Girimaddukuri,
Whether the contract is a sham is not a function of how the contract is designed and whether it results in direct supervision of the employee.
It is a function of whether there is actually any contract or the agreement and contractor are just a creation of the company to avoid paying fair wages and give benefits to the contract employees. It will depend on a number of different facts considered together by the court.
The contract can be held to be a sham even if the agreement talks of a job work and not labour supply.
The contract labour act does not specifically ban use of contract labour, or even the business of labour supply.
Instead it says the government can ban the use of contract labour if it wishes.
But it discourages the use of contract labour :
a. where it involves production or core activities
b. where it is a work generally (or previously) done by permanent workers.
Andhra has, on the other hand, has defined production and core activity and specifically banned the use of contract labour in those functions. So there you would not have an excuse to think otherwise.
So the problem is when there is a complain filed by any of the workers, or the union, that the workers are being denied permanency, and that the contract is a sham or designed to deny workers their rights. The court will look at the various aspects of the case. The things that generally make the courts think that the workers should be given permanency are :
- Work being done in production related activity
- The number of workers needed is more or less standard unchanged, or the same workers are working for a long time on continious basis.
- Workers were recruited by or under supervision of the principal employer.
- Attendance, Leave, wage register, etc being maintained by principal employer and / or leave granted by employer
- The contractor doing work only for one employer and no others, doing work without margin or very little margin
(except where there is no other factory nearby needing contract labour)
- A contract not entered into (just work order given), or not renewed when completed
- Absence of contract labour license
So, when the contractor is only giving contract labour and not doing the work, or does not know what the work is, or where they are doing work in production related activity, the court will be inclined to consider that the workers should be made permanent. This is where the real danger is. Not labour supply by its self, but a combination of factors. Still it is best avoid this were possible.