal employer stands a risk of inviting such claims if the contract is a sham.

Hope I have made myself understood.

Regards,
B. Saikumar
HR & Labour Law Advisor

[QUOTE=saiconsult;2089198]Hello, Mr. Rao. The relevant law that deals with service conditions of contract labour is the Contract Labour (Regulation & Abolition) Act, 1970. Section 10 of the Act provides for the abolition of contract labour if they are engaged in work of an entrepreneurial nature or in work that should be done by regular workmen. However, it is the appropriate government that alone is competent to notify the abolition of contract labour in an industry. But mere abolition of contract labour does not entitle the contract labour to claim permanency in the employment of the principal employer. They have to raise their claim before the authorities under the Industrial Disputes Act, 1947. Even then, they can succeed only if the contract is a sham or not genuine but only a paper arrangement to hide the real employer, i.e., the principal employer. Thus, there is no law entitling the contract labour to permanent employment in the principal employer's company. However, the principal employer stands a risk of inviting such claims if the contract is a sham.

Hope I have made myself understood.

B. Saikumar

Hi, Mr. Saikumar has correctly explained the legal provision. One has to be careful that the cloak of contract labour is not used as a camouflage. In case it is established that the contract was a sham, the employer runs the risk of making the worker permanent. The argument is that the worker was never a contract worker.

Cyril

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In regard to the engagement of contract labor, one has to keep in mind three specific conditions.

Safe Zone
This means the contract worker is engaged in jobs that are not permanent and perennial in nature. The workers are engaged for specific jobs, and upon completion, their contract is terminated.

Danger Zone
This is when workers are engaged in jobs that are permanent and perennial in nature, and the contractor workers are performing jobs that are ordinarily done by permanent workmen.

Critical Zone
This is where jobs being done by contractor workers come under the prohibited category.

The workers/unions can raise an industrial dispute in the case of the Danger Zone and Critical Zone and claim that the contract was a sham one and that the workers were always the permanent workers of the establishment. The employer can also be penalized for engaging contractor workers in jobs falling under prohibited categories.

The nomenclature "safe zone," "danger zone," and "critical zone" are only for understanding the nature of employment. These terminologies are not used in any statute book.

Regards,
Cyril.

The contract labor engagement within operations is a crucial piece of evidence that will entitle a contract labor claim to permanency within an organization. Judicial judgments have considered different types of circumventing, direct, and peripheral evidence, documents, and other proofs to arrive at legal decisions as to whether a particular contract worker is deemed to be termed as permanent, and accordingly, cases are decided. For a safe understanding, take as many precautions as possible to ensure compliance under the Contract Labor Act, non-discriminatory practices, etc.

I have personally handled a very peculiar case to its finality in legal battles but cannot divulge the details herein.

Regards,
Sanjay Jagtap

Hi Ranjana,

I have gone through your reply. Please let us know under which Act/Regulation it is required for contract employees to complete 240 days continuously without a break to be eligible for a permanent job in the company. Until now, I have not come across this information, so please help upgrade our knowledge.

Regards,
Avinash K.