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Tests Determine Employer-Employee Relationship - International Law Office

International Law Office

Employment & Benefits - India

Tests Determine Employer-Employee Relationship

October 06 2004

Domestic labour laws tend to be pro-worker. As such, employers must take seriously their obligations under the various statutes. Once an employment relationship has been established, the employer must fulfil certain statutory obligations; non-compliance entails serious consequences, including imprisonment. Consequently, employers are frequently inclined to outsource or subcontract less essential functions. The issue that arises in such circumstances is whether the workers operating under the subcontract have legal recourse against the employer and whether they should be regarded as employees. While there is no determinative test regarding the employer - employee relationship, the Supreme Court recently discussed and consolidated the principles of law that govern the issue in the context of a dispute between the workers of a cooperative society and the society itself. Historically, the supervision and control test is the prima facie test for determining an employment relationship (ie, whether the employer can control not just what an individual does, but also the way in which he or she does it). The nature or extent of control can vary between businesses. Over the years, this test has been considered to be insufficient. Other factors that were additionally considered indicative of a relationship concern:

  • the appointing authority;
  • the paymaster;
  • the right to dismiss;
  • the nature of the job;
  • the nature of the establishment; and
  • the right to reject work.
A further development is the concept of mutuality of obligations as a possible factor (ie, whether the course of dealings between the parties demonstrates sufficient mutuality for there to be an overall employment relationship). In India, the burden of proof rests with the person who asserts that he or she is an employee. Once a labour tribunal has judged the matter, the civil courts, while exercising their powers of review as to whether an employment relationship exists, generally do not interfere where the question is one of fact unless the finding is obviously erroneous or perverse.

For further information on this topic please contact Anand Prasad or Biraj Tiwari at Trilegal by telephone (+91 11 5163 9393) or by fax (+91 11 5163 9292) or by email (anand.prasad@trilegal.com or biraj.tiwari@trilegal.com).

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