Employment Dispute: How Should a Factory Handle a Service Provider's Claim of Being an Employee?

Background of Employment Dispute

The person used to work for a factory on a fixed-rate basis until last year. For example, he used to charge for his skills on a per-piece basis and then leave.

Permanent Job Offer and Current Situation

In May 2020, the factory offered him a permanent job. Now, he wants to resign and settle elsewhere, claiming that he has been working since April 2019. Although the appointment letter from May 2020 is available, the employee insists he has call recordings with other employees and the Managing Director, as well as photos from his work in 2019.

Factory's Stance and Employee's Threat

The factory acknowledges the validity of the proofs but states that the employee was only engaged for specific tasks and was treated as a service provider. Additionally, the factory notes that taking photos of their work without permission is not acceptable practice. Nevertheless, the employee is threatening to lodge a complaint and take the matter to court.

Though he was a piece-rated worker from April 2019 to April 2020, he was a paid employee of your concern. Moreover, he has proofs too. Now that he wants to leave, is there anything extra he is asking for? The point to note is that even if he is a piece-rated worker, was he getting less than the notified minimum wages for the work he was doing? If it is not so, then there is no cause for any worry. Since he has accepted the offer of April 2019, he cannot now claim that his appointment on a full-time basis is from April 2019. A piece-rate appointment is not invalid in law if the wages thus paid were not less than the Minimum Wage.

Case Details and Queries

Learned professionals, the following contains the facts of this case and some queries of my own. It would help to gain knowledge regarding this from the forum members.

A person was called whenever the wood log cutting machine broke down. He was not called every day. Breakdown repairs take about 3 days, so he was asked to work. He was never an employee. He charged 20/- for each piece of wood cutting and used to cut in a range of 30 to 50 pieces. Generally, he used to come 5-6 days a month. So, he earned around 600/- to 1000/- per day depending on the pieces he cut. He used to complete his task within 2-3 hours and leave. It was just that we needed this service. Please come and complete it. If you do so, we will pay these charges. If he was not available, another person was contacted for the same.

In May 2020, the AP factory (in Guntur) offered him a permanent job so that he could look after his work and other activities as well.

Employment Status Queries

Firstly, the factory wants to know, how can he be an employee before May 2020 because it was purely a specific work for a short time. Nothing like full-day work. Secondly, another person was contacted for the said work when the employee was unavailable, but he was never given a job. So, is the second person also an employee?

For example, if someone comes for a painting job/puja pandit, etc., for 1 day at a shop, is he an employee?

Minimum Wage Inquiry

Also KK!HR Sir, what is the notified minimum wage for this work and where can I find it?

Based on the additional inputs being given now, it can be well established that he is a self-employed contractor (meaning he is both a contractor and its worker), so he cannot claim to have been employed since April 2019. He accepted the regular appointment given from May 2020 without any protest, so his effort to now link it with a prior date is clearly an afterthought and has no legal standing. His insistence on counting the joining from an earlier date is not understood as it does not make any practical difference in the financial payout for his F&F settlement now.

Notified Minimum Wage Inquiry

Can you inform me what the notified minimum wage is for this work or similar works and where I can find these notified minimum wages?

Protecting Factories from False Claims

How can factories protect themselves from such false claims? I have come to know that the employee is taking this route because he is leaving the job and wants to start his private work. He discovered that he can receive earned leave wages and possibly make some extra cash by claiming he has been working since 2019.

Dear colleague,

This matter hinges on whether you issued any letter before engaging him, stating the applicable piece rate, timings, and working hours. If not, and the terms were verbal, then it is an open matter.

Whatever his motives are for demanding back service, which he cannot, don't yield to any pressure. He accepted a permanent job from April 2020 without protest.

From the nature of his engagement, which involves providing skilled services as and when required, with no fixed timings or hours of work, it cannot be regarded as employment.

Regarding Minimum Wages

You need to refer to the Minimum Wages Act and the State rules in which the Schedule of covered employments is provided. Check if your type of business is covered and, if yes, the applicable minimum wages.

But at this stage, that is not the issue, so don't bother about it.

If the person takes a legal route, your side appears strong. So stay put at this stage.

Regards,

Vinayak Nagarkar
HR and Employee Relations Consultant