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EMPLOYEES STATE INSURANCE
CORPORATION `PANCHDEEP BHAWAN', Website – www.esic.nic.in Å(011) 23234092 |
No.P-12(11)-11/83/05-Rev.II Dated : October, 2007
The
Regional Directors
Directors/Joint
Directors I/c
ESI
Corporation
Regional
Offices/Sub-Regional Offices
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Subject
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Coverage of workers engaged by the outside agencies /
Job Contractors in connection with the work of the principal employer outside
the premises – regarding. |
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Sir,
A reference is invited to Hqrs.’
Office letter No.P-12/11/51/9/2000-Rev.II dated 26.08.2005 on the above
subject. Attention of the Regional Directors
/Joint Directors I/c of Sub-Regional Offices is also invited to Hqrs.’ Office
letter of even No. dated 17.08.2006 wherein the recommendations of the
Committee of Senior Officers on the same subject were communicated. In these instructions, the supervision aspect
by the Principal Employer or by his agent on outsourcing job works while
claiming the contribution was elaborated.
The Hqrs.’ Office has again
received a number of representations from the different Associations of
Employers, Export Bodies of Employers and individual Employers from various
Regions expressing the difficulties faced by them in covering the employees
engaged by them through immediate employers / contractors on jobs outsourced.
Recently,
the Hon’ble High Courts of Madras, Madhya Pradesh and Karnataka have given
their judgements in the following cases in which the aspect of supervision has
been discussed in the light of the judgement of the Hon’ble Supreme Court in
the case of CESC and others Vs. Subhash Chandra Bose & others (AIR 1992-SC
Page 573 (1992) 1 SCC 441):-
1. Hon’ble High Court of Madras vide
its judgement dated 24.7.2007 in CMA (NPD) No.1765 of 1999 between ESI
Corporation V/s. Bethall Engineering Company.
2. Hon’ble High Court of Madhya Pradesh vide its
judgement dated 15.3.2007 in MA No.606/2003 between National India Rubber Works
Ltd. V/s. ESI Corporation
3. Hon’ble High Court of Karnataka vide its
judgement dated 15.7.2006 in MFA No.1089/2001 between ESIC V/s. JMD Fashions.
Keeping in view the representations
received from the employers, their associations as well as the judgements
referred above, the matter has been re-examined in its entirety. The Hqrs.’ Office had issued instructions to
all Regional Directors/Joint Directors I/c of Sub-Regional Offices vide letter
of even No. dated 05.07.2007 advising them to withhold the actions in respect
of employers who have outsourced the jobs to the Contractors/Immediate
Employers. The matter was therefore, reconsidered in depth at Hqrs.’ Office and
it was decided to undertake field study by Two Teams of Officers for ascertaining prevalent situations,
interacting with individual Employers as well as with Employers’ Associations
at prominent centres. These Teams were
also advised to ascertain the pattern of outsourcing in different industries
and to ascertain the element of supervision involved in the jobs
outsourced. The Teams of Officers have
studied field situations as well as has held extensive discussions with
individual Employers and various Employers’ Associations and has submitted
their detailed report. They have brought
out broad categories of workers engaged by the Job Contractors/Immediate
Employers. The reports of those Officers
have been examined in Hqrs.’ Office threadbare and it is revealed that the jobs
outsourced are falling in the following categories. The following guidelines are being issued to
handle different categories of cases falling in various categories:-
A.
The Jobwork done inside the factory/establishment premises through
Contractors/Immediate Employers having independent Code Nos. :
Under this category, the
contribution is not to be claimed from
the Principal Employer in respect of the employees of the Job Contractors / Immediate
Employers who are independently covered. In this category the supervision is
implied. However, at the time of
inspection, the Insurance Inspector should verify the records of the Principal
Employer in respect of Contractors/Immediate Employers required to be
maintained by the Principal Employers, according to the provisions of Section
41 (
B.
Jobwork done inside the factory premises through
Contractors/Immediate Employers not having independent Code Nos.:
The employees of the Job
Contractors/ Immediate Employers who are not having independent Code Nos., but
working in the factory/establishment of the Principal Employer are coverable
and the compliance is to be made by the Principal Employer. Under this category supervision is
implied. The compliance is to be made by
the Principal Employer in respect of coverable workers of the
Contractors/Immediate Employers. The Insurance Inspectors should verify
the records maintained by the Principal Employer in respect of Contractors who
are not having independent Code Nos. The
Revenue Branch Officers should keep this in view at the time of passing 45-A
order.
C.
Jobwork done outside the factory/establishment premises through
factories/establishments which are having independent Code Nos.:
Under this category, the
compliance is to be made by the factories / establishments having separate Code
Nos. Supervision by Principal Employer
is not involved under this category. The
Insurance Inspector should ensure the quantum of the work done by the outside
factories/establishments independently covered with reference to the
D. Jobwork done outside the factory/establishment premises
through factories/establishments which are not having independent Code Nos. but
the supervision being exercised by the Principal Employer :
The employees engaged in jobs
outsourced by the Principal Employer to outside factories/establishments which
are not having independent Code Nos. but such outsourced job is being
undertaken under the supervision of the Principal Employer or his agent are to
be covered under Section 2 (9) (ii) of the Act. In this case also the
compliance in respect of employees engaged in such work is to be made by the
Principal Employer.
To ascertain supervision by the
Principal Employer or his agent over the employees of such factories/
establishments under this category the Insurance Inspectors/ Verifying Officers
of the ESI Corporation has to clearly bring out supervision exercised by the
principal employers in their reports and Revenue Branch Officers passing 45-A
orders will elaborate this aspect in their 45-A orders. Although the degree of control and
supervision would be different in different types of industries, the following
parameters for construing supervision should be kept in view by the
I.Is/Verifying Officers and Revenue Branch Officers:-
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(a) |
In case where the employee is put to work under the eye
and gaze of the Principal Employer, or his agent, where he can be watched
secretly, accidentally or occasionally, while the work is in progress, so as
to scrutinize the quality thereof and to detect faults therein, as also put
to timely remedial measures by direction given, finally leading to the
satisfactory completion and acceptance of work amounts to supervision, for
the purposes of Section 2 (9) of the Act.
This has been held by the Hon’ble Supreme Court in the case of CESE
Ltd. Vs. S.C. Bose & Ors. (Civil Appeal Nos. 3197-98 of 1988 : SC) |
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(b) |
The right of the Principal Employer to reject the
finished product after the work is over would not alone constitute
supervision. The `supervision’ has to be established while the work is in
progress. This has been held by the Hon’ble Supreme Court in the case of CESE
Ltd. Vs. S.C. Bose & Ors. (Civil
Appeal Nos. 3197-98 of 1988 : SC) |
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(c) |
The right to control the manner of work is not the exclusive
test for determining the relationship of employer and employees. It is also to be considered as to who
provides the equipment. The fact that
the sewing machines on which the workers do the work, generally belong to the
employer, is an important consideration for deciding that the relationship is
that of Master and Servant. This has been held by Hon’ble Supreme Court in the case of M/s. Silver Jubilee
Tailoring House and others Vs. Chief Inspector of Shops and
Establishments (AIR 1974 : SC 37) |
However, these parameters are
illustrative in nature and Inspecting Officer has to examine the process of
outsourcing in each case based on `on the spot’ verification as well as verification
of records and he has to clearly bring out this in his Inspection Report.
This category of employees are
coverable under Section 2 (9) (i) of the Act as this amounts to `notional
extension of factory premises’. In this
category the supervision is implied. The
employer has to maintain a record under Section 41 (
F. Jobwork done outside the factory/establishment premises
through factory/establishment engaging less than 10/20 employees which are not
independently coverable, and where no supervision is exercised and who are
undertaking the work for more than one employer:
The employees of such Job
Contractors are not coverable under the provisions of the Act. The Insurance Inspector shall clearly bring
the details of such employees in their report, which will be subject to
cross-verification.
G. Jobwork done outside the factory premises through
Contractors/Immediate Employers who perform the work through Home workers or
works in non-implemented areas :
The workers falling in this
category are not coverable. The
Insurance Inspectors shall provide the details in their reports.
For the purpose of verification
and inspection, the details in respect of above categories of
employers/employees should invariably be obtained from the Principal Employer
in proforma prescribed in Annexure–I and shall be attached with the
Inspection Reports. The Revenue Branch
Officer shall scrutinize the information provided in Annexure – I attached with
the report of Insurance Inspector.
The Insurance Inspectors shall
also identify the coverable employees of the Job Contractors / Immediate
Employers for providing the benefits on obtaining the Declaration Forms. These Declaration Forms shall be forwarded by
Insurance Inspectors to concerned Branch Offices for issue of TIC, very next
day. Where the employer fails to submit
DFs, the prosecution action should be initiated simultaneously.
Broadly, the following categories
of employees has to be brought under coverage by the Insurance Inspectors/
Verifying Officers –
a)
The
employees working inside the premises of the Principal Employer but not covered
so far.
b)
Coverable
employees working outside the factory premises but working within the
jurisdiction of the Area Inspector.
c)
In
case of employees working outside the jurisdiction of the Area Inspector, the
matter be reported immediately to concerned Revenue Branch Officer who, in
turn, shall immediately inform to their counterpart under whose jurisdiction
such employees are reported to be working for examining coverage of such
employees. The latter will arrange
immediate verification, coverage and claiming of contribution in respect of
such employees.
Based on such inspection reports,
the Regional Office also shall issue a detailed scrutiny letter alongwith a
C-18 (ad-hoc) simultaneously and provide an opportunity to the employer to
explain his stand alongwith the documents.
Regional Director / Joint Director (I/c) should instruct Revenue Branch
Officers to ensure that where the non-covered employees are detected and
brought under the coverage, this fact should be reflected in 45-A Orders.
The
Regional Directors/ Jt.Directors I/c on receipt of a written representation
from the employer may consider reopening of job outsourced cases of the
following types depending upon the merit of the case judiciously by recording
reasons for doing so:-
The reopened cases must be
decided within 3 months and be reported to Hqrs.Office in the quarterly returns
prescribed for this purpose.
The previous instructions stands
modified accordingly.
This issues with the approval of
the Director General.
Receipt of the letter may be
acknowledged.
Hindi version will follow.
Yours faithfully,
(K. MISHRA)
DIRECTOR (REV.)
Encl.:a/a.
ANNEXURE - 1
INFORMATION REGARDING THE JOBWORK DONE THROUGH
CONTRACTORS/IMMEDIATE EMPLOYERS INSIDE
AND OUTSIDE THE FACTORY PREMISES/ ESTABLISHMENTS.
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Name of the
Employer |
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Address |
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Code No. |
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Year for which
information is being provided |
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A.
Details of the Jobwork done inside
the Factory/establishment premises through Contractors/ Immediate Employers
having independent Code Nos.
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S. No. |
Name and address of the
Contractor/Immediate Employer and Code No. |
Nature of Jobwork |
Head of A/c under which payment
booked |
Payment made |
Contribution payable in respect
of the employees engaged |
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B.
Details of Jobwork done inside the
factory premises through Contractors/Immediate Employers not having independent
Code Nos.
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S. No. |
Name and address of the
Contractor/Immediate Employer and Code No. |
Nature of Jobwork |
Head of A/c under which payment
booked |
Payment made |
Contribution paid |
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C.
Details of Jobwork done outside the
factory/establishment premises through factories/establishments which are
having independent Code No.
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S. No. |
Name and address of the
Contractor/Immediate Employer and Code No. |
Nature of Jobwork |
Head of A/c under which payment
booked |
Payment made |
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D.
Details of Jobwork done outside
the factory/establishment premises through factories/establishments which are not having
independent Code No. but
supervision being exercised by the Principal Employer.
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S. No. |
Name and address of the
Contractor/Immediate Employer and Code No. |
Nature of Jobwork |
Head of A/c under which payment
booked |
Payment made |
Contribution payable in respect
of employees engaged |
E.
Details of Jobwork done outside the
factory premises through units engaging less than 10/20 employees but working
exclusively for the principal employer.
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S. No. |
Name and address of the Contractor/Immediate Employer and Code No. |
Nature of Jobwork |
Head of A/c under which payment booked |
Payment made |
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F.
Details of Jobwork done outside the
factory/establishment premises through factory/establishment which are not
having independent Code Nos and where no supervision was exercised.
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S. No. |
Name and address of the Contractor/Immediate Employer and Code No. |
Nature of Jobwork |
Head of A/c under which payment booked |
Payment made |
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G.
Details of Jobwork done outside the
factory premises through Contractors/Immediate Employers who performed the work
through home workers.
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S. No. |
Name and address of the
Contractor/Immediate Employer and Code No. |
Nature of Jobwork |
Head of A/c under which payment
booked |
Payment made |
Contribution paid/payable in
respect of employees engaged |
Certified that the above information is true and correct and agrees
with the books of accounts, ledger, Balance Sheet / P & L A/c maintained by us.
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Place : |
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Date : |
Name and Address of the Principal Employer |
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(Employers are requested to keep
ready the documentary addresses like Code No. allotment letters issued by
Employees’ State Insurance Corporation, copies of work orders, Bills,
Returnable Gate Passes, Inward/Outward Challans, Income Tax, Pan Cards and
other documentary evidence, in support of the correctness of the statement
which can be verified by the Insurance Inspector)
2.Work entrusted to an individual outside the premises of
the factory has a separate legal entity, having no nexus with the industry/unit
which has no control or supervision over the functioning of their employees.
This category includes the factories/establishments, not independently
coverable but on exclusive contract with the principal employer to perform work
outside of the factory /establishment premises with no supervision being
exercised by the principal employer
(e) It is possible for an employee to work under different employers and still he can be an employee of the unit even if he works under different employers. It is also held that when the employer has the right to reject the end product, if it does not conform to the instructions of the employer and directs worker to redo it, the element of control and supervision is involved. [This has been held by the Hon’ble Supreme Court in the case of M/s.Silver Jubilee Tailoring House and others Vs. Chief Inspector of Shops and Establishments]
for delivery of benefits. Inspecting Officers should also insist on immediate coverage of employees so detected in course of inspection and obtain Declaration Forms in respect of such employees, on the spot, and forward it immediately to