The question whether the agreement is a camouflage or not should be decided by the tribunal, not the government.
The Supreme Court has repeatedly asked government undertakings to be model employers in the past decades, especially before the liberalisation wave. But one area where public sector undertakings (PSUs) find it difficult to be such role models is in the employment of contract labour. Private companies usually get away with their outsourcing policy by various stratagems. But PSUs cannot find such escape routes as they are presumed to be the ‘state’ in the eyes of the Constitution and the courts expect better labour practices from public functionaries.
In the past few years, the Supreme Court had decided scores of appeals brought either by the employees or the establishments regarding the status of the contract workers and the demand for their absorption. Though the constitution bench decision in the Steel Authority of India (SAIL) case in 2001 was deemed to have settled the question, the last word has not been said, as the judgement itself is one of the most-misunderstood ones, and has led to a lot of appeals.
The confusion relating to workers in the context of the provisions of the Contract Labour (Regulation and Abolition) Act, the Industrial Disputes Act and the SAIL judgement was evident in two cases dealt with by the Supreme Court in recent days. In the first case, Sarva Shramik Sangh vs Indian Oil, the union representing the workers of the canteen in Mumbai succeeded in its appeal. They had alleged that the contract between the corporation and the canteen contractor was a sham and their demand for absorption should be referred to an industrial tribunal.
The Bombay High Court had asked the central government to consider their request for reference. But it rejected the request on the ground that “the workers were not appointed by the management of the corporation but were engaged by the contractor holding a valid and legal contract.” This was challenged by the workers in the high court, but their petition was dismissed. Therefore, they appealed to the Supreme Court. It asked the government to reconsider its decision.
The crucial question in this case was whether the workers were contract labourers or not. This question should have been decided by the tribunal. However, the government answered this question on its own without referring it to the tribunal for a decision on merits. This was unlawful. If there is a dispute which should be referred to the tribunal under Section 10(1) of the Industrial Disputes Act and the government declines to do so, the court can direct the government to make the reference.
The Supreme Court listed four situations when the court can order the government to make a reference:
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In spite of the much-misundertood judgement in the SAIL case, the contract workers have at least three remedies, and the Indian Oil judgement cites them. It says that when the case of the workers is that the contract was bogus, they could demand that they should be declared as direct employees of the principal employer. Secondly, if that contention failed and it is found that the contract was valid, they can still ask for a direction to the government to consider their representation for abolition of contract labour. Thirdly, where the workers contend that the contract between the principal employer and the contractor was a camouflage merely to deny them the benefits of the labour laws, they can seek relief under the Industrial Disputes Act.
In the second decision, IAAI vs International Air Cargo Workers’ Union, the workers lost their case of nearly two decades, after seven rounds in the Madras High Court and the Supreme Court. In these years, the contractors had changed and the conditions had changed. However, the Supreme Court found that the (i) contract labour agreement between IAAI and the society engaging the cargo handlers was “not sham, nominal or a camouflage” and the contract labour were not direct employees of IAAI; (ii) there was no violation of the Industrial Disputes Act; and (iii) in the absence of a notification under Section 10 of Contract Labour Act prohibiting the employment of contract labour in the airport, the workmen were not entitled to claim absorption.
One result of these intricate interpretations of the law is that contract workers have practically ceased to move the courts. Only those unions which have the financial and organisational stamina can fight a case for more than a decade while their members face starvation. If this is the situation in government undertakings, the morale in private sector employment can well be imagined.