Labour judgement

February 15, 2018


A SUPREME Court judgement dated Dec 8, 2017 has caused a stir among employers. A three-judge bench headed by the chief justice has directed the appellant company (ie Pakistan State Oil) to regularise the services of the respondent workers employed by various contractors — 210 in number. Consequently, henceforth they will be PSO employees.

Over the last five years, this is the second Supreme Court judgement to raise employers’ concerns about how to have their non-core jobs performed through outsourcing without any legal repercussions.

In a previous judgement in 2013, another three-judge bench had confirmed the status of 112 workers of the bagging and loading area as employees of Fauji Fertiliser Company (FFC) and not of the contractor.

Lessons learnt from the latter judgement strengthened the belief that the contractors’ employees will not be considered as employees of the company if (a) they are under the control and management of the contractor and not that of the company; (b) they are not on the payroll of the company and management is not even aware of the number of workers employed by the contractor or of the terms and conditions of their appointment and service; and (c) the contractor has the power to hire and fire employees; he assigns work to them instead of the company doing so.

It’s time to regularise the services of contractual workers.

The recent judgement was passed on an appeal by PSO against the detailed judgement of a two-judge bench of the Sindh High Court in June 2017. Referring to various judgements of the Supreme Court, the Sindh High Court had directed the CEO of PSO to consider the case of petitioners for regularising their services. The FCC judgement of was also quoted by the Sindh High Court in its support.

In the 2013 case, the Supreme Court mentioned several reasons for regularising the services of the FFC’s 112 workers eg the authority to hire and fire including settlement of wages and benefits of the contractor’s workers rested with the company; their work was supervised, controlled and looked after by the FFC in-charge of the bagging department and his subordinate staff/supervisors; these workers had been continuously employed by the company for a long time; they were also responsible for cleaning the machines and floors.

The Sindh High Court accepted the petitioners’ plea that they had been regularly working against jobs of a permanent nature in PSO as far back as 1984.

They were eligible to be regularised under the office memorandum dated Aug 29, 2008, issued by the government. Since PSO had contended that petitioners regularised by the Sindh High Court were the contractors’ employees, the Supreme Court, confirming their regularisation, averred: “As regards the question that the respondents were not the employees of the petitioner (PSO) but the contractor, 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 the record that the respondents have been in service starting from as far back as 1984.”

A scare has been created among the employers, who think that they cannot contract out any jobs after this judgement. The employers should remember that labour laws here recognise and contain provisions regarding the contractors’ establishments. However, the contracting out should only be confined to a company’s non-core jobs and the relationship of contractors and his employees should be governed and guided by the principles.

Employers engaging contractors to carry out assigned services is not exclusive to Pakistan; it is a worldwide phenomenon and quite common in developed countries. Even in China and the US, the number of workers hired by contractors to perform jobs for the principal employers is more than regular employees.

Their reasons for preferring to outsource are similar to those in Pakistan — better control over the cost of production leading to economy, ease of recruitment and replacement, lesser absenteeism among contractors’ workers and flexibility in placement.

In view of the judgements in this domain by the superior courts from time to time, it is recommended that the provincial governments frame legislation to regularise such employment practices. India did so almost half a century ago when it promulgated the Contract Labour (Regulation and Abolition) Act, 1970.

Under this act, a contractor is not allowed to operate unless he has been issued a licence to that effect by the government. Besides, he has to ensure the provision of all those benefits and facilities to his employees as mentioned in the act.

The writer is an industrial relations professional.

Published in Dawn, February 15th, 2018