Local Body Directly Paying Daily Wagers Hired By Outsourcing Firm Doesn't Establish Employer-Employee Relationship: MP High Court

The Madhya Pradesh High Court upheld an order setting aside a labour court's decision directing reinstatement of a group of daily wagers hired by a private outsourcing agency but deputed to work at Ujjain Municipal Corporation, ruling that direct payment of wages to the workmen by the local body doesn't amount to an employer-employee relationship. Concurring with the reasoning of the single judge bench, the division bench of Justice Vivek Rusia and Justice Binod Kumar Dwivedi observed:"Although the respondent-Nigam has produced the agreement by which supply of manpower was given to the outsourcing agency M/s Raj Security Force. The Labour Court has discarded the agreement only on the ground that the payment of wages were made by Nagar Parishad to the appellant workman directly. Sometimes the local body directly make payment to the workman to ensure that the full salary or wages is paid to them without any deduction by the outsourcing agency. Therefore, the writ court has rightly observed that merely payment was made, will not establish the employer employee relationship". The workers had initially approached the Labour Court, claiming that they were wrongly removed from their employment in 2019 without notice, compensation or adherence to the principle of 'last come, first go'.The workers, before the Labour Court, claimed that they had worked for more than 240 days and should be treated as permanent employees, under the Industrial Disputes Act, 1947. The Labour Court had ruled in favour of the workers, directing the Ujjain Nagar Palika Nigam to reinstate the daily wage workers. However, the municipal corporation challenged this decision before the high court arguing that the labour court had not correctly appreciated the oral and documentary evidence on record.The single judge set aside the Labour Court's decision observing that the workers were hired through an outsourcing agency and were not recruited under the The M.P. Municipal Corporations (Appointment and Conditions of Service of Officers and Servants) Rules, 2000.The single judge ruled that the award passed in favour of the workmen is erroneous because merely payment of salary/wages from the bank account which is in the name of Municipal Corporation, does not bestow any right in favour of the workmen. It further ruled that the workmen had not produced any evidence to show that they were appointed by following due process of law under 2000 Rules. Against this the workmen approached the division bench. The division bench in its order referred to the Supreme Court's decision in Secretary, State of Karnataka v Uma Devi (2006) which clarified that people hired without a proper process cannot be made permanent employees. The division bench noted that the workers had only worked for three years and did not fall under the State's regularisation policy dated October 6, 2017, which applied only to workers with ten or more years of service. It thus dismissed the pleas. For Appellants: Advocate Mahesh Kumar ChoudharyCase Title: Sumitabh v Ayukt, Nagar Palika Nigam, Ujjain (2025:MPHC-IND:17807)Citation: 2025 LiveLaw (MP) 160Click here to read the Order

Local Body Directly Paying Daily Wagers Hired By Outsourcing Firm Doesn't Establish Employer-Employee Relationship: MP High Court

Jayanti Pahwa

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