There is a perceptible wane in the claims being raised before Courts by random stakeholders, whether spearheaded by trade unions or otherwise, claiming the status of employees, as also in the Courts allowing such claims.
Whether this is attributable to the days of militant trade unionism being over and the movement losing momentum, the fact remains that while Air India continues to resort to wild cat strikes, overall there is the phenomenon of technology which has transformed the workplace, with IT and BPO companies, MNC as well as the homegrown, in the forefront of this transformation, not to speak of globalisation affecting employment dynamics the world over.
Indian Employment Laws were and continue to be more in the genre of industrial laws conceived and passed in the era that organised employment meant large facilities and workforce.
The Industrial Employment (Standing Orders) Act,1946,the Industrial Disputes Act,1947, and the Payment of Wages Act,1936, are irrelevant for the services sector with its high growth white collar workforce. And while labour reforms are long overdue, the changes in employment equations are being addressed by the Judiciary placing reliance on traditional maxims and common law principles.
The basis of the employer employee relationship remains that of master-servant, a concept going back to the feudal ages with reciprocal obligations. On the employer’s part there is vicarious liability for acts of an employee, depending on the nature and extent of control the employer exercises over the services the employee provides .
The employee’s obligations include fiduciary duties towards his employer, and implicit obligations such as non compete,( not under Indian law, confidentiality, ,duty to account for profits, disclosure of adverse interests are rooted in the same doctrine. Interestingly, even the recognition of trade unions, a critical third party to the relationship, is derived from its role as a bargaining agent, being neither mandatory nor statutory, but a matter of volition on the part of the employer. Till the nineties, the judiciary was conservative in its approach. Every legislation, whether labour or service related was eventually interpreted to create further employment. While the intentions were laudable, the Air India judgement, wherein the Supreme Court held that notwithstanding the absence of an express provision in the Act for absorption of employees in establishments where the contract labour system is abolished by publication of the notification under section10 (1) of the Contract Labour Regulation Act,1070, there was a statutory obligation on the principal employer for automatic absorption of the contract labourers as the corporation’s employees.
In 2001, the Indian Supreme Court passed a land mark judgement involving the Steel Authority of India (SAIL) overruling the Air India Judgement, which if it held the field would have had disastrous consequences. The SAIL judgement was perhaps the watershed in the judicial approach in holding that the Industrial Adjudicator shall direct absorption of contract workers in the establishment of the principal employer, only if the contract is sham or bogus.
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Over the years, the Indian Courts have evolved a mechanism to determine not who is the employer, but whether the contract between service provider and the recipient is one of servant and master under the extant laws and the contractual structure. In other words, the short, die-hard question is whether the Contract in question is one of contract of service or contract for service. Courts have held that under a contract of service, the recipient is the master or employer as he can not only require what is to be done and how it is to be done. And the indicators for this are fourfold, the power of selection of the person providing the services, direct responsibility for paying wages, whatever be the nomenclature, right of suspension and dismissal, and control.
On the other hand, a contract for services is a contract whereby one party undertakes to render professional services and is entitled to use his proprietary knowledge and discretion. But not all contracts, whether for or of service can have, or not have all or some of these elements, or they maybe present in an unusual form, and circumstances differ from case to case, and sector to sector. The test is not infallible, nor is it a substitute for a proper employment law for an emerging economy, with diverse sectors undergoing radical changes. Justice cannot be dispensed based on maxims, doctrines and precedents alone. These are tools which the Courts may rely on in its application and interpretation of laws, something that the Lawmakers are not taking seriously enough.
Kumkum Sen is a partner at Bharucha & Partners Delhi office and can be reached at kumkum.sen@bharucha.in