Levels of Employer Control in Employment Law

𝑬𝒗𝒆𝒓𝒚 𝑮𝑪𝑪 𝒊𝒏 𝑰𝒏𝒅𝒊𝒂 𝒃𝒆𝒈𝒊𝒏𝒔 𝒘𝒊𝒕𝒉 𝒕𝒘𝒐 𝒄𝒐𝒓𝒆 𝒒𝒖𝒆𝒔𝒕𝒊𝒐𝒏𝒔: 𝑾𝒉𝒐 𝒆𝒎𝒑𝒍𝒐𝒚𝒔 𝒚𝒐𝒖𝒓 𝒑𝒆𝒐𝒑𝒍𝒆?  𝑨𝒏𝒅 𝒘𝒉𝒐’𝒔 𝒍𝒊𝒂𝒃𝒍𝒆 𝒊𝒇 𝒕𝒉𝒊𝒏𝒈𝒔 𝒈𝒐 𝒘𝒓𝒐𝒏𝒈? Employment structuring has become the invisible force shaping 𝐋𝐞𝐠𝐚𝐥 𝐜𝐞𝐫𝐭𝐚𝐢𝐧𝐭𝐲,  𝐓𝐚𝐱 𝐞𝐱𝐩𝐨𝐬𝐮𝐫𝐞,  𝐎𝐩𝐞𝐫𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐚𝐠𝐢𝐥𝐢𝐭𝐲.  Yet it’s one of the most overlooked parts of a setup plan. 𝐇𝐞𝐫𝐞’𝐬 𝐚 𝐛𝐫𝐞𝐚𝐤𝐝𝐨𝐰𝐧 𝐞𝐯𝐞𝐫𝐲 𝐆𝐂𝐂 𝐥𝐞𝐚𝐝𝐞𝐫 𝐬𝐡𝐨𝐮𝐥𝐝 𝐤𝐧𝐨𝐰: 1️⃣𝐄𝐦𝐩𝐥𝐨𝐲𝐦𝐞𝐧𝐭 𝐌𝐨𝐝𝐞𝐥𝐬 – 𝐖𝐡𝐨𝐬𝐞 𝐏𝐚𝐲𝐫𝐨𝐥𝐥 𝐈𝐬 𝐈𝐭 𝐑𝐞𝐚𝐥𝐥𝐲 𝐎𝐧? 𝐃𝐢𝐫𝐞𝐜𝐭 𝐄𝐦𝐩𝐥𝐨𝐲𝐦𝐞𝐧𝐭 (𝐈𝐧𝐝𝐢𝐚𝐧 𝐒𝐮𝐛𝐬𝐢𝐝𝐢𝐚𝐫𝐲): Hired & managed on the local entity’s rolls, ideal for compliance clarity, payroll control & long-term stability 𝐓𝐡𝐢𝐫𝐝-𝐏𝐚𝐫𝐭𝐲 𝐒𝐭𝐚𝐟𝐟𝐢𝐧𝐠 𝐏𝐫𝐨𝐯𝐢𝐝𝐞𝐫: Hired on the staffing firm’s rolls but works under the GCC’s supervision. The GCC becomes the principal employer under the Contract Labour Act and shares responsibility for compliance 𝐄𝐦𝐩𝐥𝐨𝐲𝐞𝐫 𝐨𝐟 𝐑𝐞𝐜𝐨𝐫𝐝 (𝐄𝐎𝐑) / 𝐏𝐄𝐎: Useful for quick entry or pilots, but limited control & potential Permanent Establishment (PE) risk if the EOR acts as an agent for the foreign parent 2️⃣ 𝐓𝐡𝐢𝐫𝐝-𝐏𝐚𝐫𝐭𝐲 𝐎𝐩𝐞𝐫𝐚𝐭𝐞𝐝 𝐆𝐂𝐂 𝐒𝐜𝐞𝐧𝐚𝐫𝐢𝐨𝐬 𝐓𝐡𝐢𝐫𝐝-𝐏𝐚𝐫𝐭𝐲 𝐄𝐦𝐩𝐥𝐨𝐲𝐦𝐞𝐧𝐭 𝐌𝐨𝐝𝐞𝐥: A local partner hires staff. The foreign entity avoids direct liability, but excessive control may invite co-employment scrutiny. 𝐖𝐡𝐢𝐭𝐞-𝐋𝐚𝐛𝐞𝐥 𝐨𝐫 𝐁𝐫𝐚𝐧𝐝-𝐎𝐩𝐞𝐫𝐚𝐭𝐞𝐝 𝐒𝐭𝐚𝐟𝐟𝐢𝐧𝐠: When operations run under a foreign brand name, labour authorities may assess who truly exercises control. 𝐁𝐎𝐓 𝐓𝐫𝐚𝐧𝐬𝐟𝐞𝐫𝐬: In Build-Operate-Transfer models, employees move from third-party roles to the new entity, requiring compliance on continuity, benefits, & retrenchment 3️⃣ 𝐂𝐨𝐫𝐞 𝐋𝐚𝐛𝐨𝐮𝐫 𝐋𝐚𝐰 𝐑𝐞𝐪𝐮𝐢𝐫𝐞𝐦𝐞𝐧𝐭𝐬 - Shops & Establishments Act (work hours, leave, holidays) - EPF & ESI Acts - Payment of Gratuity Act (after 5 years’ service) - Maternity Benefit Act - Contract Labour (Regulation & Abolition) Act - Upcoming Codes on Wages reforms 4️⃣ 𝐓𝐚𝐱 & 𝐓𝐫𝐚𝐧𝐬𝐟𝐞𝐫 𝐏𝐫𝐢𝐜𝐢𝐧𝐠 𝐀𝐥𝐢𝐠𝐧𝐦𝐞𝐧𝐭 - Payroll tax (TDS under Section 192) and quarterly filings. - Transfer pricing documentation (Form 3CEB) at arm’s length. - PE exposure, if the foreign entity directs business operations from abroad. 5️⃣ 𝐑𝐞𝐜𝐫𝐮𝐢𝐭𝐦𝐞𝐧𝐭 𝐋𝐢𝐜𝐞𝐧𝐬𝐢𝐧𝐠 𝐄𝐬𝐬𝐞𝐧𝐭𝐢𝐚𝐥𝐬 - No license needed for direct employment. - Mandatory for staffing, overseas hiring, or third-party recruitment under CLRA 6️⃣ 𝐅𝐨𝐫𝐞𝐢𝐠𝐧 𝐍𝐚𝐭𝐢𝐨𝐧𝐚𝐥𝐬 & 𝐑𝐞𝐦𝐨𝐭𝐞 𝐖𝐨𝐫𝐤 𝐑𝐮𝐥𝐞𝐬 - Employment visas and FRRO/FRO registration required. - Remote work governed by state IT/ITES policies (e.g., Karnataka, Maharashtra). What’s been your biggest challenge or learning in aligning global HR frameworks with India’s GCC regulations? #GCC #TaxCompliance #LabourLaw #GlobalCapabilityCenters #IndiaGrowth

Most employment disputes hinge on one question: is the worker an employee or an independent contractor? Here’s what yesterday’s Supreme Court ruling changes for every law practitioner. Justices J.B. Pardiwala and Sandeep Mehta didn’t deliver academic commentary. They delivered a definitive framework. When the U.P. Cooperative Bank argued that its canteen staff were contractors, the Supreme Court reversed and consolidated four tests that now govern employer–employee classifications under the Industrial Disputes Act and Factories Act. The Four-Point Framework Every Lawyer Must Know (1) Control Test The Court clarified that “due control and supervision” over both the nature and manner of work signals employment. It isn’t about micromanaging every task. It’s about whether the hirer dictates how work is performed. (2) Integration Test Does the worker’s role form part of the employer’s core business? As in Silver Jubilee Tailoring House (1974), deep integration into the principal trade indicates an employment relationship. (3) Multifactor Test Nine indicators must be weighed together: → Control over work method → Ownership of tools → Business integration → Profit opportunity → Risk of loss → Power of selection → Payment terms → Suspension rights → Dismissal authority No single factor prevails. The totality of circumstances governs. (4) Refined Multifactor Test Emphasizes economic dependence and mutual obligation. Where contracts disguise true service, courts will pierce the veil to uphold statutory protections. Why This Matters Beyond Procedure The Court reversed both Labour Court and High Court findings in the canteen staff case, underscoring that providing infrastructure or subsidies alone does not create employment. But where control, integration, and economic dependence coincide, labels won’t protect employers from liability. After decades in employment law, I’ve seen too many attempts to mask employment through contractor models. This judgment safeguards workers’ rights while preserving genuine contracting. These tests are not checklists; they require thoughtful application to each case’s facts. Case citation: General Manager, U.P. Cooperative Bank Ltd. v. Achchey Lal & Anr., 2025 LiveLaw (SC) 1024 Bench: Justice J.B. Pardiwala and Justice Sandeep Mehta Date of Judgment: 21 October 2025

#Employers -- further to my Saturday teaser, the Eastern District of Texas has struck down the #NLRB's Joint Employer Final Rule, which was set to go into effect today, and also denied the Board's motion to transfer the case to the D.C. Circuit, where a parallel challenge to the Rule remains pending. For my money, this passage from the Court's decision hits the nail on the head, and really emphasizes why the Rule was so unworkable. "So if an entity exercises or has the power to exercise control (even indirect control) over at least one essential term, the entity is an employer, jointly with workers’ undisputed employer. That would treat virtually every entity that contracts for labor as a joint employer because virtually every contract for third-party labor has terms that impact, at least indirectly, at least one of the specified “essential terms and conditions of employment." Stated another way, because the Rule was drafted so broadly, basically any input from a contracting employer regarding whether, how, when, or under what circumstances a contracted employer's employees worked would establish joint employer liability. That simply cannot be right. If it was, why would an entity ever reach out to a third party to do work? So what now? Well, the Court further reasoned that the Board's rescission of the 2020 Rule was arbitrary and capricious. For that reason, the 2020 Trump Joint Employer Rule is once again the law of the land. Under that rule, only the exercise of direct and substantial control over another employer's employees will create a joint employer relationship. And what next? Probably an appeal to the Fifth Circuit and eventual Supreme Court review. At least for now, though, a modicum of certainty has returned to the joint employer calculus.

𝗪𝗵𝗼𝘀𝗲 𝗲𝗺𝗽𝗹𝗼𝘆𝗲𝗲𝘀 𝗮𝗿𝗲 𝘁𝗵𝗲𝘀𝗲 𝘄𝗼𝗿𝗸𝗲𝗿𝘀, 𝗮𝗻𝘆𝘄𝗮𝘆? The Supreme Court breaks it down using multi-factor tests. ➤ 𝗕𝗮𝗰𝗸𝗴𝗿𝗼𝘂𝗻𝗱 𝗼𝗳 𝘁𝗵𝗲 𝗖𝗮𝘀𝗲 ↳ The Bank’s employees formed a registered Society to run a canteen. The Bank provided infrastructure and subsidies. ↳ The Society hired four workmen to work in the canteen. ↳ Later, when the Bank declined to provide adequate support, the Society had to close the canteen, resulting in the termination of the four workmen’s services. ↳ The Labour Court and the High Court held that the workmen were in the employment of the Bank and directed their reinstatement with back wages. ↳ The Appellant Bank challenged the judgment before the Hon’ble Supreme Court. ➤ 𝗔𝗿𝗴𝘂𝗺𝗲𝗻𝘁𝘀 𝗼𝗳 𝘁𝗵𝗲 𝗕𝗮𝗻𝗸 ⓐ No master–servant relationship existed; the Bank never issued appointment letters, fixed service conditions, or paid salaries (which were paid by the Society from its own funds). ⓑ Its only role was to provide infrastructure and subsidies on food items. ➤ 𝗔𝗿𝗴𝘂𝗺𝗲𝗻𝘁𝘀 𝗼𝗳 𝘁𝗵𝗲 𝗪𝗼𝗿𝗸𝗺𝗲𝗻 ⓐ The Bank exercised direct control and supervision over the employees. ⓑ Financial assistance provided by the Bank was used to pay salaries, and the working hours were dictated by the Bank’s regulations. 𝗦𝘂𝗽𝗿𝗲𝗺𝗲 𝗖𝗼𝘂𝗿𝘁 𝗛𝗲𝗹𝗱 ➊ 𝗧𝗵𝗲 𝗖𝗼𝗿𝗲 𝗠𝘂𝗹𝘁𝗶-𝗙𝗮𝗰𝘁𝗼𝗿 𝗧𝗲𝘀𝘁 ↳ The Court listed the well-settled factors necessary to establish an employer–employee relationship: • Who appoints the workers? • Who pays salaries/remuneration? • Who has the authority to dismiss? • Who can take disciplinary action? • The extent of control and supervision ➋ 𝗧𝗵𝗲 𝗣𝗿𝗶𝗺𝗮 𝗙𝗮𝗰𝗶𝗲 𝗖𝗼𝗻𝘁𝗿𝗼𝗹 𝗧𝗲𝘀𝘁 ↳ The prima facie test of a master–servant relationship is the employer’s right not merely to direct what work is to be done but to control the manner in which it is done. ➌ 𝗧𝗵𝗲 𝗢𝗿𝗴𝗮𝗻𝗶𝘀𝗮𝘁𝗶𝗼𝗻/𝗜𝗻𝘁𝗲𝗴𝗿𝗮𝘁𝗶𝗼𝗻 𝗧𝗲𝘀𝘁 ↳ This test looks at the degree of integration of the work into the hirer’s business: the higher the integration, the more likely the worker is an employee. ➍ 𝗧𝗵𝗲 𝗠𝘂𝗹𝘁𝗶𝗽𝗹𝗲 𝗙𝗮𝗰𝘁𝗼𝗿 𝗧𝗲𝘀𝘁 𝗮𝗻𝗱 𝗥𝗲𝗳𝗶𝗻𝗲𝗺𝗲𝗻𝘁 ↳ Control, ownership of tools, integration, chance of profit, risk of loss, power of selection, payment of remuneration, right to control the method, and right of suspension or dismissal. ➎ Applying these tests, 𝘁𝗵𝗲 𝗦𝘂𝗽𝗿𝗲𝗺𝗲 𝗖𝗼𝘂𝗿𝘁 𝗵𝗲𝗹𝗱: ↳ Insufficient control: The Bank provided infrastructure, finance, and subsidies, but there was no indication that it managed the canteen’s affairs. Management was left “absolutely to the Society”. ↳ The Bank’s support was only to discharge its obligation to provide canteen facilities. ↳ No evidence showed that the Bank exercised control or supervision over the canteen staff. ↳ The Bank's appeals succeeded, and the High Court judgment was set aside. [Views are personal]

Hey, #humanresources and #employmentlaw attorneys! ICYMI, there's a new joint-employer rule. (Yes, another one.) This one comes from the National Labor Relations Board. Here's the deal... An entity may be considered a joint employer of a group of employees if each entity has an employment relationship with the employees and they share or codetermine one or more of the employees’ essential terms and conditions of employment. There are seven essential terms and conditions of employment: (1) wages, benefits, and other compensation; (2) hours of work and scheduling; (3) the assignment of duties to be performed; (4) the supervision of the performance of duties; (5) work rules and directions governing the manner, means, and methods of the performance of duties and the grounds for discipline; (6) the tenure of employment, including hiring and discharge; and (7) working conditions related to the safety and health of employees. And this matters because...why again? As the Board said earlier when it formulated a variation of the joint-employer rule in 2020, a joint-employer finding has significant implications for rights and obligations under the National Labor Relations Act relative to collective bargaining, strike activity, and unfair labor practice liability: 📑 If a union represents the employees, the joint employer must participate in collective bargaining over their terms and conditions of employment. 📑 Picketing directed at a joint employer that would otherwise be secondary and unlawful is primary and lawful. 📑 Each business comprising the joint employer may be found jointly and severally liable for the other's unfair labor practices. However, in adopting this new standard, the final rule rescinds the 2020 final rule that the prior Board promulgated. In contrast to the 2020 final rule, the 2023 rule considers the alleged joint employers' authority to control essential terms and conditions of employment, whether or not such control is exercised, and without regard to whether any such exercise of control is direct or indirect. The most likely application would be in situations involving either staffing companies or franchisors and franchisees. The new rule's effective date is December 26, 2023, and the new standard will only be applied to cases filed after the effective date. I'll link the full Final Rule below. If you have questions about it, call a lawyer.