Can Long-term Contract Workers Legally Seek Permanent Employment? Seeking Advice!

Dear Concern,

We have 10 workers (3rd party payroll) working with the same roles and responsibilities since 2015 (more than 7 years of continuous service). They have PF, ESIC, Gratuity, Bonus, and all other statutory benefits provided by the agency, and we pay them on a monthly basis. Their employment is renewed every year with a 1-year extension, and they also receive a wage revision annually.

Can a contract employee seek permanent employment through the court?

Any advice on the above will be greatly appreciated.

Regards,
Paul

Dear Paul,

Legally, there is no contract of employment between the contract labor engaged through any contractor and the principal employer for whose benefit such contract workmen's services are utilized. However, certain factors like regular engagement of such contract workmen on core activities, continuity of such engagement in the same establishment for a long period through the same contractor or different contractors by means of an "umbrella contract," the ratio of the number of contract labor to that of the regular employees employed in the same operations, and any difference in the scales of general service conditions between them are indicative of the fact of such contract being a sham or ruse to deny the benefits of regular employment to such long-serving contract labor simply for the sake of easy hire and fire.

Such a continuing situation can create disgruntlement in the contract labor in the long run and induce them to seek judicial remedy by means of raising a collective industrial dispute under the ID Act, 1947, or pressure the concerned appropriate Government for abolishment under section 10 of the CLRA Act, 1970. Therefore, it would be better to offer regular employment to such long-serving contract labor in a phased manner during the years to come. Such a move by the principal employer would instill confidence and a sense of belongingness in the minds of such contract labor, avoid unnecessary industrial disputes, and ensure the smooth running of the establishment in the long run.

Dear Umakanthan Sir, Thank you very much for the advice. Please guide, can the permanent worker trade union appeal through court to confirm such old contract employees who are working in the same unit but are not active members of the said union.

Regards,
Amit

Here, my view is a little different. If there is no direct relationship between the employer and the employee, specifically between the management and the contract workers, and if the workmen have no evidence that such engagement is a sham or camouflage, then there is no need to make them permanent. In most organizations, all allied activities are carried out by contract workers, some even for more than fifteen years.

Regards,
Ranjan Ku Dixit

Dear Amit,

Espousal of contract labor by trade unions

The espousal of the cause of contract labor engaged in the same principal employer's (PE) establishment by the existing trade union for its permanent employees depends on the by-laws of the union. In my observation, the existing clash of employment interests between permanent workmen and contract labor performing the same operations prevents such unions from taking up these issues. However, any general workers' union can do so, provided the contract laborers are its members or authorize it to act on their behalf.

Enforcement of the CLRAA, 1970

Regarding Mr. Ranjan's observation, although I would also acknowledge it as the ground reality, I can emphasize that it indicates the enforcement of the Contract Labor (Regulation and Abolition) Act (CLRAA), 1970, being more of an alarming violation than compliance. If we closely observe the ratio decidendi of the case laws and the successive amendments to the Act, except for the flexible hire and fire policy, the cost-effectiveness of engaging contract labor is gradually eroding. The morale and commitment of such labor become negative beyond a certain point in the long run. This situation could result in in-plant violence, as in the case of Suzuki's Manesar Car Plant, if I remember correctly. Moreover, the long-term engagement of the same contract labor through umbrella contracts is an irrefutable fact of the requirement for optimal labor strength and the indulgence in unfair labor practices.