No, employees who work for a contractor are not necessarily employees of the business; however, they may be if the business manages their work and their duties are essential to its operations.
Based on a 2013 ruling by the Supreme Court of Pakistan, this story traces the decades-long struggle of 112 workers to be acknowledged as employees of a large fertilizer company.
The Start: Urea Bags and a Legal Issue
It began with urea bags, a factory floor, and a life-altering query: who actually hires these people?
The vast fertilizer factory was filled with the hum of machinery and the heavy odor of chemicals. Workers filled, stitched, and loaded urea bags day and night. Their lives were synchronized with the beat of the production line, and their hands worked quickly. These employees weren’t just any workers; they were the foundation of the factory’s operations, making sure the urea made it to markets all over the nation.
The catch was that these employees weren’t paid by the company. They were employed by contractors, intermediaries who controlled daily operations and wage administration. This arrangement was accepted for years until a legal firestorm was sparked by a spark of dissatisfaction.
Employees Create a Union and Threaten Lockout
The Bagging and Loading Contractors Mazdoor Union was established by the workers. Their requests were straightforward but crucial:
Fair compensation for their work
Improved factory floor working conditions
Acknowledgment as fertilizer company employees
When the business gave a new contract to a different contractor in 1992, everything changed. 112 employees were abruptly locked out—no warning, no justification, just the harsh reality of a closed factory gate.
The employees thought the company was responsible for the lockout in order to reduce expenses and lessen the power of their union. They chose to fight in the courts because they felt wronged and desperate, which led to a conflict that lasted for more than 20 years.
The Fundamental Legal Issue
The legal query was straightforward but significant: were these contractors’ employees truly workers for the fertilizer company?
It was more than just semantics. They would be eligible for the following benefits if they were acknowledged as company employees:
Restoring the factory
Refunds and other monetary advantages
Legal safeguards provided by Pakistan’s labor regulations
If not, the contractors would still be in charge of them and have no legal recourse against the business that benefited from their work.
For the 112 employees as well as the innumerable others employed under comparable contractual arrangements throughout Pakistan, the stakes were extremely high.
Employees’ Argument
The employees contended that their responsibilities extended well beyond typical contractor work:
They used the company’s machinery, supplies, and equipment while working inside its factory.
They did as the company’s managers told them.
Their duties, which included loading urea, cleaning, filling, and stitching, were essential to the business’s main functions.
The purpose of the lockout was to coerce them into taking on less advantageous contracts.
The employees argued that the company had significant control over their day-to-day work and that the contractors were only middlemen.
Defense of the Company
However, the business continued to tell a completely different story:
They said they had no direct connection to the workers’ jobs.
The workers were employed, compensated, and overseen by the contractors.
The contractors were only paid by the company according to the amount of urea that was processed.
They claimed that the employees were not entitled to company protections because they were outsiders.
The workers’ demands for integration and control were pitted against the company’s claims of contractual separation as the legal battle got underway.
The Law
This dispute was based on a number of laws:
Anybody who hires employees under a contract, whether directly or through a contractor, is considered a “employer” under the Industrial Relations Ordinance (IRO) of 1969. Additionally, it shields employees from unfair labor practices like unlawful lockouts.
According to the Factories Act of 1934, a “worker” is any individual engaged in manufacturing operations, such as operating machinery or moving materials, whether they are directly employed or through a contractor.
According to these laws, a worker might be regarded as an employee of the company if their work was crucial to its operations and was managed by the company.
Proceedings of the NIRC
Under Section 22A(8)(g) of the IRO, which permits unions to contest unfair labor practices, the employees brought a case before the National Industrial Relations Commission (NIRC). According to Section 2(xvii), which defines lockouts as employer actions intended to pressure workers into accepting unfair terms, they contended that the lockout was unlawful.
At first, the NIRC took the company’s side and said that the contractors were in charge of paying the employees’ salaries.
Full Bench Labour Court & NIRC
The employees refused to give up. They appealed to the NIRC’s full bench, which ruled on March 3, 1993, that the workers were not only contractor hires but also company employees.
In parallel, they submitted individual grievance applications to the Labour Court in Sukkur under Section 25A of the IRO, requesting reinstatement due to wrongful termination. The court examined their claims closely:
These weren’t temporary workers doing odd jobs.
They managed urea, maintained production, and cleaned machinery.
The business demonstrated control by providing materials, equipment, and supervision.
The Labour Court ordered the reinstatement of all 112 employees with full back benefits on April 24, 1996.
Intervention by the Supreme Court and Appeals
Both the High Court of Sindh and the Sindh Labour Appellate Tribunal upheld the Labour Court’s ruling after the company filed an appeal.
Unwilling to back down, the business appealed the case to Pakistan’s Supreme Court, claiming:
Since the NIRC was handling the case, the Labour Court lacked jurisdiction.
Contractor-employed workers are not entitled to company employee status by default, citing examples such as:
The State v. Mian Munir Ahmad (1985 SCMR 257)
Pakistan Burmah Shell Ltd. v. Farid Ahmad (1987 SCMR 1463)
The employees retorted with a powerful precedent:
Hussainbhai Calicut v. Alath Factory (AIR 1978 SC 1410): If a contractor’s work is essential and under the company’s control, they may be considered employees.
Sindh Labour Appellate Tribunal v. M/s Dawood Cotton Mills (SBLR 2004 Sindh 614): Employees of the company are those in core departments who are supervised by the company.
Tests the Supreme Court Takes Into Account
Two crucial criteria were used by the Supreme Court:
Control Test: Who oversaw and guided the employee’s work?
Integration Test: Did the employee’s work constitute an essential component of the business’s operations?
The court came to the following conclusion:
The employees were supervised by the company.
They made use of company resources, equipment, and tools.
Their work was central, not incidental, to the production of fertilizer.
The company was still held accountable despite contractors’ involvement in wage payments.
The court further explained that the Labour Court had legitimate jurisdiction because NIRC cases and Labour Court grievances were different.
Supreme Court Decision
The Supreme Court decided on May 16, 2013:
Since the 112 workers were company employees, they were covered by all labor laws.
The company must reinstate all employees with full back benefits because the lockout was unlawful.
The Labour Court’s ruling was upheld when the company’s appeals were denied.
Importance of the Decision
This ruling was more than just a court win:
Employee dignity and recognition were restored.
reaffirmed the idea that businesses cannot deny rights by claiming they have contractors.
Establish a standard for Pakistan’s contractor workforce.
The decision sent a message across the country: regardless of the employment contract with a third-party contractor, you are their employee if the company controls your work and depends on your labor.
FAQs
Q1: Are employees of a contractor regarded as employees of the company?
A: In accordance with the 2013 Supreme Court decision, provided that their work is directly controlled by the company and essential to its operations.
Q2: What distinguishes a worker as an employee of a business from a contractor?
A: Employment status is determined by the integration and control tests, which look at core operational tasks, supervision, and the use of company resources.
Q3: According to labor law, what is an illegal lockout?
A: In violation of laws such as IRO 1969, when a business bans workers or shuts down operations in order to impose unfair terms.
Q4: Is it possible for independent contractors to organize a union against the business?
A: They have the legal right to contest unfair labor practices if they are considered employees of the company.
Q5: What legal rights do contractor workers have in Pakistan?
A: Protections under the Factories Act of 1934 and the IRO of 1969, including reinstatement and back pay.
Q6: In labor disputes, what is the control test?
A: Establishes who oversees the employee’s work; if the business does, the employee might be regarded as an employee of the business.
Disclaimer
This blog is not legal advice; it is merely for public awareness.
