Case Law Details
The workers of a contractor engaged by an establishment do not get the benefits of the Employees State Insurance Corporation Act, the Supreme Court stated last week in the judgement, Managing Director, Hassan Co-operative Milk Producer’s Society Union Ltd vs ESI Assistant Regional Director.
The ESI authorities demanded contribution to the fund from the milk coop maintaining that the loaders of the contractor engaged to bring milk to the main plant were in effect engaged by the coop. The ESI tribunal and the Karnataka high court upheld the demand. But on appeal, the Supreme Court overruled them and stated that the coop had no direct control over the workers of the contractors and had no supervisory power over them. The wages were not paid by the coop. Therefore it was not bound to pay the contribution under the law.
i am a small time contractor, i have done work of constructing a compound wall for a factory for 1.30 laks, the company want to deduct esi of 6.75%. is it correct. please clarify
There is no confusion because the principal employer is resoponsible for contract works done by an immdediate employer, within the premisis of the factory or outside the factory if there is supervison by the principal employer with regard to the priliminary or connected works of the establishment. In the absence of supervison outside the premisis by the principal employer, there can not be a contribution by the principal employer. However, the contractee who is an immediate employer is not excluded from hsi laiablity from the coverage if the number of employess exceed the statutory nuber. A.Muthuswamy
Henceforth ,the principal employers are absolved from complying with the provisions of ESI and the contractors are hereinafter made responsible for complying with the provisions of ESI Act with regard to their deployment is a land mark judgement delivered by Hon’ble Supreme Court.
There seems to be some confusion on type of workers engaged by a contractor and their coverage under ESI. Construction workers are already out of ESI coverage . So please speicfy whether workers enagged by a contarctor firm at contractee sight for performimg carpentray work, electric fitiings, works contact like interiors etc rae covered by ESI or not.
Nope. Contractor can be treated as an independent establishment carrying on his business under the category of ‘Shop’ and hence asked to register and pay contributions, provided his establishment is otherwise coverable and other conditions are met.
It does not absolve the contractor from providing ESI because Contractor are direct employer and has direct control over the employee and can identify them.
Please don’t interpret this judgment in your favour if you are a principal employer deploying contractual labour in your establishment which is covered under ESI & EPF.
This judgment is passed in case of loaders deployed by contractor outside the premises where there was no control of principal employer.
Dear Mr. Vasudevan,
To my mine the contractor does not absolve from the liability of paying ESI for his worker, because he has full control and he also observe supervisory function on his worker, therefore contractor is liable for payment of ESI w.r.t. to his employees.
The decision is a welcome relief to corporates as ESI inspectors were asking for ESI contribution even on repair of lock & key. Importantly, no actual benefit was accruing to contractor labourers.
SIR,
THE TITLE IS MISLEADING.. PLEASE CHANGE IT TO STATE THAT “INDEPENDENT PARTY HELD – “NOT A CONTRACTOR” – “
The supreme Court judgement implies that the principal employer does not have a contractual liability for ESI in respect of the empoloyees of the contractor.
Does it absolve the contractor from providing cover to such employees