Employment Practices – Legal and Ethical Dimensions

Fairness, compliance, and dignity of labour

The Executive Committee of a listed company was in the midst of its annual review meeting. While presenting his analysis, the CFO informed the team about a sharp increase in the hiring of contract labour over the past couple of years. He noted that many of these contract hires were effectively performing regular, permanent roles, raising concerns about potential legal implications. The CEO turned to the HR and Legal Heads and asked if they foresaw any issues and could manage the fallout should problems arise. Both replied confidently that they did not foresee any significant issues and would handle any complications that may come up. The CFO then reminded them that the auditors had previously flagged this as a potential compliance risk. Dismissing the concern, the CEO said, “Based on HR and Legal’s assurance, convince the auditor. I do not want any mention of this subject in the report to the Board.” While not purporting to be a record of an actual Board Meeting, such a scenario does play out in the corporate world.

Over the years, the HR function has evolved significantly. From a traditional focus on employee welfare, time office, payroll, grievance handling, and industrial relations, it has transitioned into a more strategic and advisory role. Today, HR is a tech-enabled, AI, and a value-driven partner to the business, focusing on talent development, employee well-being, and organizational values. Large listed companies are mandated to follow certain ESG reporting norms where HR plays a facilitating role. Despite these advancements, there are still fundamental concerns that need attention.

One such concern is the increasing prevalence of certain unhealthy labour practices, particularly the prolonged engagement of temporary or contractual workers. This issue came into sharp focus with the recent landmark judgement of the Supreme Court in Jagoo v. Union of India (December 2024). The judgment deprecated the unethical practice of maintaining workers in a state of “perpetual temporariness,” effectively denying them the rights and benefits due to permanent employees. Alarmingly, this practice is prevalent not just in private enterprises but also within government institutions and public sector enterprises.

The Supreme Court made several critical observations:

1. Discriminatory regularization is arbitrary: Selective regularization or exclusion of eligible workers violates Article 14 of the Constitution and is unsustainable.

2. Post hoc enforcement of qualifications is impermissible: Qualifications not insisted upon at the time of hiring cannot later be used to deny regularization.

3. Systematic misuse of temporary engagements is exploitative: Employing workers on casual or contractual terms for permanent roles is an unjust practice.

4. Government and public institutions must lead by example: These bodies are expected to model best employment practices.

5. Concerns about the gig economy: With platform-based and gig work increasing, workers increasingly face job insecurity, lack of social security, and denial of basic benefits. More needs to be done to mitigate these problems.

   
   

The judgement can be viewed as a judicial affirmation of worker rights and sets a precedent in safeguarding the dignity and right to permanency of the workforce.

In a more recent judgement (reported in the Times of India, August 21, 2025), the Supreme Court directed the UP Government to grant permanency to temporary and daily wage staff who had been so employed from the year 2002. While the judgement is against the actions of a State Government, it is worth quoting some of the observations of the Court which would apply equally to other fields and should come as a clarion call to the private sector too:

“The long term extraction of regular labour under temporary labels ….. offends the promise of equal protection.”

“Ad hocism thrives where administration is opaque”.

“Sensitivity to the human consequences of prolonged insecurity is not sentimentality”.

Other Significant Judgements/Cases:

• PCMC Waste Collectors (Feb 2025): The Supreme Court upheld a Bombay High Court ruling mandating permanent employment and benefits for over 300 conservancy workers after a 26-year legal battle.

• Another 2025 Supreme Court decision in Shripal & Anr. v. Nagar Nigam reiterated protections for temporary workers in municipal bodies, setting precedents against misuse of temporary status and arbitrary dismissals

• Bajaj Auto (Feb 2021): The Bombay High Court directed a compensation of Rs. 39 lakhs per workman for unfair labour practices under the guise of rotational employment.

• Tata Motors (March 2022): Held liable for hiring hundreds of temporary workers and denying them permanent status; ordered to compensate 52 workers.

• Wistron iPhone Facility (Dec 2020): A violent strike exposed poor labour practices, with over 8500 of 9700 employees engaged via contractors.

The decades-old Industrial Disputes Act sets the threshold for permanency depending on the nature of work (seasonal or regular) and the number of days worked in a year. This has led, in many companies, to the deplorable practice of contract workers hired for just the number of days below the threshold. These contracts are then renewed, always keeping the permanency threshold in mind.

Temporary Workforce Disclosures in Reputed Companies:

Even large, well-governed, listed, profit-making companies are guilty of this practice, with ESG disclosures revealing a disproportionate dependence on contract labour.

Here is  recent workforce data of some reputed companies:

These companies, being award-winning employers, yet show a disproportionate reliance on temporary labour.

Additional Observations:

1. Slow Legal Redress: Labour justice in India is slow, which discourages workers from asserting their rights. For instance, a recent complaint I supported involved unpaid dues of contract workers employed by a reputed conglomerate. Only after sustained follow-up and involvement of the Labour Department did the companies release pending dues.

2. Workforce Composition and Wage Gaps: The growing ratio of contract to permanent employees impacts workplace equity. Wage disparity between permanent and contract workers for similar roles often exceeds 40-60

3. Fixed Term Employment (FTE) Concerns: Initially introduced to support seasonal or project-based work, FTE is now misused for long-term roles, with no cap on duration or renewal. Background: Around 2015-16, employer organizations, especially in the auto sector, advocated for a structured mechanism to manage short-term skilled labour needs. This led to the re-introduction of FTE under the Industrial Employment (Standing Orders) Act in 2017. However, with no time limits or safeguards, it risks becoming another form of contract labour.

4. Workplace Injuries: It is no accident that India has one of the highest rates of industrial accidents. Between 2014 and 2018, over 5,800 fatal injuries were recorded in registered factory accidents, averaging more than 1,160 deaths per year. The question this poses is whether this statistic, damning as it is, hides one of the reasons, which could be the lack of safety awareness and training, because of the use of contract labour in jobs that require skill and long-term commitment.

   
   

Questions for the HR and Leadership Fraternity:

• Are we truly practicing Equity and Fairness? This is the bedrock of good HR practice.

• Do employee engagement programs include non-regular employees?

• Is our employee lifecycle management truly inclusive?

• Are we statutorily compliant or relying on weak enforcement?

• Are we living up to ILO commitments on stable employment?

• Are safety protocols uniformly applied to all workers?

Conclusion

There is no doubt that most organizations genuinely value their people. Their mission and values often reflect these sentiments. Yet, current practices tell a different story. While temporary employment may be a necessary evil in some situations, its pervasive scale and misuse cannot be ignored. As the saying goes, “charity begins at home”.

The question we, in the HR community, need to ask ourselves is this: are we meeting the foundational requirements of fairness, compliance, and dignity of labour, and are we setting the right example for a Viksit Bharat in the future?

If HR professionals do not lead the charge in correcting these practices, who will?

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