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VENKATARAMANI (professional)     16 April 2012

Reinstatement of contract labour

A contract labour (warehouse keeper) was paid salary, ESI and PF benefits through the contractor, without  default

The contractor was remitting  the ESI/PF contribution to authorities on account of contract labour.

The Principal employer closed the warehouse, hence there was no need for a warehouse keeper.

The contract labour was sent back to the contractor.

Contarct Labour requested for an expereince certificate from the Principal employer.

By mistake the experience  letter was wrongly worded  to  mean  that the contract labour was in employment with the Principal for two years. It was an inadvertent mistake by the Principal.

The contractor failed to provide alternative job to the contact labour.

Now the contract labour has approached the labour court demanding reinstatement by the principal employer.

Is he(contract  labour) right in demanding  reinstatement by the Principal employer, when he had not demanded the same from the contractor with whom he had a contractual relationship.

Please clarify my doubt.




 7 Replies

Adv. Gulammayudin A. Gagdani (LEGAL ADVISOR)     16 April 2012

in this case if you can prove that it is wrongly issued and acutal facts can be proved by

1) getting proof of payment of salar/wages from contractor and at no point of time principal paid any salary/wages to the concerned labour/employee.

2) get all details from contractor i.e. pf number and esi number of labour and produce the same in court that as the payment of salary/wages and concerned accounts are of contract labour, contractor has to provide job and principal is not responsible.

principal is responsible if proper payment or benefits are not availed.




Pathikrit Naha (DGM - HR & ADMIN)     16 April 2012

If he is in true terms contract labour, then mere issuing a simple certificate cannot demand permanency or reinstatement.

Please collect the total information about the case, from how many years he was working and who was the controlling authority or was it a job contract or simply labour supply etc.

Navaneetha Krishnan (Junior lawyer)     16 April 2012

in contract employement it is our right to make the employee permanant and just mentioned as two years does not mean that he was working continuous, you can take a defence that he has been working in a consequtive periods of 11 months

Manindra Singh (Chief Manager IR)     17 April 2012


Please check the following:

1. Is there any agreement / contract with the said contractor?

2. Has contractor issued appointment letter to the said contract labour?

3.How many such contract labours were deployed at the establishment of the PE?

4. Did the contractor pay RC and Notice pay to the contract labour at the time of retenchment?

5. Was there any supervisor of the contractor deputed at the establishment?

6. How often, did the contractor visited the establishment? and is there any record of it?

This will help to understand whether the contract is Sham (Bogus) or not. If the contract is sham, the contract labour will get reinstated with full back wages.

VENKATARAMANI (professional)     18 April 2012

Mr Manindra

1. There is an agreement between the Principal and Contractor

2. As  per the agreement the contractor  will depute persons to work for the Principal

3. As per the agreement complinace of labour laws is the responsibilty of the contracor

4. The contractor raises  bill on a monthly basis for all deputations

5. Payment made by Principal to the Contractor on a monthly basis by a cheque

6. The contractor issues appointment letter to labour

7. Then the labour is deputed to   work for contractor

8.ESI and PF payments are made by the contractor

9. Labour has ESI and PF accounts in their name

10. Due to business exigency the Principal had to close down the warehouse

11. The labour is not seeking re-empoyment with contractor

12. The contractor was ready to provide alternative assignent, but the labour demands reinstatement by Principal 


Please offer your comments



VENKATARAMANI (professional)     18 April 2012

Pls read point no.7 as

7. Then the labour is deputed to   work for Principal

Manindra Singh (Chief Manager IR)     18 April 2012

Thanks for the clarification.

Two points you have not responsed to - one about number of contract workers and second about the supervisor / visit of the contractor.

Please check the above two aspects also, the purpose is to know if there were sufficient number of contract labour requiring RC by the PE and license by the Contractor, and whether same was done or not. The purpose of checking supervisor / visit of the contractor is to establish the supervision and control over the contract workers deployed at your premises.

The Relief is possible to the said contract worker only if he is able to establish that the contract was Sham and there was direct master servant relationship between the PE and the said contract Worker. Supreme Court in the case of "Ram Singh Vs Union Territory, Chandigarh, Haldia Refinery Canteen Employees Union Vs IOC, International Airport Authority of India  Vs International Air Cargo Workers Union etc has amply clarified this.

Whats needs to be seen / checked is:

1. Who has supervision and control?

2.Who does the selection and Rejection of the workers to be engaged?

3. Who pays remuniration?

4.Who deduct Insurance contribution ?

5. Who organises the work ?

6. Who supplies tools and material for work ?

7.Who sanctions leaves / advances / loans etc

8. Whether there is valid agreement ?

9. Whether the contractor has issued appointment letter ? etc.. etc..

Thus, just one proof  with the contract worker will not establish that he was your employee, if you are able to establish other facts.

However, the service certificate issued by you and the fact that Contractor has not retrenched the worker may go against you. If it is recent case ( 1 -2 months ), you can ask the contractor to formally terminate their service and retrench him legally by making the application and also paying him retrenchment compensation and notice pay under section 25 F of the ID Act - all this has to be done by the contractor, you can reimburse the expenses.. This will strengthen your case if rest of the things are in place.

You are right, contract worker will never seek reinstatement with the contractor, he will always raise dispute agansit the copmany, because he knows that he can not get any thing from the contractor. 



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