Can a principal employer exercise some supervision and control upon the contract workmen?

• July 29, 2024

Over here we deal with the most important and crucial aspect of contract labour management namely the question of supervision and control exercised by the Principal Employer  over the contract workmen.  Supervision and control are the most debated aspects of contract labour management. Various angles of this aspect were debated in the courts and a landmark order was delivered by the Hon Apex Court on 29th April 2005 in the lis Haldia Refinery Canteen Employees Union & Others Vs M/s Indian Oil Corporation Ltd & Others.

CASE OVERVIEW 

The canteen employees of the contractor had sought absorption on the rolls of the principal employer claiming they were actually direct employees of the PE. The Single Judge of the Calcutta High Court had allowed the workmen’s application and directed the Indian Oil Corporation Limited (IOCL), Haldia Oil Refinery to absorb the workmen in its service and regularise their services.

ARGUMENTS AND DEFENSE 

It was contended that the canteen workmen are regular employees of IOCL for the following reasons –

1. The workmen are working in the refinery canteen run by IOCL through a contractor, but IOCL treats them as employees of the contractor.
   
2. The factory where the workmen are employed is governed by the provisions of the Factories Act 1948. It is a statutory canteen established by IOCL as require under the provisions of the Act.
3. The canteen is maintained for the benefit of the workmen employed in the factory and the IOCL management has direct control over the canteen workmen.
4. Contractor though shown as a contractor has no control over the management, administration and functioning of the canteen.
5. Canteen work is of perennial nature and the canteen is incidental to and is connected with the establishment of the management.
6. Canteen is part of the establishment of the management and the workers in the canteen are the employees of the management.
7. IOCL management has refused to grant the status of regular employees to canteen workmen and treated them as employees of the canteen contractor.

The IOCL management on the other hand put forth very strong defence in its arguments to oppose the demand of the canteen workmen, which are;

1. None of the canteen workmen was appointed by the principal employer.
2. All of them were appointed by the contractor and therefore, they are the employees of the contractor.
3. The Factories Act or rules framed thereunder do not require that a statutory canteen should be managed and run by regular employee of the establishment. In law it is open and permissible to the management to entrust the same to a contractor.
4. IOCL being a public sector undertaking has devised and put in place rigid employment strategies for its core activities based on employment strengths derived on the basis of production and output norms and requirement studies. All recruitment by and within the corporation is made strictly according to those norms on the basis of staff strength and quotas fixed for direct recruitment on the basis of job qualifications, employment norms, reservation of posts to be filled by internal promotion pursuant to settlements arrived by the corporation with its recognised union and such employment can only be made against existing vacancies. 
5. IOCL management cannot appoint any person in contravention of the recruitment policy which requires the management to follow the system.
6. Therefore, apart from the fact that the canteen workmen were not regular employees of IOCL, the absorption and regularisation of their services would contravene Article 16(4) of the Constitution as well as the reservation policy.

LEGAL PROCEEDINGS

The Single bench was convinced of the arguments of the canteen workmen and had awarded regularisation on the rolls of the principal employer. The Division bench, however, disagreed and set aside the order of the Single Bench.

When the matter reached the Hon Apex court, the contents of its order set guidelines for employers across the country in appropriate utilisation and regularisation of contract workmen. They are;

1. The principal employer shall have the right to test, interview or otherwise assess or determine skills, knowledge, proficiency, capability etc. so as to ensure that such workers are competent, qualified and suitable for efficiently and safely performing the work covered by the contract.
2. Management exercises effective control over the contractor on certain matters to ensure that the canteen is run in an efficient manner and to provide wholesome and healthy food to the workmen of the establishment.
3. This however does not mean that the employees of the canteen have become the employees of the management.
4. A free hand has been given to the contractor with regard to the engagement of the employees working in the canteen.
5. In the agreement between the canteen contractor and the IOCL unlike in the case of Indian Petrochemicals Ltd & Another, there is no clause that IOCL shall retain and engage compulsorily the employees who were already working in the canteen under the previous contractor.
6. The management has kept with it the right to test, interview or otherwise assess or determine the quality of the canteen workmen with regard to their level of skills, knowledge, proficiency, capability etc to ensure that such canteen workmen are competent, qualified and suitable for efficient performance of the work covered under the contract.
7. The control of the management is to keep a check on the quality of service provided to its employees.
8. The management of IOCL is not involved in the appointment or disciplinary action or dismissal or removal from service of the workmen working in the canteen.
9. Settlements were entered into between the Contractor and the workmen of the canteen before the Assistant Commissioner from time to time.
10. The management was not a party to the said settlements which showed that the canteen workmen were treating themselves to be the employees of the contractor and not that of management.

CONCLUSION

The procedures, practices of the  principal employer along with the Supreme Court order provide very clear operating guidelines in dealing with contract workmen. We urge the employers to take note of the same to accordingly regularise their own operations for productive and efficient deployment of contract workmen.