Legal Considerations for Trainee and Employee Status
Very good question. It got me thinking, and I was forced to look deeper than usual. In the case of Chairman-Cum-Managing ... vs Regional Labour Commissioner ... on May 26, 2005 (2) ESC 1547, you can find it here
https://indiankanoon.org/doc/331661/.
The following questions were framed:
(i) Whether a trainee or an apprentice is an 'employee' within the definition under the Payment of Gratuity Act.
(ii) Whether the period of training has to be counted towards 'service' for the purpose of calculation of gratuity under the Payment of Gratuity Act, 1972.
(iii) Whether the training period is to be counted as service for payment of gratuity in terms of Clause 4.2 of the V.S.S/V.R.S?
The court observed:
1) "The entire case rests upon the fulcrum of the questions whether there was a relationship of master and servant or employer and employee subsisting between the petitioners and the respondents. The question of the relationship of master and servant and employer and employee has been considered by their Lordships of Hon'ble the Supreme Court in a catena of cases. The crux of the decision of the apex court as well as various High Courts is that the concept of employment has three essential ingredients, namely, he must be (a) employed on wages; (b) employed in (i) establishment (ii) factory (iii) shop, etc.; (c) employed to do work which may be of skilled, semi-skilled, unskilled, manual, supervisory, technical, or clerical nature, and their term of employment may be express or implied. Whether a person is an employee or not is a question of fact. A contract of employment may be for training, i.e., a person may be employed for imparting education and training but it does not follow from the fact that it is a contract of employment. There is a well-established distinction between a contract for service and a contract of service and also a contract of training or apprenticeship as used in the context of The Apprentices Act, 1961. Mere existence of a contract to employ does not constitute a relationship of master and servant until the contract is performed and the person is actually employed. The expression 'employed' used in Section 2(e), therefore, postulates a relationship of master and servant and that such employment must be for wages earned by him."
2) "From a plain reading of the definition, the term 'wages' means earned wages and not potential wages. The expression 'in accordance with the terms and conditions of his employment' means no more than the remuneration payable or paid in employment. They have further to be earned in accordance with the terms and conditions of employment, express or implied. The phrase used in the definition of 'wages' should not, therefore, be construed in a narrow sense. The question whether there is an implied term of employment is a mixed question of fact and law and not a pure question of fact."
3) Whether the trainee is an employee or not would depend upon the terms of the contract executed between him and the industrial establishment as well as on the nature of duties performed by him. It is evident that wages are the emoluments earned by an employee while on duty or on leave, which implies that a person has to be employed in the establishment against a sanctioned post and is paid emoluments earned by him on fulfilling the terms and conditions of employment.
4) In this case, "It is also not in dispute between the parties that the employees concerned were paid a stipend during their training period and not wages. They were taken into employment after completion of training; hence the terms of the contract of training executed between the petitioners and the guardians of the apprentices at the relevant time have an important bearing on the case. It is apparent from the contract of training appended as Annexure 6 to the writ petition that the petitioners did not guarantee any employment in the Corporation, which is also evident from the advertisement. It was further agreed between the parties that if there was any violation of any terms of the agreement by the trainees, the concerned apprentice craftsman trainee was liable to refund the amount paid to and spent on him by the employers on his training. The aforesaid conditions very strongly indicate that the respondents did not enjoy the status of an employee in the Corporation as wages paid to an employee in terms of his employment are not returnable by him for the reason that he has earned it. Further, the respondents during the training period were neither appointed to any post nor even had any right to be appointed to a post after successful completion of their training."
See the website below for details.