1973 (9) TMI 100 - SC - Indian Laws

Supreme Court affirms employer-employee relationship, Andhra Pradesh Shops Act applies.

The Supreme Court dismissed the appeal, affirming the existence of an employer-employee relationship between the parties, making the Andhra Pradesh ... Employer and employee relationship - right to control and supervise the manner of work - multi-factor or economic-reality test for contract of service - provision of equipment as indicium of employment - application of Shops and Establishments Act to persons principally employed in a shopEmployer and employee relationship - application of Shops and Establishments Act to persons principally employed in a shop - Whether the workers engaged by Silver Jubilee Tailoring House were employed within the meaning of S.2(14) of the Andhra Pradesh (Telengana Area) Shops and Establishments Act, 1951, and therefore the Act applied to the establishments. - HELD THAT: - The Court examined the totality of facts found by the High Court and the Chief Inspector: workers were paid on piece rate, generally attended and worked in the proprietor's shop on machines belonging to the proprietor, were required to stitch according to instructions with defective work liable to rejection and remaking, sometimes took work home with permission, and could be refused further work if standards were not met. The Court rejected the submission that absence of continuous on the spot supervision or of an obligation to work full days decisively negatived employment. It held that presence in the employer's premises, use of employer's machines, the right to reject and require restitching, and the liberty of the proprietor not to give further work where standards or attendance were unsatisfactory all point towards a contract of service within the meaning of the definition of 'person employed' in S.2(14). Applying these factors, the Court found that the relationship was one of employer and employee and that the Act was therefore applicable to the establishments.The Court upheld the findings that the workers were employed within S.2(14) and that the Shops and Establishments Act applied.Right to control and supervise the manner of work - multi-factor or economic-reality test for contract of service - provision of equipment as indicium of employment - Whether the traditional 'control over manner of work' test is the exclusive determinant of master servant relationship in the circumstances of this case. - HELD THAT: - The Court reviewed precedent and international authority recognizing that the strict control test is not universally decisive, especially in modern or skilled employments. It endorsed a multi factor or 'economic reality' approach: control remains an important factor but must be weighed with others such as provision of tools/equipment, place of work, opportunity for profit or loss, permanency of relationship and the organisation test. Applying that approach to the tailoring establishments, the Court treated the proprietor's ownership of machines, the performance standards enforced by rejection and rework, the fact that work was generally performed on the proprietor's premises and the proprietor's ability to withhold further work as cumulatively indicative of employment, even though continuous supervision was not shown.The Court held that the control test is not exclusive; a multi factor analysis is required and, on that analysis, the relationship was one of employment.Final Conclusion: The appeal is dismissed. The Supreme Court affirmed that the workers were employees within S.2(14) of the Act and that the Shops and Establishments Act applied to the establishments; no order as to costs was made. Issues Involved:1. Employer and employee relationship between the appellants and workers.2. Applicability of the Andhra Pradesh (Telengana Area) Shops and Establishments Act, 1951.3. Determination of the right to control and supervise the manner of work.4. Examination of prior case law regarding the employer-employee relationship.Detailed Analysis:1. Employer and Employee Relationship:The core issue in this appeal was whether an employer and employee relationship existed between the Silver Jubilee Tailoring House (the appellants) and the workers represented by the second respondent. The Chief Inspector of Shops and Establishments, Hyderabad, concluded that such a relationship did exist, making the provisions of the Andhra Pradesh (Telengana Area) Shops and Establishments Act, 1951 applicable to the establishments in question. This conclusion was upheld by both the Single Judge and the Division Bench of the High Court of Andhra Pradesh.2. Applicability of the Andhra Pradesh (Telengana Area) Shops and Establishments Act, 1951:The second respondent, representing the workers, made claims under Section 37A of the Act read with Section 15 of the Payment of Wages Act, 1936. The competent authority referred the applicability question to the State Government, which delegated the decision-making power to the Chief Inspector of Shops and Establishments. The High Court affirmed that the Act was applicable based on the existence of an employer-employee relationship as defined in Section 2(14) of the Act.3. Determination of the Right to Control and Supervise the Manner of Work:The appellants argued that the test to determine the employer-employee relationship is whether the employer has the right to control and supervise the manner of work done by the workers. They contended that the facts did not support such control. However, the Court examined various precedents to determine that the right to control is not the sole test. The Court cited several cases, including Dharangadhara Chemical Works Ltd. v. State of Saurashtra, Birdhichand Sharma v. The First Civil Judge, Nagpur, and D. C. Dewan Mohideen Sahib and Sons v. The Industrial Tribunal, Madras, to illustrate that control over the manner of work is not universally applicable and that other factors, such as the nature of the work and the provision of equipment, are also relevant.4. Examination of Prior Case Law:The judgment referenced multiple cases to illustrate the complexity of determining an employer-employee relationship:- Dharangadhara Chemical Works Ltd. v. State of Saurashtra: Emphasized that the right to supervise and control the work done by the servant is a prima facie test but not universally applicable.- Birdhichand Sharma v. The First Civil Judge, Nagpur: Highlighted that control could be exercised at the end of the day by rejecting substandard work.- D. C. Dewan Mohideen Sahib and Sons v. The Industrial Tribunal, Madras: Confirmed that the bidi workers were employees based on the nature of control and supervision.- Shankar Balaji Wage v. State of Maharashtra: Distinguished between the right to control the manner of work and the type of work to be performed.- Montreal v. Montreal Locomotive Works Ltd.: Suggested a complex test involving control, ownership of tools, chance of profit, and risk of loss.- U.S. v. Silk: Introduced the 'economic reality' test, considering factors like degrees of control, opportunities for profit or loss, and permanency of relations.The Court concluded that the facts, such as the workers using the employer's machines, being paid on a piece-rate basis, and the employer's right to reject substandard work, supported the existence of an employer-employee relationship. The Chief Inspector of Shops and Establishments and the High Court's conclusions were deemed correct.Conclusion:The Supreme Court dismissed the appeal, affirming that the employer-employee relationship existed between the parties, making the Andhra Pradesh (Telengana Area) Shops and Establishments Act, 1951 applicable. The appeal was dismissed without any order as to costs.