Labour Engaged Through Contractor For Maintenance, Repair Of Factory Premises Qualify As 'Employee' Under ESI Act: Karnataka High Court

The Karnataka High Court has held that labourers engaged through contractors for construction and repair works within a factory premises are treated as 'employees' within the meaning of Section 2(9) of the Employees State Insurance (ESI) Act.Justice Ramchandra D Huddar added that in such a case, contribution under the Act will have to be paid by the company employing them. The bench reasoned,"Expression `Employee' under Section 2(9) of the Act has been defined in conclusive and expansive terms. It not only encompasses persons directly employed by the Principal Employer but, also includes persons employed through an immediate employer (such as a contractor) so long as they are engaged in connection with the work of the factory or establishment or work which is incidental or preliminary to or connected with the main work of the factory."In the case at hand, the Respondent-firm had engaged contractors for various construction works, maintenance and repair activities within its factory premises. However, no contribution had been paid in respect of the labour engaged in such activities.The High Court noted that the activities undertaken by the labourers such as construction of additional sheds, installation of new units, renovation of existing structures and replacements to support utility systems were all activities "intimately connected with the efficient running of the factory". It held, "It is well established that, construction and maintenance work undertaken for the expansion or operational upkeep of the factory premises of the factory are not alien or external to the functioning of manufacturing unit. On the contrary, such works are integral to the continuity, efficiency and safety of the factory's operations...Such works cannot be compartmentalized as non-core or detached for the purpose of the establishment."As such, it directed the firm to pay Rs.13,52,825/- demanded by the ESI Corporation.The development comes in an appeal preferred by the ESI Corporation, challenging an order of the ESI Court which reduced the statutory contribution demand raised under Section 45-A of the ESI Act to Rs.3,50,000. The ESI court had while reducing the demand considered the argument of the firm that the the workers were not under its control or supervision.The High Court however noted that the ESI Act is a social welfare legislation designed to confer certain benefits upon employees in case of sickness, maternity, employment injury and related contingencies and for ensuring medical care to insured persons and their family members. "It is well settled that the provisions of such a welfare statute should be construed liberally to advance its beneficent purpose and not in a manner that defeats its statutory intent."Appearance: Advocate Kumar M N For Appellant.Advocate Somashekar for Respondent. Citation No: 2025 LiveLaw (Kar) 273Case Title: Assistant Director, ESI Corporation AND M/s. Sansera Engineering P LtdCase No: MISCELLANEOUS FIRST APPEAL NO. 3687 OF 2016.Click Here To Read/Download Order

Labour Engaged Through Contractor For Maintenance, Repair Of Factory Premises Qualify As 'Employee' Under ESI Act: Karnataka High Court

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