Recently, the Supreme Court held that workers engaged through third-party contractors cannot claim parity in status or employment benefits with regular employees of a State entity. The Court emphasised that extending equal status to such contractual workers would legitimise an arbitrary hiring process and erode the sanctity of public employment, observing that regular government employment is a public asset that cannot be diluted through indirect engagements.
Brief facts:
The case arose from a long-standing engagement of several workers, including sanitation and municipal staff, who had been deployed at a municipal council through successive manpower contractors since the mid-1990s. Despite changes in contractors over the years, the same set of workers continued to render uninterrupted services to the municipality. Aggrieved by lower wages despite performing duties similar to those of regular employees, the workers approached the Andhra Pradesh Administrative Tribunal seeking regularisation and pay parity. While the Tribunal rejected their claim, the High Court overturned that decision and directed the municipality to extend the minimum time-scale of pay attached to regular posts, along with annual increments. Challenging this direction, the municipality approached the Supreme Court, asserting the absence of any direct employer-employee relationship and questioning the legal basis for extending parity benefits.
Contentions of the Appellant:
The Counsel for the municipality contended that the High Court had failed to appreciate the fundamental distinction between direct employment and engagement through a contractor. The Appellant argued that the workers were never appointed by the municipal council and that all contractual obligations, including payment of wages and statutory benefits, were between the contractor and the workers. Reliance was placed on precedents such as Joint Secretary, Central Board of Secondary Education and Another Vs. Raj Kumar Mishra and Another and Bharat Heavy Electricals Ltd. v. Mahendra Prasad Jakhmola and Ors. to submit that, in the absence of a direct employment relationship, claims of pay parity or regularisation against the principal employer were legally untenable.
Contentions of the Respondent:
The Senior counsel appearing for the workers argued that denying them minimum pay parity was arbitrary and discriminatory, especially when they had performed identical work as regular employees for decades. Placing reliance on State of Punjab v. Jagjit Singh, the Respondent submitted that equal pay for equal work is a constitutional mandate and that the municipality, being a State under Article 12 of the Constitution, could not evade its obligations by routing employment through contractors. It was also argued that similarly placed workers in other municipalities had been granted such benefits.
Observation of the Court:
The Court observed that the central issue was whether the relationship between the municipality and the workers was direct or mediated through an independent contractor. The Bench held that the existence of a contractor fundamentally altered the legal relationship, noting that “the obligation and responsibility of the appellant was to pay to the contractor… and the responsibility then was that of the contractor to ensure payment of wages and other emoluments.”
The Court noted that although the workers had rendered long and continuous service, continuity alone could not transform a contractual arrangement into direct employment. Emphasising the importance of maintaining distinctions between modes of hiring, the Bench observed that “if all such distinctions between a regular employee and such contractual employees is not made, then the basic concept of hiring through various modes and in different capacity would lose its purpose and sanctity.”
The Court held that regular employment under a State entity involves transparent recruitment processes open to all eligible citizens, whereas engagement through contractors is based on the contractor’s discretion. Granting equal status to contractor-supplied workers, the Bench cautioned, would “amount to giving premium and sanction to a process which is totally arbitrary.” Distinguishing Jagjit Singh, the Court noted that in that case, contractual workers were directly engaged by the government, unlike the present case involving an intermediary contractor.
The decision of the Court:
In light of the foregoing discussion, the Apex Court allowed the appeals, set aside the High Court’s directions granting pay parity, and restored the Tribunal’s decision, holding that in the absence of a direct employer-employee relationship, workers engaged through contractors cannot claim equal status or benefits with regular employees.
Case Title: The Municipal Council, Rep. by Its Commissioner Nandyal Municipality, Kurnool District, A.P. Vs. K. Jayaram & Ors.
Case No.: SLP (C) Nos. 17711–17713 of 2019
Coram: Hon’ble Mr. Justice Ahsanuddin Amanullah and Hon’ble Mr. Justice Vipul M. Pancholi
Advocate for the Petitioner: AOR Y. Raja Gopala Rao, Adv. Dhuli Gopi Krishna, Adv. Akshay Singh, Adv. Sanjana Jain, AOR N. Rajaraman, Adv. Prerna Singh, AOR Guntur Pramod Kumar, Adv. Keshav Singh.
Advocate for the Respondent: Sr. Adv. L. Narasimha Reddy, Adv. P. Raghavender Reddy, Adv. C. Raghavendren, Adv. Ch. Leela Sarveswar, Adv. C. Rubavathi, Adv. Nandi Kiran Kumar, Adv. Saurabh Gupta, AOR M. A. Chinnasamy, Sr. Adv. DVSS Somayajulu, Adv. Goli Rama Krishna, AOR Vandana Sharma, Adv. Koppula Gopal, AOR N. Rajaraman, AOR Guntur Pramod Kumar
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