After-effect of abolition of contract labour :
At present there is no provision in the Act for absorption of contract labour in the event of prohibition of employment of contract labour in any category of work/jobs under Section 10 of the Act. There have been complaints that contract workers are being thrown out of employment in the jobs covered by the relevant notification.
On the crucial question as to after effect of abolition of contract labour under Section 10 of the Act, the Supreme Court in Air India Statutory Corporation v. United Labour Union, AIR 1997 SC 645, held that a High Court in exercise of its jurisdiction under Article 226 of the Constitution, can direct a principal employer in an appropriate case to absorb the workman concerned after abolition of the contract labour. It overruled its earlier decision of two member bench of the Court (Dena Nath case 1991 AIR SC 3026). In this case, it was held that High Court in exercise of its power under Article 226 could not drive at the absorption of contract labour (on its abolition) as direct employees of the principal employer. The Court also overruled another important case (Gujarat Electricity Board, AIR 1995 SC 2942) wherein it was held that on abolition of contract labour their employees are free to raise their cause for reference under Section 10 of Industrial Disputes Act, 1947 seeking absorption of contract labour. After abolition of contract labour system, if the principal employer omits to abide by the law and fails to absorb the contract labour worked in the establishment on regular basis, the workmen have no option but to seek redress under Article 226 of the Constitution.
Judicial review being the basic feature of the constitution, the High Court is to have the notification enforced at the first instance. Further, the affected employees have a fundamental right to life. Meaningful right to life springs from continued work to earn their livelihood. The right to employment, therefore, is an integral facet of right to life. When they are engaged as contract labour and were continuously working in the establishment of the appellant to make their right to social and economic justice meaningful and effective, they are required to be continuously engaged as contract labour, so long as the work is available in the establishment. When the work is of perennial nature and on abolition of contract labour system, they are entitled, per force to be absorbed on regular basis.
Thus, in Air India Statutory Corporation case, the Supreme Court has held though there exists no express provision in the Act for absorption of employees in establishments where contract labour system is abolished by publication of notification under Section 10(1) of the Act, the principal employer is under obligation to absorb the contract labour. The linkage between the contractor and employee stood snapped and direct relationship stood restored between the principal employer and contract labour as its employees. Where the contract labour through a contractor engaged in keeping industrial premises clean and hygiene, but no licence was obtained by principal employer nor contractor and the contract itself stipulating number of employees to be engaged by contractor and overall control of working of contract labour including administrative control remaining with principal employer, it was held by the Court that the contract is a camouflage which could be easily pierced and the employee and the employer relationship could be directly visualised. Employees who have put in 240 days of work is ordered to be absorbed (1999 LAB IC SC 1323 HSEB v. Suresh).