Labour law | Labour Act 1970

Are Contract Labourers Direct Employees: Supreme Court Lens

The Supreme Court defined the phrase "Exercise of control and supervision" in International Airport Authority of India v. International Air Cargo Workers' Union ((2009) 13 SCC 374). According to the court, "If the contract is for the supply of labour, necessarily, the labour supplied by the contractor will work under the orders, supervision, and control of the principal employer, but that would not make the worker a direct employee of the principal employer, if: 

(i) the salary is paid by a contractor;

(ii) the right to regulate the employment is with the contractor, and

(iii) the ultimate supervision and control lie with the contractor.

When contract labour is given to him, the principal employer is the only one who oversees and directs the job that is to be done by that labour. But whether the employee is to be assigned/allocated to the principal employer or used in another manner is up to the contractor in their capacity as the employer. In other words, because the worker is an employee of the contractor, the contractor has the last say over where, for how long, and under what circumstances the employee will work. The worker is only under the principal employer's supervision and control when the contractor assigns or dispatches them to work for them; otherwise, it is a secondary control. The contractor has the main control.

Call for action: If you deploy contractors. You must have robust internal guidelines and processes that ensure compliance with the regulation, regular audits, Risk assessments and mitigation to avoid any claims and disputes.