Service Law / Labour Law : Law on Regularization of Contractual Employees

Service Law / Labour Law : Law on Regularization of Contractual Employees

In an important judgment it is held that in an Industrial Dispute, the deposition of the person representing similarly placed persons would suffice. 

If there is a genuine labour contract between the principal employer and the contractor, the authority to abolish the contract labour vests in the appropriate government and not in any court including Industrial Adjudicator. If the appropriate govt. abolishes the contract labour system in respect of an establishment, the Industrial Adjudicator, would after giving opportunity to the parties to place material before it, decide whether the workman be absorbed by the principal employer, if so, how many of them and on what terms, but, if the appropriate government declines to abolish the contract labour, the Industrial Adjudicator has to reject the reference. If however, the so called contract is not genuine, but, is a sham and camouflage to hide the reality, Section 10 of Industrial Disputes Act, 1947 would not apply and workman can raise an Industrial Dispute for relief that they should be deemed to be employees of the principal employer. The Court or the Industrial Adjudicator would have jurisdiction to entertain such a dispute and grant necessary relief.

It has been held that a contract labour can raise an Industrial Dispute for seeking declaration that the contract is genuine or not. If it is not genuine, the contract labour need to be treated as the employee of the principal employer.

Section 10(4) of the Industrial Disputes Act, 1947 permits the Industrial Adjudicator to confine its adjudication to the terms of reference and to those points and matter incidental thereto.

In this case it was also held that to establish that a person is the direct employees of the organization, for which, it is necessary to prove (1) salary is being paid by the organization; (2) disciplinary powers are with the organization ; (3) the employees petitioners are working under the supervision and control of the organization. 

If the industrial adjudicator finds that contract between the principal employer and contractor to be sham, nominal or merely a camouflage to deny employment benefits to the employee and that there was in fact a direct employment, it can grant relief to the employee by holding that the workman is the direct employee of the principal employer. Two of the well recognized tests to find out whether the contract labour are the direct employees of the principal employer are (i) whether the principal employer pays the salary instead of the contractor; and (ii) whether the principal employer controls and supervises the work of the employee.

It is also necessary to get the relief of regularization, the employees were required to prove that their exists posts commensurating their qualifications, vacancies with the organization and that they have been engaged through the process followed by the organization for making regular appointments. 

Case reference is Vinay Sharma v. IGL [2014] GCtR 6508 (Delhi).