Definitions: Contractor, Contract Labour, Establishment, Employer & Employee
Topic Overview
Core Definitions
Understanding the statutory definitions of Contractor, Contract Labour, Establishment, Employer, and Employee.
Judicial Interpretations
Examining landmark case laws governing the absorption of contract labour and the legal nature of employers in different setups.
Detailed Concepts
· Definitions
- Section 2(f) – Contractor
“Contractor” means a person who: Undertakes to produce a given result for the establishment through contract labour; or
- Supplies contract labour to the establishment.
- Section 2(g) – Contract Labour
“Contract Labour” means a worker who:
- Ishired through a contractor; and
- Works in connection with the work of an establishment.
The worker may be hired with or without the knowledge of the principal employer.
However, it does not include a worker who is:
- i. Regularly employed by the contractor in connection with the establishment; and
- ii. Provided with:
Periodic pay increments
Social security benefits
Other welfare benefits available to permanent employees under law.
Case Law: Steel Authority of India Ltd. v. National Union Waterfront Workers (2001)
Whether contract labour working in an establishment would automatically become employees of the principal employer after the Government abolishes contract labour under the Contract Labour (Regulation and Abolition) Act, 1970.
Supreme Court Held:Abolition of contract labour does not automatically lead to absorption of such workers by the principal employer.
Contract workers may become employees of the principal employer where the contract is found to be sham or bogus.
The earlier judgment in Air India Statutory Corporation v. United Labour Union (1997), which had allowed automatic absorption, was overruled.
- Section 2(m) – Establishment
“Establishment” means any place where any industry, trade, business, manufacture or occupation is carried on.
It also includes any establishment as specified under the relevant law.
- Section 2(k) – Employer
“Employer” means a person who employs one or more employees in an establishment, either: Directly, or Throughanother person.
1. Government Establishment
Where the establishment belongs to the Central or State Government, the authority specified by the Head of the Department (HOD) is treated as the employer. If no authority is specified, the Head of the Department is the employer.
2. Local Authority
Where the establishment is run by a local authority, the Chief Executive Officer (CEO) or the head of that authority is treated as the employer.
3. Factory
In a factory, the occupier of the factory or the manager of the factory is treated as the employer under the applicable factory law.
4. Other Establishments
For establishments other than factories, the person having ultimate control over the affairs of the establishment is treated as the employer.
The Term “Employer” Also Includes:
- Contractor
- Legal representative of a deceased employer
- Section 2(l) – Employee
“Employee” means any person employed on wages in an establishment to do:
- Skilled work
- Semi-skilled work
- Unskilled work
- Manual work
- Supervisory work
- Managerial work
- Administrative work
- Technical work
- Clerical work
However, it does not include an apprentice appointed under the Apprentices Act, 1961.