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June 24, 2020

Contract status

Opinion

June 24, 2020

Over the last seven years, there have been three significant judgments by the apex court declaring contractors’ employees as employees of respective companies.

The latest judgement in this regard, is by a two-member bench headed by Justice Maqbool Baqar, who has also authored the same. This judgment has been given in an appeal instituted by the Sui Southern Gas Company (SSGC) against the December 7, 2018 ruling of the Islamabad High Court.

The Supreme Court has held that a contract between employers and labour contractors could not be used as a device to deprive the contract workers of their legitimate and fundamental right of forming union or becoming a part of it. The issue pertained to the question whether a worker/workman engaged for rendering service in an establishment, was eligible to be registered or enlisted as a voter to participate in a referendum for choosing a Collective Bargaining Agent (CBA) in that establishment or not.

The defendant trade union had contended that the SSGC had employed more than 3,000 workers on contract basis. They had been performing their duties on different posts of permanent nature and out of them 500 employees were members of the trade union. They were engaged by the SSGC directly or through some labour contractor. According to the union, those workers were performing their duties on the posts, which were of permanent nature, hence they were entitled to be included in the voters list of the trade union. These workers were employed as security guards, janitors, gardeners and meter readers etc.

In the judgment, Justice Baqar has relied heavily on an earlier judgment of the Supreme Court in 2013, discussed below, in which it was held that where an employer retained or assumed control over the means and methods by which the work of a contractor was to be done, then the relationship of employer and employee existed between the employer and employees of the contractor.

There are numerous judgments of the Indian Supreme Court relating to the employment status of contractors’ employees and the latter’s relationship with the principal employer. However, Pakistan’s first landmark judgment in this matter came in May 2013. A three-member bench led by the then Chief Justice of the Supreme Court Iftikhar Chaudhry confirmed the status of 112 workers of the bagging and loading area as employees of the Fauji Fertilizer Company (FFC) and not of the contractor. This case pertaining to FFC’s fertilizer plant at Mirpur Mathelo in Sindh, had been pending adjudication in various courts for more than 30 years.

The Supreme Court had rightly held them to be employees of the company and not of the contractor on account of the following: (a) the authority to hire and fire including settlement of wages and benefits of the contractor’s workers, rested with the company; b) their work was supervised, controlled and looked after by the FFC in charge of bagging department and his subordinate staff/supervisors; © these workers had been continuously in employment of the company for a long time; and (d) they were also responsible to clean the machines and floors.

In another judgment of December 2017, a three-judge bench of the Supreme Court, headed by CJ Saqib Nisar, had directed the management of Pakistan State Oil (PSO) Company to regularize the services of 208 workers, who were employed by various contractors. It was passed on an appeal by PSO on the judgment of the Sindh High Court (SHC), which had also directed the company to consider regularization of the services of these employees.

Since PSO had contended that petitioners regularized by the SHC were the contractors’ employees, the Supreme Court while confirming their regularization, asserted as follows; “As regards the question that the respondents were not employees of the petitioner (PSO) but the contractors, suffice it to say that it is a normal practice on behalf of such industries to create a pretence and on that pretence to outsource the employment of the posts, which are permanent in nature and it is on record that the respondents have been in service starting from as far back as 1984”.

One common factor in all the above mentioned three judgments, is longevity of the contractors’ employees’ services in the respective companies. Had that not been the case, the court would have been reluctant to pass judgments in their favour.

The judgment in the case of the SSGC will have serious implications for employers as now contractors’ employees may also claim the same increases in salary and benefits as agreed upon between the employers and the CBAs in their periodical collective labour agreements. This will cause a significant increase in employers’ fixed cost on human resource.

In the emerging economic catastrophe due to Covid-19, the prime responsibility of the government is to facilitate entrepreneurs in sustaining their businesses and refrain from shedding human resource.

In view of the prevailing situation and judgments of the apex court mentioned above, the government should enforce an act to regularize the contract employment system similar to India’s Contract Labour (Regulation and Abolition) Act, 1970.

The writer is an industrial relations professional and teaches labour welfare laws at IBA.

Email: [email protected]