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Workers of a contractor engaged in a company's canteen claim they are the company's employees because the company controls their daily work. The company says the contractor is genuine. Following the approach in the Supreme Court's decisions on contract labour (such as Steel Authority of India v. National Union Waterfront Workers), what is the correct position?

Under the SAIL decision, absorption of contract labour by the principal employer is not automatic on abolition of contract labour. Workers can claim employee status only if the contract is proved to be a sham or camouflage, which is a matter of fact.

  1. AAbolition of contract labour under the contract labour law automatically results in absorption of the workers by the principal employer
  2. BAbsorption is not automatic on abolition; workers can claim to be employees of the principal employer only if the contractual arrangement is shown to be a sham or camouflageCorrect
  3. CWorkers become employees of the principal employer merely because the principal employer supervises the work
  4. DContract labour can never be engaged in any activity of the principal employer

Explanation

In the SAIL case the Supreme Court overruled the earlier Air India Statutory Corporation view of automatic absorption. Absorption is not an automatic consequence of abolition; the workers can succeed only if the contract is a sham or a camouflage, which is a question of fact. Supervision alone does not prove sham, so option C is wrong.

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