The document outlines the legal perspective on contractor employees, emphasizing the lack of distinction between workmen and non-workmen in outsourcing arrangements. It highlights that courts have consistently ruled that contractor workers may be classified as employees of the deploying organization to prevent avoidance of labor laws. The criteria for lawful outsourcing of non-core functions include contractor appointment documentation, salary payments, and contractor supervision.

1. Contractor Employees
Legal Perspective
By
Faisal Mahmood Ghani
Advocate and Industrial Relations Advisor

2. • Contracting manpower
• No distinction between workman and non-
workman
• No distinction between core and non-core
operations
• Documentation with contractor’s
employees
• Controlling and managing contractor’s
employees
Conventional view

3. Superior judiciary examining such
arrangement
• Contractor workers challenging such
arrangement claiming employment
relationship with organization of
deployment
• Even where Contractor claiming
employment relationship with its
worker(s) and organization where
deployed disowning; of no consequence
• Court making distinction where such
arrangement is merely paper
documentation to avoid employment

4. relationship and denial of benefits under the
labour laws.
• Superior Judiciary have held that such worker’s
supply arrangement is aimed at circumvention of
Labour Laws.
• Consequently workers of Contractor were
declared as workers of deployed organization.
• This view in most of the Judgments was
maintained by Supreme Court and is now
followed with consistency by the lower Courts.
.

5. .
• Superior Courts have made distinction
between contracting out core and non-
core functions; and have reiterated the
previous view that contracting out non-
core functions is permissible subject to
meeting the three main ingredients for
outsourcing.

6. Legal view
Now the criteria to be fulfilled for
outsourcing of non core functions and
where the contractor/service
provider/vendor can render services and
deploy its workers are:
1. Engagement and appointment letter of
the contractor;
2. Payment of salary and other benefits by
the contractor;
3. Control and supervision by the Contractor

7. .
However there is no legal exposure where
outsourcing is done in core functions but
the Agreement requires deployment of
non-workman; as such persons are not
governed under the Labour Laws but
under the terms of appointment letter e.g.,
Sales related persons, management cadre
etc.