Is It Fair for ESI to Count Contract Labor as Our Employees and Demand Contributions?

We are an automobile finance trade. A Social Security Officer came to our office and inspected our book of accounts, employee attendance register, etc., and found 8 employees. In his report, he also mentioned 8 employees. After 2 years, we received a letter containing ESI registration. Upon our objection, we were asked to bring bills relating to a painting job. The said job was conducted by Berger Paints (an ESI registered establishment).

Now, the ESI organization is asking for details of the labor that did the painting (which are not available with us as the painting was done under a sq. ft. rate basis). ESI is trying to count those laborers as our employees and enforce our organization to pay ESI contributions from 2011. How correct are they in this matter?

Sir, nowadays, how many employees and laborers do you have? This is important because ESIC inspectors count all the employees, including the gatekeeper or sweeper.

In regards to your case, you can write a letter to the ESIC department along with the bills from Berger Paints. The purpose of the letter is to state that the number of employees in our organization is less than 10, therefore, we are not required to be covered under ESIC.

I agree, but my question is: Can ESI count the labor worked for a painting job as an employee, even though the company supplying that labor is registered with ESI?

Understanding ESI Coverage and Contesting Decisions

Coverage under the ESI Act, 1948, and the rules/regulations framed thereunder is a question of fact. If you are not satisfied with the decision or inquiry made by ESIC, you can contest it by presenting all facts correctly, including the fact that the individuals through whom you had the painting work done were employees of another firm. You can raise the issue of a contract for service, etc.

Even if the aforementioned department decides against you and asks you to cover your unit under the said Act, you can challenge the decision before the Honorable Employees' Insurance Court of your area having jurisdiction in the matter.