Do contractors break the employment link?

No. If the owner controls the work and benefits from it, and the work is integral to the business, the owner can be the real employer.

What test did the Court apply?

An economic reality and control test—look beyond contracts to who directs, supervises, and benefits from the labour.

Are contractor-hired workers ‘workmen’ under Section 2(s)?

Yes, if they work in the employer’s plant, on core tasks, under his control—labels like ‘independent contractor’ won’t defeat labour rights.

Who was held the real employer here?

The factory owner, Hussain Bhai. He used the plant, equipment, and controlled the rope-making work done by the labourers.

What relief followed from this finding?

Liability for denial of employment rested on the owner; intermediary arrangements could not be used to evade labour obligations.

Hussain Bhai v. Alath Factory Employees Union (1978) 4 SCC 257

Quick Summary

The Court said: look at reality, not labels. If workers hired through contractors do core work in the employer’s plant, under his control and supervision, and for his business, the owner is the real employer. Here, rope-making was core to the factory; the owner controlled the work. So, he was liable for denying employment.

Issues

Do contractor intermediaries change the employment status of workers?
Should labour law prefer social justice over strict contract forms for such workers?
Are the rope workers workmen under Section 2(s) of the Industrial Disputes Act?

Rules

Real employer test: Who controls the manner of work, provides plant/premises, and derives the direct benefit?
Economic reality: Courts look beyond contractor labels to the substance of the relationship.
Section 2(s) workman: Includes those working in the employer’s plant on integral tasks under his direction.

Facts (Timeline)

Factory setup: Rope-making factory; owner engaged contractors to bring workers into the plant.

Core work: Workers produced ropes through stages inside the factory using its equipment and space.

Denial of employment: After a point, the owner refused further work to 29 workers.

Tribunal & High Court: Found owner the true employer; intermediaries did not break the link.

Supreme Court (SLP): Dismissed; upheld findings—economic reality governs over contract form.

Timeline: contractors engaged, rope-making in plant, denial of employment, and court rulings

Arguments

Workmen/Union

Work was integral to business; done inside the plant with owner’s equipment.
Owner exercised control/supervision over process and output.
Therefore, they are the owner’s workmen under labour law.

Owner (Petitioner)

Workers were hired by independent contractors, not by him.
No direct employment contract; thus no liability.
Denial of employment was outside labour law’s reach.

Judgment

SLP dismissed. The Supreme Court affirmed that the factory owner was the real employer. Intermediary contractors did not break the employment link where the owner controlled the work, used his plant, and directly benefited from the labour.

Courts should adopt a social justice lens and see the economic reality.
Workers were workmen under Section 2(s); owner was liable for denial of employment.

Judgment visual: economic reality and control determine the real employer

Ratio Decidendi

Where work is integral to the business and the owner controls it in his premises for his benefit, the workers are his employees—even if routed through contractors.

Why It Matters

Blocks attempts to evade labour duties via intermediaries.
Centers control and economic reality over paper contracts.
Protects contract labour doing core functions inside principal employer’s plant.

Key Takeaways

Point	Quick Note
Real employer test	Control, premises, and benefit decide who the employer is.
Contractor label ≠ shield	Intermediaries cannot break genuine employment links.
Section 2(s)	‘Workman’ includes contractor-supplied labour in core work under control.
Social justice lens	Courts prioritise substance over form in labour relations.

Mnemonic + 3-Step Hook

Mnemonic: “PLANT • CONTROL • BENEFIT = EMPLOYER.”

Plant? Work done in owner’s premises with his kit.
Control? Owner directs the how of the work.
Benefit? Output goes straight to his business.

IRAC Outline

Issue: Are contractor-supplied rope workers employees of the factory owner?

Rule: Economic reality + control test; Section 2(s) covers workers under owner’s direction in core tasks.

Application: Work was core, done in the plant, under owner’s supervision; intermediaries were nominal.

Conclusion: Owner is the real employer; liable for denial of employment.

Glossary

Real employer test: A facts-first check of who controls, houses, and benefits from the work.
Contract labour: Workers routed via contractors who may still be employees of the principal employer.
Section 2(s): Definition of “workman” in the Industrial Disputes Act, 1947.

FAQs

No. Courts ask who really controls the work and who directly benefits. Labels don’t decide status.

If the task is core to the business and done under the owner’s eye, the workers are likely his employees.

No. The principle applies wherever economic reality shows control and benefit by the putative employer.

Wage routing is one factor. The decisive point is overall control, plant use, and direct business benefit.

Case Meta

CASE_TITLE	HUSSAIN BHAI V. ALATH FACTORY EMPLOYEES UNION ((1978) 4 SCC 257)
PRIMARY_KEYWORDS	real employer test; contract labour; Section 2(s) workman; economic reality; control & supervision
SECONDARY_KEYWORDS	industrial disputes; social justice; rope-making factory; intermediaries; denial of employment
PUBLISH_DATE	23 Oct 2025
AUTHOR_NAME	Gulzar Hashmi
LOCATION	India
Slug	hussain-bhai-v-alath-factory-employees-union-1978-4-scc-257