Can Contractual Labor Be Made Permanent? Understanding Legal Steps and Consequences

Dear All,

Please tell me about the appointment of contractual labor on a permanent basis for production. Can one organization do so? If yes, what precautions and documentation must it maintain to comply with various laws?

If not, why and what would be the consequences?

I have heard that there is a Supreme Court judgment on this matter. If you have the case details, please let me know.

Thank You.

Regards,
Varun

Dear Varun,

As per the latest decision by the five-judge members of the Supreme Court in the SAIL case, the principal employer is under no obligation to absorb contract workers where the contract labor has been abolished. However, this only applies to seasonal jobs and roles that are not core to the business. Therefore, utilizing contract labor for production jobs would not be legally valid, and in the event of executive intervention (State Labor Department), there is a possibility of the contract labor system being abolished and absorbed.

I'm also attaching the report of the Second Commission on Labor, which includes a dedicated chapter on contract labor (page 52).

Regarding the second part of your question, employing contract labor for core jobs (those related to production or integral to the business) is considered labor exploitation and should therefore be terminated.

I hope your queries have been addressed.

Dear All,

Is the above-mentioned Supreme Court judgment in the SAIL case still valid, or has it been overruled by a more recent one?