{"id":33176,"date":"2026-09-29T00:55:13","date_gmt":"2026-09-29T00:55:13","guid":{"rendered":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/?p=33176"},"modified":"2026-09-29T01:05:04","modified_gmt":"2026-09-29T01:05:04","slug":"rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization","status":"publish","type":"post","link":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/","title":{"rendered":"Rights of Contract Workers in India: Analyzing Statutory Protections and the Practice of Sham Contractualization"},"content":{"rendered":"<h1><span class=\"ez-toc-section\" id=\"Contract_Labour_in_India_Sham_Contracts_Labour_Codes_and_the_Gap_Between_Law_and_Reality\"><\/span>Contract Labour in India: Sham Contracts, Labour Codes and the Gap Between Law and Reality<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<h2 id=\"abstract\"><span class=\"ez-toc-section\" id=\"Abstract\"><\/span>Abstract<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>This article is about contract workers who, according to law, are not the factory&#8217;s own workers. The article examines the protections that Indian labour law gives to contract workers, and it also explores a trick that lets a contractor exist only on paper while the real employer avoids responsibility. This trick is known as a camouflage contract, a term used in the Supreme Court&#8217;s language. The article traces the story from the Contract Labour (Regulation and Abolition) Act, 1970, through the absorption battle that ended in the SAIL case, to the four Labour Codes that have been in force since November 2025.<\/p><div id=\"ez-toc-container\" class=\"ez-toc-v2_0_88 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #0c0c0c;color:#0c0c0c\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #0c0c0c;color:#0c0c0c\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#Contract_Labour_in_India_Sham_Contracts_Labour_Codes_and_the_Gap_Between_Law_and_Reality\" >Contract Labour in India: Sham Contracts, Labour Codes and the Gap Between Law and Reality<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#Abstract\" >Abstract<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#1_Introduction\" >1. Introduction<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#Contract_Labour_Share_of_Non-Managerial_Employment_by_Establishment_Size\" >Contract Labour Share of Non-Managerial Employment, by Establishment Size<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#Research_Problem\" >Research Problem<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#Objectives_of_the_Study\" >Objectives of the Study<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#Research_Questions\" >Research Questions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#Literature_Review\" >Literature Review<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#Research_Methodology\" >Research Methodology<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#Scope_of_the_Study\" >Scope of the Study<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#Reason_for_Choosing_This_Topic\" >Reason for Choosing This Topic<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#Researchers_Stand\" >Researcher&#8217;s Stand<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#The_Researcher_Welcomes\" >The Researcher Welcomes<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#The_Researcher_Is_Unhappy_With\" >The Researcher Is Unhappy With<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#The_Statutory_Framework_From_the_1970_Act_to_the_Four_Labour_Codes\" >The Statutory Framework: From the 1970 Act to the Four Labour Codes<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#The_Contract_Labour_Regulation_and_Abolition_Act_1970\" >The Contract Labour (Regulation and Abolition) Act, 1970<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#The_Occupational_Safety_Health_and_Working_Conditions_Code_2020\" >The Occupational Safety, Health and Working Conditions Code, 2020<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#The_Industrial_Relations_Code_2020\" >The Industrial Relations Code, 2020<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#The_Code_on_Wages_2019\" >The Code on Wages, 2019<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#The_Code_on_Social_Security_2020\" >The Code on Social Security, 2020<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#Judicial_Decisions_The_Doctrine_of_Sham_Contractualization\" >Judicial Decisions: The Doctrine of Sham Contractualization<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-22\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#The_Triangular_Problem\" >The Triangular Problem<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-23\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#The_Absorption_Battle_Air_India_and_SAIL\" >The Absorption Battle: Air India and SAIL<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-24\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#The_Tests_for_Shamness\" >The Tests for Shamness<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-25\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#The_Wage-Justice_Counterweight_Jagjit_Singh\" >The Wage-Justice Counterweight: Jagjit Singh<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-26\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#The_Gap_Between_Law_and_Practice\" >The Gap Between Law and Practice<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-27\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#Statutory_Protection_Without_Enforcement\" >Statutory Protection Without Enforcement<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-28\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#What_the_Judicial_Turn_Produced\" >What the Judicial Turn Produced<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-29\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#The_Workplace_Evidence_Maruti_Suzuki\" >The Workplace Evidence: Maruti Suzuki<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-30\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#The_New_Frontier_Platform_Work\" >The New Frontier: Platform Work<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-31\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#Analysis_Do_the_Codes_Cure_the_Illness\" >Analysis: Do the Codes Cure the Illness?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-32\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#The_Case_for_the_Codes\" >The Case for the Codes<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-33\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#The_Case_Against\" >The Case Against<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-34\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#The_Doctrines_Fate_Under_the_Codes\" >The Doctrine&#8217;s Fate Under the Codes<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-35\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#Form_and_Substance\" >Form and Substance<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-36\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#Recommendations\" >Recommendations<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-37\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#Expected_Outcome\" >Expected Outcome<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-38\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#Conclusion\" >Conclusion<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-39\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#References\" >References<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-40\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#Cases\" >Cases<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-41\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#Statutes_and_Rules\" >Statutes and Rules<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-42\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/rights-of-contract-workers-in-india-analyzing-statutory-protections-and-the-practice-of-sham-contractualization\/#Secondary_Sources\" >Secondary Sources<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n\n<p>The argument made in the article is simple: Indian labour law protects the form of contract labour better than its substance. The new Codes remove the power to abolish contract labour, raise the coverage threshold, and give a place to fixed-term and platform work. They also extend benefits to workers inside the net. The article concludes with suggestions that aim to restore the primacy of the work-relationship over the paper arrangement.<\/p>\n<h2 id=\"introduction\"><span class=\"ez-toc-section\" id=\"1_Introduction\"><\/span>1. Introduction<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>In the year 2000, roughly one out of every five non-managerial workers in big Indian factories was hired through a contractor. By 2015, that number had climbed to two out of every five. Smaller factories saw no change during this period. In the automobile industry, contract workers and those brought in through staffing agencies now account for about half of all jobs.<\/p>\n<p>These figures hide a powerful legal trick: the contract labour arrangement. A worker may produce goods inside a factory, work under its roof and follow its supervision. On official documents, she is listed as an employee of another company. This setup gives employers what they want: the benefits of having a worker without the responsibilities that come with the label &#8217;employee&#8217;.<\/p>\n<h3 id=\"contract-labour-share\"><span class=\"ez-toc-section\" id=\"Contract_Labour_Share_of_Non-Managerial_Employment_by_Establishment_Size\"><\/span>Contract Labour Share of Non-Managerial Employment, by Establishment Size<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<table>\n<thead>\n<tr>\n<th>Establishment Size<\/th>\n<th>2000<\/th>\n<th>2015<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>More Than 100 Workers<\/td>\n<td>About 21%<\/td>\n<td>About 40%<\/td>\n<\/tr>\n<tr>\n<td>Fewer Than 50 Workers<\/td>\n<td>14%<\/td>\n<td>17%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><em>Source: Marianne Bertrand, Chang-Tai Hsieh &amp; Nick Tsivanidis, Contract Labor and Firm Growth in India (Nat&#8217;l Bureau of Econ. Research, Working Paper No. 29151, 2021), [online] Available at: https:\/\/www.nber.org\/papers\/w29151 [Accessed 28 September 2026].<\/em><\/p>\n<p>The Contract Labour (Regulation and Abolition) Act, 1970 was Parliament&#8217;s response to this issue. Its title shows a two-part plan: control contract labour where it is present and remove it where the job is ongoing and usually done by regular workers.<\/p>\n<p>Fifty years later, the part about removal has faded away. The Occupational Safety, Health and Working Conditions Code (OSH Code)[1], which takes the place of the 1970 Act[2] and twelve other central laws, has no part about ending contract labour at all. What remains &#8211; and has increased &#8211; is the first part: the regulation of an employment type the law once wanted to stop.<\/p>\n<p>This article looks at the situation of contract workers in two ways.<\/p>\n<ul>\n<li><strong>The statutory way:<\/strong> what kinds of protection do the 1970 Act and the four Labour Codes offer to contract workers, and to the fixed-term and platform workers who are replacing them?<\/li>\n<li><strong>The real-life way:<\/strong> the &#8216;sham contract&#8217; &#8211; where the contractor is just a fake and the real employer is the one actually in charge, even though the name on the paper is different.<\/li>\n<\/ul>\n<p>These two ways come together in one truth: every protection can be stopped by putting the right name on the wrong piece of paper.<\/p>\n<p>The question is urgent: the four Labour Codes &#8211; on wages, industrial relations, social security and occupational safety &#8211; began to apply on 21 November 2025, taking the place of twenty-nine central statutes.<\/p>\n<p>These four Labour Codes change the world for contract workers: a higher coverage threshold, one single licence, a ban on core activities with a long list of exceptions, a new fixed-term category that offers equal benefits, and the first legal recognition of gig workers and platform workers.<\/p>\n<p>The thesis is simple: Indian labour law now protects the form of contract labour better than the substance of contract labour. Until that changes, the rights of a contract worker stay conditional on proving that the paper is false.<\/p>\n<h2 id=\"research-problem\"><span class=\"ez-toc-section\" id=\"Research_Problem\"><\/span>Research Problem<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The issue evaluated in this study is the disparity which exists between the paper law and the real condition of the worker. Since the year 1970, the law has assured that contract workers would be subject to regulation concerning wages, welfare and working conditions; the Supreme Court has guaranteed help by making use of the so-called sham contract doctrine.<\/p>\n<p>Currently, five decades later, by conservative estimates, workers categorized as flexible form the majority of the formal manufacturing workforce. They earn much less than permanent workers doing the same kind of job as theirs, and owing to the nature of their arrangement they do not have any job security.<\/p>\n<p>The four Labour Codes, which became effective in November 2025, alter the regulation in this area and abolish the very machinery for ending contract labour.<\/p>\n<p>The research question has two sides:<\/p>\n<ul>\n<li>Why do these protections keep the form of the arrangement instead of its content?<\/li>\n<li>Do the new Codes solve the problem or preserve it?<\/li>\n<\/ul>\n<h2 id=\"objectives-of-the-study\"><span class=\"ez-toc-section\" id=\"Objectives_of_the_Study\"><\/span>Objectives of the Study<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ol>\n<li>To examine the legislative protections for workers engaged through contracts in the four Labour Codes, namely the OSH Code relating to the regulation of contract labour, the IR Code[1] on fixed-term employment, the Code on Wages[2] regarding minimum rates of remuneration, and the SS Code[3] with regard to social security benefits;<\/li>\n<li>To trace how the sham contract doctrine developed through court judgments, and where it stands today;<\/li>\n<li>To do a gap analysis between protection available under the law and ground reality, based on existing empirical literature and the Maruti Suzuki case;<\/li>\n<li>To assess whether the four Labour Codes solve the problem of sham contractualization or allow it to grow; and<\/li>\n<li>To make necessary legal and policy recommendations to address the gap between legal rights and ground reality.<\/li>\n<\/ol>\n<h2 id=\"research-questions\"><span class=\"ez-toc-section\" id=\"Research_Questions\"><\/span>Research Questions<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ol>\n<li>What rights does Indian law provide to contract workers, and how have those rights changed from the 1970 Act to the four Labour Codes?<\/li>\n<li>How have the courts policed the sham contract, and by what tests is a contractor identified as a front?<\/li>\n<li>What do the existing studies show about contract labour in Indian workplaces?<\/li>\n<li>Do the four Labour Codes cure sham contractualization &#8211; or entrench it?<\/li>\n<li>What reforms would put the work-relationship above the paper-arrangement?<\/li>\n<\/ol>\n<h2 id=\"literature-review\"><span class=\"ez-toc-section\" id=\"Literature_Review\"><\/span>Literature Review<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Studies on contract labour in India can be divided according to four categories. The first one discusses the legislation itself. In this regard, one can mention Pathak&#8217;s summary[1] of the 1970 Contract Labour Act, as the author provides a detailed description of the Act before it was replaced by the Code.<\/p>\n<p>The second one addresses the reality of production facilities. Thus, the work by Bertrand, Hsieh, and Tsivanidis[2] has shown that contract labour in large factories has almost doubled within a single decade. In terms of enforcement, Rajjev&#8217;s Survey points out the main reasons for the failure of the Act.<\/p>\n<p>The third set focuses on the factory floor, and the fourth on the latest variation of labour: app-based platform jobs. Nowak&#8217;s analysis[1] of the Maruti Suzuki conflict reveals that the difference between permanent and temporary workers led to one of the largest labour disputes in India. The NITI Aayog[2] took the measure of the size of the platform sector while the PUDR field survey[3] provides some of the &#8216;partner&#8217; earnings, hours worked, and the control by the app.<\/p>\n<p>The question that is common among all four groups is: when does a worker become an employee? The current article thus adds a new angle to what existing research keeps separated: while previous work addresses either the rules, or the cases, or the real-life situation alone, this article shows how the three components relate to one another.<\/p>\n<p>Thus, it helps fill the gap that no study has addressed before: do the Codes provide a solution to the problem of fictitious contracts, or do they merely reaffirm its existence?<\/p>\n<p>Different groups also have differing views. The economist group sees something good in their system. According to Bertrand and her team, having an easier access to contract labour made big industrial enterprise more productive. The fieldwork experts see something very bad; Rajeev&#8217;s study demonstrates that the system of enforcement quietly collaborates with an employer. This discrepancy of positions matters, as one camp of the researchers would regulate the form better while the other would abolish it.<\/p>\n<h2 id=\"research-methodology\"><span class=\"ez-toc-section\" id=\"Research_Methodology\"><\/span>Research Methodology<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The article examines the law as it is stated and tries to understand it by investigating the reality on the ground.<\/p>\n<p>To do that, the researcher first read through the primary materials &#8211; the 1970 Act and the Central Rules[1], the four Labour Codes and the main judgments of the Supreme Court on contract labour (around thirty provisions in total); these include the provisions on applicability, licensing and prohibition of the 1970 Act as well as definitions, thresholds and responsibilities in the Codes.<\/p>\n<p>Then all of the above was analyzed in light of one concept &#8211; the sham contract. According to the courts, a contract should be classified as sham when both indicators &#8211; who pays the wages and who supervises the work &#8211; point to the principal employer.<\/p>\n<p>In the third place, the research conducted a comparison between what benefits the law promises to deliver such as registration, licensing, provision of benefits, and equal pay &#8211; and the reality of the situation as presented by the field studies.<\/p>\n<p>The field research comes from eleven studies and reports chosen based on three criteria:<\/p>\n<ul>\n<li>they should be dealing with gig work or Indian contracts;<\/li>\n<li>they should be written on the basis of primary data such as surveys, factory records, or fieldwork conducted on the spot; and<\/li>\n<li>they should be prepared either by an academic institution, in an academic journal, or by an investigative body.<\/li>\n<\/ul>\n<p>A contradiction was noted if the evidence stated that the majority of the units surveyed disobeyed the rules, or the Code removed protection from the 1970 Act.<\/p>\n<p>Fourthly, in cases where the judgments and field studies were at odds, the judgments were regarded as showing the correct interpretation in terms of what the law is and the field studies as revealing the functional aspect of the law.<\/p>\n<p>The conflict of Maruti Suzuki is used here as effective illustration of the whole problem because it demonstrates the whole issue in one case.<\/p>\n<p>Thus, the procedure involves reading legislation, case law, and field studies and testing one notion &#8211; sham contract &#8211; against them all. The references are in accordance with the Bluebook style.<\/p>\n<p>The limitations are acknowledged, namely, that the legislation has been effective since November 2025; therefore, no case law is available yet, and the figures used in the study are derived from published studies, not from the researcher&#8217;s own fieldwork.<\/p>\n<h2 id=\"scope-of-the-study\"><span class=\"ez-toc-section\" id=\"Scope_of_the_Study\"><\/span>Scope of the Study<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The research examines contract labour in India starting from the 1970 Act to the four Labour Codes that became effective in November 2025.<\/p>\n<p>The topic of discussion comprises contract workers who were working under the 1970 Act and new OSH Code. It also comprises workers who are close to these workers such as fixed term, gig and platform-based workers.<\/p>\n<p>Factory work, for instance, in industries mainly comprising auto industry and app-based work is discussed in detail in this research.<\/p>\n<p>The construction and building industry is excluded from the study and analysis because this industry follows its own separate laws.<\/p>\n<h2 id=\"reason-for-choosing-this-topic\"><span class=\"ez-toc-section\" id=\"Reason_for_Choosing_This_Topic\"><\/span>Reason for Choosing This Topic<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The researcher&#8217;s choice of this topic comes from personal work experience. The researcher worked for three months as a junior accountant in a contract agency that supplies peons, sweepers and other helping workers to local government bodies on contract.<\/p>\n<p>The contract workers had no awareness of their rights. The agency owner did not inform the workers about their legal entitlements, and the workers themselves did not know what protections the law gives them.<\/p>\n<p>This experience made the researcher realise how easily contract workers can be exploited when they are unaware of their rights, and when the contractor does not fulfil his obligations.<\/p>\n<p>The researcher chose this topic to understand what the law provides, and where the gap lies between law and ground reality.<\/p>\n<p>That observation is what this article tests: the Karnataka survey and the Maruti evidence describe the same silent gap the researcher saw at first hand.<\/p>\n<h2 id=\"researchers-stand\"><span class=\"ez-toc-section\" id=\"Researchers_Stand\"><\/span>Researcher&#8217;s Stand<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The researcher&#8217;s stand is mixed: the Codes get some things right, and some things badly wrong.<\/p>\n<h3 id=\"researcher-welcomes\"><span class=\"ez-toc-section\" id=\"The_Researcher_Welcomes\"><\/span>The Researcher Welcomes<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>the single five-year licence;<\/li>\n<li>the inclusion of inter-state migrant workers;<\/li>\n<li>equal wages, hours and conditions for fixed-term workers doing the same work as permanent workers;<\/li>\n<li>pro-rata gratuity after one year;<\/li>\n<li>the universal minimum wage; and<\/li>\n<li>the first legal recognition of gig and platform workers.<\/li>\n<\/ul>\n<h3 id=\"researcher-is-unhappy-with\"><span class=\"ez-toc-section\" id=\"The_Researcher_Is_Unhappy_With\"><\/span>The Researcher Is Unhappy With<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>the removal of the power to abolish contract labour;<\/li>\n<li>the coverage threshold rising from twenty to fifty workers;<\/li>\n<li>the core-activity ban with an exception list longer than the ban itself; and<\/li>\n<li>no cap on fixed-term renewals, which allows the &#8216;permanently temporary&#8217; worker.<\/li>\n<\/ul>\n<p>In short, the Codes give contract workers benefits but not job security &#8211; and both are needed. Part 14 argues for the corrections.<\/p>\n<h2 id=\"statutory-framework\"><span class=\"ez-toc-section\" id=\"The_Statutory_Framework_From_the_1970_Act_to_the_Four_Labour_Codes\"><\/span>The Statutory Framework: From the 1970 Act to the Four Labour Codes<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3 id=\"contract-labour-regulation-abolition-act-1970\"><span class=\"ez-toc-section\" id=\"The_Contract_Labour_Regulation_and_Abolition_Act_1970\"><\/span>The Contract Labour (Regulation and Abolition) Act, 1970<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The 1970 Act was enacted after the committees highlighted the role of the &#8216;theka&#8217; system which involved middlemen supplying workers to establishments at extremely low rates.<\/p>\n<p>Within four years, the Supreme Court simplified the Act\u2019s aim: it intended to put an end to the exploitation of contract labourers by abolishing the process wherever applicable and regulating it wherever needed.<\/p>\n<p>The mechanism put in place was quite simple:<\/p>\n<ul>\n<li>it applied to an establishment where there were twenty or more contract workers;<\/li>\n<li>the employer had to register the establishment;<\/li>\n<li>the contractor was required to obtain the licence for every contract; and<\/li>\n<li>the contractor was required to offer canteens, rest rooms, drinking water, latrines and first aid to workers.<\/li>\n<\/ul>\n<p>In addition, if the contractor did not disburse the wages to the labourers, the principal employer was liable to pay them.<\/p>\n<p>The Central Rules made it clear that the contract workers performing similar tasks to those done by regular employees should be paid the same salary as the latter.<\/p>\n<p>One of the strongest measures of the Act was Section 10: the government could ban the use of contract labour wherever a continuous process of work existed which, ultimately, would require regular employment of workers.<\/p>\n<p>But the section said nothing about what happens to the workers after a ban &#8211; and that silence, as the case law shows, killed the abolition project.<\/p>\n<h3 id=\"osh-code-2020\"><span class=\"ez-toc-section\" id=\"The_Occupational_Safety_Health_and_Working_Conditions_Code_2020\"><\/span>The Occupational Safety, Health and Working Conditions Code, 2020<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The OSH Code encompasses thirteen basic laws including the Act of 1970, and its chapter on contracted labour directly continues the previous Act &#8211; it retains the concept and forfeits the requirement.<\/p>\n<p>The limit has been increased from twenty to fifty contracted employees thus allowing the contractors to operate with forty-nine workers who are not regulated by the chapter at all; compliance procedures have been simplified into one electronic registration and five-year licence valid in any state.<\/p>\n<p>The definition of contracted labour now includes inter-state migrant workers and the ceiling on supervisory and employee wages is raised as well.<\/p>\n<p>All welfare services that used to be contractor&#8217;s responsibility are now imposed directly on the principal employer.<\/p>\n<p>Section 57 prohibits the employment of contract workers in the &#8216;core activities&#8217; of an establishment.<\/p>\n<p>It is noteworthy, however, that there is a long list of exemptions &#8211; work involving sanitation, security, canteen management, shipping, courier service, construction, gardening, cleaning, transportation, and other &#8216;intermittent&#8217; jobs is excluded from &#8216;core activities&#8217;; the same applies to work that is ordinarily done through contractors; moreover, the question of defining &#8216;core activities&#8217; does not go to court, rather it is an issue for the Joint Secretary in the Ministry of Labour[1].<\/p>\n<p>Finally, the Code no longer provides for the power to cancel the contractor system on the basis of Section 10.<\/p>\n<h3 id=\"industrial-relations-code-2020\"><span class=\"ez-toc-section\" id=\"The_Industrial_Relations_Code_2020\"><\/span>The Industrial Relations Code, 2020<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The IR Code merges the trade union, industrial disputes and standing-orders statutes, and adds a category that will define the next decade: the fixed-term employee, engaged on a written contract for a fixed period under Section 2(o).<\/p>\n<p>Fixed-term workers doing the same or similar work as permanent workers must get the same wages, hours and conditions, with statutory benefits pro rata.<\/p>\n<p>But the automatic expiry of a fixed-term contract is not &#8216;retrenchment&#8217;, so no notice or compensation is due when the term ends; and there is no limit on renewals &#8211; an establishment can roll a worker through one fixed term after another indefinitely.<\/p>\n<p>The Code also raises the threshold for standing orders and the stricter retrenchment machinery to three hundred workers.<\/p>\n<p>In short, fixed-term employment is contract labour without the contractor: direct employment with none of direct employment&#8217;s security.<\/p>\n<h3 id=\"code-on-wages-2019\"><span class=\"ez-toc-section\" id=\"The_Code_on_Wages_2019\"><\/span>The Code on Wages, 2019<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The Wages Code is the quickest route to protection, because it does not depend on classification: it gives every worker a minimum wage and timely payment, and restates equal remuneration in gender-neutral form.<\/p>\n<p>Its new definition of &#8216;wages&#8217; caps allowances, so at least half of remuneration counts as wages &#8211; which changes the base for overtime, bonus and social security contributions.<\/p>\n<p>Its benefits reach a contract worker only through the contractor&#8217;s compliance; a platform worker gets only what the market offers.<\/p>\n<h3 id=\"code-on-social-security-2020\"><span class=\"ez-toc-section\" id=\"The_Code_on_Social_Security_2020\"><\/span>The Code on Social Security, 2020<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The SS Code merges the provident fund, insurance, gratuity and maternity-benefit statutes.<\/p>\n<p>Contract labour hired through a contractor is an &#8217;employee&#8217;, with a recovery route against the contractor and, ultimately, the principal employer; the fixed-term employee becomes eligible for gratuity on a pro-rata basis after one year of service, against five years for permanent employees; and, most novel, &#8216;gig worker&#8217; and &#8216;platform worker&#8217; are defined in statute for the first time, with social security funded by aggregator contributions of one to two per cent of turnover.<\/p>\n<p>The design is scheme-based, not rights-based: entitlements are what the government may notify, not what the worker can demand, and the gig worker is defined as earning &#8216;outside of a traditional employer-employee relationship&#8217;. Recognition arrives at exactly the moment the obligation it would create is defined away.<\/p>\n<p>Taken together, the four Codes give a contract worker inside the net a real bundle:<\/p>\n<ul>\n<li>minimum wages;<\/li>\n<li>equal pay;<\/li>\n<li>welfare facilities that are now the principal employer&#8217;s direct duty;<\/li>\n<li>provident fund and insurance; and<\/li>\n<li>pro-rata gratuity for fixed-term workers.<\/li>\n<\/ul>\n<p>A worker outside the net holds only the general floors and the promise of schemes not yet notified. The bundle is real, but it depends on a classification the employer controls.<\/p>\n<h2 id=\"judicial-decisions\"><span class=\"ez-toc-section\" id=\"Judicial_Decisions_The_Doctrine_of_Sham_Contractualization\"><\/span>Judicial Decisions: The Doctrine of Sham Contractualization<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3 id=\"triangular-problem\"><span class=\"ez-toc-section\" id=\"The_Triangular_Problem\"><\/span>The Triangular Problem<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Contract labour is a triangular relationship: principal employer, contractor, worker.<\/p>\n<p>The worker&#8217;s wages and job security depend on which corner of the triangle the law treats as the real employer.<\/p>\n<p>Because every benefit attaches to &#8217;employment&#8217;, the incentive to paper the worker as someone else&#8217;s employee has always existed.<\/p>\n<p>The courts have long recognised it as a device to hide the real employer and strip workers of the benefits of permanent employment.<\/p>\n<p>The doctrine that polices this trick &#8211; asking, in substance, who economically controls the worker&#8217;s work and wages &#8211; is the sham contract doctrine.<\/p>\n<h3 id=\"absorption-battle-air-india-sail\"><span class=\"ez-toc-section\" id=\"The_Absorption_Battle_Air_India_and_SAIL\"><\/span>The Absorption Battle: Air India and SAIL<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The 1970 Act raised one major question that was not addressed: what would happen to the employees after the abolition under Section 10?<\/p>\n<p>The Supreme Court&#8217;s ruling in <em>Air India Statutory Corporation v. United Labour Union<\/em>[1] stated that, once prohibition notification was given, the contract workers become part of the workforce of the principal employer.<\/p>\n<p>All other views would allow the employer to benefit from its error in judgement.<\/p>\n<p>This perspective lasted only four years. In <em>Steel Authority of India Ltd. v. National Union Water Front Workers<\/em> (SAIL)[2], the Supreme Court ruled against Air India &#8211; but only from that moment on.<\/p>\n<p>This means neither Section 10, nor any other provision of law refers to the automatic absorption of workers in case of abolition: Section 10 is the prohibition provision, not the absorption one.<\/p>\n<p>The displaced workers would have to seek relief in industrial adjudication, which allows for determining the actual facts.<\/p>\n<p>The court made an important classification of previous cases, placing them into three categories, with the third one being the most relevant for the current discussion.<\/p>\n<p>These cases dealt with contract work that was found to be an empty form used for avoiding the beneficial laws that demand hiring actual employees.<\/p>\n<h3 id=\"tests-for-shamness\"><span class=\"ez-toc-section\" id=\"The_Tests_for_Shamness\"><\/span>The Tests for Shamness<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>SAIL made available a practical question: How does an adjudicator determine that a contract is genuine?<\/p>\n<p>To answer this question, the Court said in the case of <em>Workmen of Nilgiri Coop. Marketing Society<\/em>[1] that shamness is a question of fact.<\/p>\n<p>No single test can determine the existence of shamness.<\/p>\n<p>This investigation will look at functionality instead of form, meaning that the name written on the paper does not really matter compared to the actual control over the worker.<\/p>\n<p>The process continued to improve, resulting in two refinements.<\/p>\n<p>In <em>International Airport Authority of India v. International Air Cargo Workers&#8217; Union<\/em>[2], the Court held that where the contractor pays the wages and exercises primary control over the worker, the principal employer&#8217;s secondary supervision on the shop floor does not make the contract sham.<\/p>\n<p>In <em>General Manager (OSD), Bengal Nagpur Cotton Mills v. Bharat Lal<\/em>[1] the inquiry was finally limited to two questions:<\/p>\n<ol>\n<li>does the principal employer pay the wages instead of a contractor?<\/li>\n<li>and does he in any way control and supervise the work?<\/li>\n<\/ol>\n<p>The end result is straightforward: a worker himself carries the burden of proof of the contractor being a mere paper company, which was proportional to the achievements of the courts after SAIL in the area we have been dealing with.<\/p>\n<h3 id=\"wage-justice-counterweight\"><span class=\"ez-toc-section\" id=\"The_Wage-Justice_Counterweight_Jagjit_Singh\"><\/span>The Wage-Justice Counterweight: Jagjit Singh<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>In the Wage Justice cases[1], the effects of the absorption policy have been mitigated.<\/p>\n<p>The Supreme Court ruled that temporary employees who perform the same functions as regular employees with sanctioned posts and the required qualifications are entitled to at least the minimum pay in the normal pay scale plus dearness allowance.<\/p>\n<p>Paying a lower salary to equally placed employees constitutes \u201cexploitative enslavement,\u201d which is held to be unacceptable under Articles 14, 16, and 39(d)[2].<\/p>\n<p>In this case, the Court did not convert contract employees into employees of the company, but rather attacked the economic rationale that underlies the arrangement: the same work should receive the same minima pay, irrespective of its name.<\/p>\n<h2 id=\"gap-between-law-and-practice\"><span class=\"ez-toc-section\" id=\"The_Gap_Between_Law_and_Practice\"><\/span>The Gap Between Law and Practice<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3 id=\"statutory-protection-without-enforcement\"><span class=\"ez-toc-section\" id=\"Statutory_Protection_Without_Enforcement\"><\/span>Statutory Protection Without Enforcement<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The first of the field studies&#8217; findings is that the 1970 Act&#8217;s protections have largely failed in reality.<\/p>\n<p>A study conducted in Karnataka determined that most of the provisions of the Act\u2014including minimum wages, welfare benefits, and pension contributions\u2014were simply ignored.<\/p>\n<p>The study found out that at least 30 percent of workers received less than 1500 rupees a month\u2014less than the mandated minimum wage\u2014and workers believed there was some form of collusion between inspectors and employers.<\/p>\n<p>The model provided by the study explains this situation. Where an inspector does not stand to gain anything from reporting the violations but has abundant opportunities to accept bribes, collusion necessarily follows unless workers know their rights and can file complaints with an independent body.<\/p>\n<h3 id=\"judicial-turn\"><span class=\"ez-toc-section\" id=\"What_the_Judicial_Turn_Produced\"><\/span>What the Judicial Turn Produced<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The 2001 Supreme Court turn changed the hiring environment.<\/p>\n<p>ICRIER&#8217;s research[1] shows that after the SAIL judgment removed the fear of automatic absorption, employers rapidly expanded contract labour to bypass strict job security laws.<\/p>\n<p>Research on various companies proves that strict job security legislation causes the rise of contract workers.<\/p>\n<p>The research by Bertrand, Hsieh and Tsivanidis results in an interesting conclusion: the level of contract labour increased tremendously and simultaneously contributed to the growth of productivity by 7.3%.<\/p>\n<p>The success story has an important exception, however. The notification of Andhra Pradesh that prohibited the use of contract labour in the primary production operation reduced the scope of contracting as a whole and led to the drop in productivity, labour wages, and labour conditions.<\/p>\n<p>The main conclusion that needs to be drawn is that the contracting option has been successfully applied despite the existence of both judicial and legislative prohibitions.<\/p>\n<h3 id=\"maruti-suzuki-workplace-evidence\"><span class=\"ez-toc-section\" id=\"The_Workplace_Evidence_Maruti_Suzuki\"><\/span>The Workplace Evidence: Maruti Suzuki<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The Maruti Suzuki labour conflict represents the classic case study.<\/p>\n<p>After the tumultuous events of 2000-01 that saw the forced retirement of most of the permanent workforce and the hiring of contract labourers to replace them, the Manesar plant opened in 2007 with an even larger proportion of contract workers.<\/p>\n<p>By the early years of the 2010s, approximately 2,600 out of 3,500 workers of the plant were contract workers and there were about 225 apprentices as well.<\/p>\n<p>The most important thing about the strikes of 2011 and the disturbances of July 2012 was that while normally permanent and contract workers do not work collaboratively, this time they did.<\/p>\n<p>The results were also tragic: 147 workers were arrested for murder and the union that represented the employees included only permanent ones, thus excluding the workers who played a crucial role in the developments.<\/p>\n<p>Maruti&#8217;s response to 2012 was not to reduce flexible employment but to change its name: the contract labour system was replaced with fixed-term employment and a hierarchy of categories &#8211; apprentices, temporary workers (TW 1-3), casual workers (CW 1-2), and multi-skilled technical workers.<\/p>\n<p>As reported by The Wire[1] in January 2025, it was estimated that of about 36,000 workers across the plants of the company, more than 83 per cent are non-permanent, earning between twelve thousand and thirty thousand rupees a month against around 1.3 lakh for permanent workers.<\/p>\n<p>Accounts by workers speak of the same person going through the positions of apprentice, temporary and casual so that years of work appear as short employments made by &#8216;three workers&#8217; who are in fact one.<\/p>\n<p>The charter of demands of non-permanent workers &#8211; equal payment for equal work and preferential appointment to permanent jobs for the roughly 30,000 workers employed in those categories, constitutes, in essence, a request to apply the sham contract doctrine to the entire system of employment.<\/p>\n<h3 id=\"platform-work\"><span class=\"ez-toc-section\" id=\"The_New_Frontier_Platform_Work\"><\/span>The New Frontier: Platform Work<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The platform economy reproduces the contractor trick without the contractor.<\/p>\n<p>The delivery rider signs a &#8216;partner&#8217; agreement that disclaims employment; an algorithm then decides where the worker goes, what the worker earns, and whether the worker may keep working at all.<\/p>\n<p>The label denies them minimum wages, provident fund, accident compensation and collective bargaining rights &#8211; rebranded as entrepreneurial freedom.<\/p>\n<p>NITI Aayog counted 7.7 million gig workers in 2020-21 and projects 23.5 million by 2029-30.<\/p>\n<p>Field studies document the economics of the fiction: drivers taking home roughly 25,000-30,000 rupees a month before vehicle-loan instalments, delivery workers at 14,000-15,000.<\/p>\n<p>In one documented case, a customer paid 427 rupees for a ride of which the driver received 230.<\/p>\n<p>Litigation follows a well-known pattern.<\/p>\n<p>In 2021, the Indian Federation of App-Based Transport Workers[1] filed a petition in the Supreme Court with regard to the recognition of gig workers as unorganised workers capable of receiving social security; the case remains pending before the Supreme Court.<\/p>\n<p>Rajasthan[2] has come up with India&#8217;s first ever platform-gig-worker legislation which grants recognition to platform workers but does not actually confer on them employment status.<\/p>\n<p>The theme of every platform dispute is the question which sham doctrine always asks &#8211; who really controls the subsistence of the worker in economic reality?<\/p>\n<h2 id=\"analysis\"><span class=\"ez-toc-section\" id=\"Analysis_Do_the_Codes_Cure_the_Illness\"><\/span>Analysis: Do the Codes Cure the Illness?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3 id=\"case-for-the-codes\"><span class=\"ez-toc-section\" id=\"The_Case_for_the_Codes\"><\/span>The Case for the Codes<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The Codes cannot merely be deemed pure regressions.<\/p>\n<p>Some of the provisions have safeguarding measures for workers left out of the traditional system; e.g. the single licence throws out the invisible contractor that was the traditional sham; inter-state migrant workers now fall under the definition; the fixed-term category requires such workers to be on a written contract and receive the same wages and hours, as well as pro-rated gratuity, retirement fund, and insurance; the Wages Code brings in the minimum wage floor; and the mere recognition of the gig and platform workers puts in place the registry framework that was absent before.<\/p>\n<p>The issue is not about whether the Codes offer improvements compared to the informal situation, but whether a situation that works with the exceptions and thresholds can be considered a workers&#8217; rights regime or just a system of workers&#8217; benefits.<\/p>\n<h3 id=\"case-against-the-codes\"><span class=\"ez-toc-section\" id=\"The_Case_Against\"><\/span>The Case Against<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The case against is structural.<\/p>\n<ol>\n<li>First, the abolition machinery is gone: no provision of any Code allows any authority to end contract labour in a notified perennial process &#8211; the single most consequential fact about the new regime.<\/li>\n<li>Second, the coverage threshold has risen from twenty to fifty, pushing a whole band of engagements outside the chapter.<\/li>\n<li>Third, Section 57&#8217;s core-activity ban is a ban in name only: the exception list covers most support functions, and the carve-outs invite the employer to argue that core-function workers are not contract labour at all.<\/li>\n<li>Fourth, the 2019 draft OSH Bill deemed workers engaged through an unlicensed contractor employees of the principal employer; the 2020 Code replaced that with a bare statement that such engagement contravenes the Code.<\/li>\n<li>Fifth, fixed-term employment is open to exactly the practice Maruti pioneered.<\/li>\n<li>And sixth, inspection exemptions and notification-dependent welfare weaken the enforcement machinery on which every right depends.<\/li>\n<\/ol>\n<h3 id=\"doctrines-fate-under-codes\"><span class=\"ez-toc-section\" id=\"The_Doctrines_Fate_Under_the_Codes\"><\/span>The Doctrine&#8217;s Fate Under the Codes<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The sham contract doctrine survives the Codes.<\/p>\n<p>The tests are common law, and nothing in the Codes displaces them: an adjudicator facing a paper contractor will still ask who appoints, who pays, who dismisses, who supervises.<\/p>\n<p>In the researcher&#8217;s view, the doctrine may even become more necessary, because the statutory routes that once competed with it are narrower &#8211; with abolition gone, &#8216;whose worker is this, really?&#8217; is the only question left with teeth.<\/p>\n<p>But the opportunities to ask it have shrunk &#8211; higher threshold, long exception lists; the likely result is a doctrine of great dignity and modest reach &#8211; honoured in appellate rhetoric, rare in the tribunal&#8217;s docket.<\/p>\n<h3 id=\"form-and-substance\"><span class=\"ez-toc-section\" id=\"Form_and_Substance\"><\/span>Form and Substance<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>International standards frame the choice.<\/p>\n<p>The ILO&#8217;s Recommendation No. 198 (2006)[1] directs that the existence of an employment relationship be decided primarily by the facts of how the work is done and paid, whatever the parties have called it; the UK Supreme Court held in <em>Uber BV v. Aslam<\/em>[2] that Uber drivers were &#8216;workers&#8217; because the contract did not reflect the reality of control; and the European Union&#8217;s Platform Work Directive of 2024[1] presumes employment where control indicators are met.<\/p>\n<p>Indian law has the doctrine but not the presumption &#8211; the gap between them is where the platform workforce lives.<\/p>\n<p>The pattern is this article&#8217;s finding: from condemning the form (the 1970 Act), to policing its abuse (the sham doctrine), to administering it (the Codes), the worker&#8217;s substance has each time been traded for the regularisation of the form &#8211; measurable efficiency, at the price of a two-tier workforce.<\/p>\n<p>The Codes complete the trade: parity of benefits without security of tenure.<\/p>\n<h2 id=\"recommendations\"><span class=\"ez-toc-section\" id=\"Recommendations\"><\/span>Recommendations<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ol>\n<li>Introduce something similar to abolition by either restoring the prerogative to outlaw contract labour in core operations permanently or expanding Section 57&#8217;s definition of &#8220;core activity&#8221; to preclude the possibility of the exception list completely undermining the prohibition.<\/li>\n<li>Bring back the coverage limit by having businesses register with twenty employees and obtain a licence when employing over fifty.<\/li>\n<li>Set limits on the number of renewals of fixed terms and make it necessary for employers to justify each renewal.<\/li>\n<li>Legislate a rebuttable presumption of employment (putting the burden on the employer to prove otherwise) when key signals &#8211; payment of wages, supervision, integration with the employer, and duration of the work &#8211; point to dependence; the Nilgiri test serves as a ready-made basis for this statutory presumption.<\/li>\n<li>Create ways to strengthen worker-side enforcement, such as mandatory electronic registration of fixed-term and contract workers, independent machinery for filing complaints, and inspector incentives designed to prevent collusion with employers.<\/li>\n<\/ol>\n<h2 id=\"expected-outcome\"><span class=\"ez-toc-section\" id=\"Expected_Outcome\"><\/span>Expected Outcome<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The findings of this research reveal the following four points:<\/p>\n<ol>\n<li>the existence of a statutory package for the contract worker, although it completely depends on the classification made by the employer;<\/li>\n<li>the survival of the sham contract doctrine, but with a narrower scope than it previously had;<\/li>\n<li>the presence of a two-tier workforce preserved, rather than dissolved, by the new regime; and<\/li>\n<li>the great ease with which sham contractualization travels across the three categories &#8211; from the contractor to the fixed-term worker to the platform &#8216;partner&#8217;.<\/li>\n<\/ol>\n<p>If the recommendations are followed, the next worker forced to sign a document that gives a distorted description of the work will be inside the law&#8217;s protection.<\/p>\n<h2 id=\"conclusion\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The article examines the legal safeguards provided by Indian legislation to contractual employees, as well as how the practice of sham contracting has been able to circumvent them.<\/p>\n<p>The answer to this query breaks down into three parts: how the safeguards have shifted from an abolitionist model to an approach based on regulation, how the doctrine of sham contracting continues to exist albeit in a more restricted form, and how the practice of sham contracting has evolved from the classic contracting model to that of fixed term employment, and now to the category of platform partner.<\/p>\n<p>The rights of contractual workers boil down to the benefits associated with a job that has been deliberately structured to keep them from acquiring permanent work in addition to the ability to make common law claims that require proving the information presented in the documentation is false.<\/p>\n<p>The oldest instruction of the sham doctrine is also the most apt observation: the paper cannot be allowed to hide the reality of the work.<\/p>\n<p>The law should not do so, either.<\/p>\n<p>A legal order that focuses only on clean paperwork &#8211; the licence, the written contract and the partner agreement &#8211; is not regulating the triangular relationship at all; it is legitimising it.<\/p>\n<h2 id=\"references\"><span class=\"ez-toc-section\" id=\"References\"><\/span>References<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3 id=\"cases\"><span class=\"ez-toc-section\" id=\"Cases\"><\/span>Cases<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li><em>Air India Statutory Corp. v. United Labour Union<\/em>, (1997) 9 SCC 377 (India).<\/li>\n<li><em>General Manager (OSD), Bengal Nagpur Cotton Mills, Rajnandgaon v. Bharat Lal<\/em>, (2011) 1 SCC 635 (India).<\/li>\n<li><em>Indian Fed&#8217;n of App-Based Transp. Workers v. Union of India<\/em>, W.P. (Civil) No. 1068 of 2021 (India).<\/li>\n<li><em>International Airport Authority of India v. International Air Cargo Workers&#8217; Union<\/em>, (2009) 13 SCC 374 (India).<\/li>\n<li><em>State of Punjab v. Jagjit Singh<\/em>, (2017) 1 SCC 203 (India).<\/li>\n<li><em>Steel Authority of India Ltd. v. National Union Water Front Workers<\/em>, (2001) 7 SCC 1 (India).<\/li>\n<li><em>Uber BV v. Aslam<\/em> [2021] UKSC 5 (UK).<\/li>\n<li><em>Workmen of Nilgiri Coop. Mktg. Socy. Ltd. v. State of Tamil Nadu<\/em>, (2004) 3 SCC 514 (India).<\/li>\n<\/ul>\n<h3 id=\"statutes-and-rules\"><span class=\"ez-toc-section\" id=\"Statutes_and_Rules\"><\/span>Statutes and Rules<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Code on Social Security, 2020, No. 36, Acts of Parliament, 2020 (India).<\/li>\n<li>Code on Wages, 2019, No. 29, Acts of Parliament, 2019 (India).<\/li>\n<li>Contract Labour (Regulation and Abolition) Act, 1970, No. 37, Acts of Parliament, 1970 (India).<\/li>\n<li>Contract Labour (Regulation and Abolition) Central Rules, 1971 (India).<\/li>\n<li>Directive (EU) 2024\/2831 of the European Parliament and of the Council of 23 October 2024 on Improving Working Conditions in Platform Work, OJ L, 2024\/2831, 11.11.2024, [online] Available at: https:\/\/eur-lex.europa.eu\/eli\/dir\/2024\/2831\/oj [Accessed 28 September 2026].<\/li>\n<li>India Const. arts. 14, 16, 39(d).<\/li>\n<li>Industrial Relations Code, 2020, No. 35, Acts of Parliament, 2020 (India).<\/li>\n<li>Int&#8217;l Labour Org., Recommendation Concerning the Employment Relationship, No. 198 (2006).<\/li>\n<li>Occupational Safety, Health and Working Conditions Code, 2020, No. 37, Acts of Parliament, 2020 (India).<\/li>\n<li>Rajasthan Platform Based Gig Workers (Registration and Welfare) Act, 2023 (India).<\/li>\n<\/ul>\n<h3 id=\"secondary-sources\"><span class=\"ez-toc-section\" id=\"Secondary_Sources\"><\/span>Secondary Sources<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Marianne Bertrand, Chang-Tai Hsieh &amp; Nick Tsivanidis, Contract Labor and Firm Growth in India (Nat&#8217;l Bureau of Econ. Research, Working Paper No. 29151, 2021), [online] Available at: https:\/\/www.nber.org\/papers\/w29151 [Accessed 28 September 2026].<\/li>\n<li>Nandita Haksar, The Reality of Maruti Suzuki&#8217;s Employment Practices, The Wire (Jan. 8, 2025), [online] Available at: https:\/\/thewire.in\/rights\/maruti-suzukis-employment-practices [Accessed 28 September 2026].<\/li>\n<li>Deb Kusum Das, Homagni Choudhury &amp; Jaivir Singh, Contract Labour (Regulation and Abolition) Act 1970 and Labour Market Flexibility (Indian Council for Research on Int&#8217;l Econ. Relationships, Working Paper No. 300, 2015).<\/li>\n<li>Ministry of Labour and Employment, Annual Report 2018-19 (Government of India).<\/li>\n<li>NITI Aayog, India&#8217;s Booming Gig and Platform Economy: Perspectives and Recommendations on the Future of Work (2022), [online] Available at: https:\/\/www.niti.gov.in\/sites\/default\/files\/2022-06\/25th_June_Final_Report_27062022.pdf [Accessed 28 September 2026].<\/li>\n<li>Joerg Nowak, Strikes and Labor Unrest in the Automobile Industry in India: The Case of Maruti Suzuki India Limited, 20 WorkingUSA 432 (2017).<\/li>\n<li>Manishi Pathak, An Overview of Contract Labour Related Laws in India, 3 Nat&#8217;l L. Sch. Bus. L. Rev., no. 1, art. 4 (2017).<\/li>\n<li>PUDR, Behind the Veil of Algorithms: Invisible Workers &#8211; A Report on Workers in the &#8216;Gig&#8217; Economy (Dec. 15, 2021), [online] Available at: https:\/\/www.pudr.org\/publications\/behind-the-veil-of-algorithms-invisible-workers\/ [Accessed 28 September 2026].<\/li>\n<li>Meenakshi Rajeev, Contract Labour Act in India: A Pragmatic View (Indira Gandhi Inst. of Dev. Research, Publication No. PP-062-33, 2009).<\/li>\n<\/ul>\n<p><a href=\"#_ftnref1\" name=\"_ftn1\"><\/a><\/p>\n<p><a href=\"#_ftnref2\" name=\"_ftn2\"><\/a><\/p>\n<p><a href=\"#_ftnref2\" name=\"_ftn2\"><\/a><\/p>\n<p><a href=\"#_ftnref1\" name=\"_ftn1\"><\/a><\/p>\n<p><a href=\"#_ftnref1\" name=\"_ftn1\"><\/a><\/p>\n<p><a href=\"#_ftnref2\" name=\"_ftn2\"><\/a><\/p>\n<p><a href=\"#_ftnref1\" name=\"_ftn1\"><\/a><\/p>\n<p><a href=\"#_ftnref2\" name=\"_ftn2\"><\/a><\/p>\n<p><a href=\"#_ftnref2\" name=\"_ftn2\"><\/a><\/p>\n<p><a href=\"#_ftnref1\" name=\"_ftn1\"><\/a><\/p>\n<p><a href=\"#_ftnref2\" name=\"_ftn2\"><\/a><\/p>\n<p><a href=\"#_ftnref3\" name=\"_ftn3\"><\/a><\/p>\n<p><a href=\"#_ftnref1\" name=\"_ftn1\"><\/a><\/p>\n<p><a href=\"#_ftnref2\" name=\"_ftn2\"><\/a><\/p>\n<p><a href=\"#_ftnref3\" name=\"_ftn3\"><\/a><\/p>\n<p><a href=\"#_ftnref1\" name=\"_ftn1\"><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Contract Labour in India: Sham Contracts, Labour Codes and the Gap Between Law and Reality Abstract This article is about contract workers who, according to law, are not the factory&#8217;s own workers. The article examines the protections that Indian labour law gives to contract workers, and it also explores a trick that lets a contractor<\/p>\n","protected":false},"author":1845,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_bbp_topic_count":0,"_bbp_reply_count":0,"_bbp_total_topic_count":0,"_bbp_total_reply_count":0,"_bbp_voice_count":0,"_bbp_anonymous_reply_count":0,"_bbp_topic_count_hidden":0,"_bbp_reply_count_hidden":0,"_bbp_forum_subforum_count":0,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"two_page_speed":[],"_jetpack_memberships_contains_paid_content":false,"_joinchat":[],"footnotes":""},"categories":[4766],"tags":[774],"class_list":["post-33176","post","type-post","status-publish","format-standard","category-labour-law","tag-labour-law"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v28.4 (Yoast SEO v28.5) - 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