On February 20, 2019, the Supreme Court of India passed an order in the case of Bharat Heavy Electricals Ltd. v Mahendra Prasad Jakhmola (Civil Appeal Nos. 1799-1800 of 2019).

Facts in Brief

Bharat Mahindra Heavy Electricals Ltd. (hereinafter “BHEL”) entered into agreements with various contractors, in order to ensure the completion of certain projects. During the course of work undertaken towards such end, the employment of some contract labourers was terminated. The contract labourers contended that such termination amounted to violation of the Uttar Pradesh Industrial Disputes Act, 1947 (hereinafter “Act”). On such contentions being presented before the High Court of Uttar Pradesh, the Hon’ble Court opined that the workmen, otherwise employed by contract, were directly employed by BHEL.

Issue

On appeal to the Supreme Court, the issues framed by the Hon’ble Court, in order to determine as to whether the workmen were employees of BHEL or not, were:

i. Whether the principal employer pays the salary instead of the contractor; and

ii. Whether the principal employer controls and supervises the work of the employee.

Judgement and Analysis

The court held that in order to fall under the definition of an ‘employee’, as provided in the Act, the wages of such contract labourers must be directly paid by the principal employer, which was not the case in the present matter as it was observed that the contractors directly paid the workmen. Secondly, it was held that the principal employer was not in direct control and did not supervise the work of the workmen. The Apex Court opined that merely because the principal employer directs the workmen of contractors as to ‘what to do’, after entering into such agreement with contractors, does not imply that said principal employer has direct control and supervision. The court further observed that, in order for such workmen to be classified as ‘employees’, evidence must be led to show that the work undertaken by such contract labour is work which is ordinarily part of the industry of BHEL. Factors such as authority of appointment and termination of labour, authority to take disciplinary action, continuity of service, inter-alia, must be considered while determining a matter of this nature. 

The court applied the test laid down in the matter of International Airport Authority of India v. International Air Cargo Workers’ Union wherein it was held as under:

"If the contract is for supply of labour, necessarily, the labour supplied by the contractor will work under the directions, supervision and control of the principal employer but that would not make the worker a direct employee of the principal employer, if the salary is paid by a contractor, if the right to regulate the employment is with the contractor, and the ultimate supervision and control lies with the contractor. The principal employer only controls and directs the work to be done by a contract labour, when such labour is assigned/allotted/sent to him. But it is the contractor as employer, who chooses whether the worker is to be assigned/allotted to the principal employer or used otherwise. In short, worker being the employee of the contractor, the ultimate supervision and control lies with the contractor as he decides where the employee will work and how long he will work and subject to what conditions. Only when the contractor assigns/sends the worker to work under the principal employer, the worker works under the supervision and control of the principal employer but that is secondary control. The primary control is with the contractor."

Applying the above test to the matter at hand, the court held that the workers under contract were not direct employees of BHEL, as BHEL did not have direct control and supervision over the contract laborers, and further that the necessary tests, provided by the Apex Court, were not satisfied.