ESI Act does not apply to the workers employed by contractors

The Supreme Court in the case of Managing Director, Hassan Co-operative Milk Producer's Society Union Ltd vs. ESI Assistant Regional Director has ruled that the workers employed by contractors while in performance of the contract awarded to them do not fall within the purview of the Employee’s State Insurance Act (ESI Act).

It was held that these workers do not fit in to the definition of ‘employee’ under Section 2(9) of the ESI Act as they are neither paid by the principal employer, nor does he has any direct control or supervisory powers over these workers.

Also, exercise of some remote supervisory powers or indirect control by principal employer, are inevitable in such contracts and this in itself does not make these workers eligible to be covered under the ESI Act.

Also Check: Other Legal Aspects