The first case of outsourcing reported in India
The first case of outsourcing reported in India was way back in 1967.
GHATGE & PATIL CONCERN’S EMPLOYEES’ UNION Vs. GHATGE & PATIL (TRANSPORTS) PRIVATE LTD. 22/08/1967 – Supreme Court
GHATGE & PATIL (TRANSPORTS) carried on the business of transport and removal of goods by road. It owned a fleet of trucks and employed drivers and cleaners to run them. In 1963, the company, finding difficulty in observing the provisions of the Motor Transport Workers Act 1961, introduced a scheme whereby the trucks, instead of being run by the company itself, were hired out to contractors at a fixed rate per mile.
Employees of the company who were engaged in running the trucks resigned their jobs, and most of them, who had formerly been drivers, became contractors under the scheme.
The workmen's Union, however, raised a dispute asking for the reinstatement of the ex-employees who had been given work on a contract basis.
The Tribunal held that the contract system could not be said to be an unfair labor practice, for the ex-employees were never coerced or forced to resign their jobs, and they got more benefits from the contract system than from their original contract of employment.
In appeal to the Supreme Court, the Union contended that the ex-employees of the company continued to be workmen notwithstanding that they were posed as independent contractors, that the beneficent legislation conceived in the interests of transport workers was being set at naught by the company, and that the setting up of the contract system amounted to unfair labor practice.
… to be continued
From India, Chennai
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89The first case of outsourcing reported in India was way back in 1967.
GHATGE & PATIL CONCERN’S EMPLOYEES’ UNION Vs. GHATGE & PATIL (TRANSPORTS) PRIVATE LTD. 22/08/1967 – Supreme Court
GHATGE & PATIL (TRANSPORTS) carried on the business of transport and removal of goods by road. It owned a fleet of trucks and employed drivers and cleaners to run them. In 1963, the company, finding difficulty in observing the provisions of the Motor Transport Workers Act 1961, introduced a scheme whereby the trucks, instead of being run by the company itself, were hired out to contractors at a fixed rate per mile.
Employees of the company who were engaged in running the trucks resigned their jobs, and most of them, who had formerly been drivers, became contractors under the scheme.
The workmen's Union, however, raised a dispute asking for the reinstatement of the ex-employees who had been given work on a contract basis.
The Tribunal held that the contract system could not be said to be an unfair labor practice, for the ex-employees were never coerced or forced to resign their jobs, and they got more benefits from the contract system than from their original contract of employment.
In appeal to the Supreme Court, the Union contended that the ex-employees of the company continued to be workmen notwithstanding that they were posed as independent contractors, that the beneficent legislation conceived in the interests of transport workers was being set at naught by the company, and that the setting up of the contract system amounted to unfair labor practice.
… to be continued
From India, Chennai
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The concept of relationship in employment
The concept of relationship has totally changed to 'principal to principal' rather than that of employer-contractor. In the case of Group 4 Securitas Guarding Ltd. & Another vs. Employees’ Provident Fund Appellate Tribunal & Ors., 2012 LLR 22, the Delhi High Court held that where the contractor, being the employer providing services of manpower, has control over the personnel supplied by him to establishments—through issuance of appointment letters, payment of wages and other allowances, taking disciplinary actions, and effecting their placement, transfer, and termination of services—the relationship between such a contractor and the establishment where the manpower is supplied would be 'principal to principal' and not that of employer-contractor.
From India, Madras
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The concept of relationship has totally changed to 'principal to principal' rather than that of employer-contractor. In the case of Group 4 Securitas Guarding Ltd. & Another vs. Employees’ Provident Fund Appellate Tribunal & Ors., 2012 LLR 22, the Delhi High Court held that where the contractor, being the employer providing services of manpower, has control over the personnel supplied by him to establishments—through issuance of appointment letters, payment of wages and other allowances, taking disciplinary actions, and effecting their placement, transfer, and termination of services—the relationship between such a contractor and the establishment where the manpower is supplied would be 'principal to principal' and not that of employer-contractor.
From India, Madras
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Important points in Ghatge & Patil (Transports) case
(i) Since the drivers had resigned their jobs, they could not be said to be employed in the Motor Transport undertaking. The word 'employed' in the definition of the Motor Transport Act is not used in the sense of using the services of a person but rather in the sense of keeping a person in one's service. Persons who are independent and hire a vehicle for their own operation, paying a fixed hire per mile from their earnings, cannot be said to be persons employed in the Motor Transport Undertaking in the sense of persons kept in service. The operators were therefore not Motor Transport Workers within the definition.
(ii) There was no bar in law to the introduction of the contract system. A person must be considered free to arrange his business so that he avoids a regulatory law and its penal consequences, which he has no proper means of obeying without the arrangement. This, of course, he can do only so long as he does not break that or any other law.
(iii) Those who resigned did so voluntarily and they got substantial benefits under the new system.
(iv) The Tribunal was right in its conclusion that there was no exploitation of the ex-employees. There was thus no unfair labour practice. The present case was not analogous to the case of contract labour when employment of labour through a contractor or middleman put the labour at a disadvantage in collective bargaining and thus robbed labour of an important weapon in its armoury.
..... to be continued
Regards, V.Sounder Rajan
HR & Employment Law Attorney
Specializing in Recruiting and Contract Staffing Industry
M: [Phone Number Removed For Privacy-Reasons]
From India, Chennai
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(i) Since the drivers had resigned their jobs, they could not be said to be employed in the Motor Transport undertaking. The word 'employed' in the definition of the Motor Transport Act is not used in the sense of using the services of a person but rather in the sense of keeping a person in one's service. Persons who are independent and hire a vehicle for their own operation, paying a fixed hire per mile from their earnings, cannot be said to be persons employed in the Motor Transport Undertaking in the sense of persons kept in service. The operators were therefore not Motor Transport Workers within the definition.
(ii) There was no bar in law to the introduction of the contract system. A person must be considered free to arrange his business so that he avoids a regulatory law and its penal consequences, which he has no proper means of obeying without the arrangement. This, of course, he can do only so long as he does not break that or any other law.
(iii) Those who resigned did so voluntarily and they got substantial benefits under the new system.
(iv) The Tribunal was right in its conclusion that there was no exploitation of the ex-employees. There was thus no unfair labour practice. The present case was not analogous to the case of contract labour when employment of labour through a contractor or middleman put the labour at a disadvantage in collective bargaining and thus robbed labour of an important weapon in its armoury.
..... to be continued
Regards, V.Sounder Rajan
HR & Employment Law Attorney
Specializing in Recruiting and Contract Staffing Industry
M: [Phone Number Removed For Privacy-Reasons]
From India, Chennai
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