Court Emphasizes Need for Written Appointment to Establish Employer-Employee Link; Outsourced Staff Cannot Claim Benefits as Regular Employees of PRTC
In a significant judgment delivered on August 31, 2026, the Punjab and Haryana High Court, presided over by Justice Harsimran Singh Sethi, overturned a lower court order that had directed the regularization of outsourced employees working through private agencies with the Pepsu Road Transport Corporation (PRTC). The decision clarifies the legal position concerning the employment status of outsourced personnel and their eligibility for regularization and associated benefits.
The case arose when several employees, appointed and deployed by a private manpower agency (M/s S.S Service Providers), sought regularization of their services with PRTC, claiming they had been working continuously in positions such as drivers and conductors. The respondents relied on Supreme Court precedents, including Jaggo v. Union of India (2025 AIR SC 296), and the Punjab Ad hoc, Contractual, Daily Wage, Temporary, Work Charged, and Outsourced Employees' Welfare Act, 2016, to support their claims.
However, the High Court found that the fundamental criterion for establishing an employer-employee (master and servant) relationship is the existence of a written appointment order or similar documentation by the alleged employer—in this case, PRTC. The Court noted that the respondents were appointed by the private agency and not directly by PRTC, and no appointment orders or employment status had ever been conferred upon them by PRTC. Mere deployment and performance of duties under PRTC’s supervision do not create such a relationship.
Relying on the Supreme Court’s ruling in The Joint Secretary, Central Board of Secondary Education v. Raj Kumar Mishra (2025), and The Municipal Council, Nandyal Municipality v. K. Jayaram (2026), the Court reiterated that supervisory control or the nature of duties performed at the premises of an organization does not convert outsourced personnel into regular employees of that organization. The responsibility for payment of wages, provident fund, and other statutory benefits lies with the outsourcing agency, which was confirmed by the fact that PRTC had no disciplinary jurisdiction over the respondents.
The Court further examined the provisions of the Punjab Outsourced Employees' Welfare Act, 2016, noting that it mandates outsourced employees to be taken on contract by the state entity only if the entity is financially capable. No evidence was presented to show that PRTC had taken the respondents on contract or had the financial capacity to bear such liability. Hence, the statutory framework did not support regularization.
The High Court also distinguished this case from judgments like Jaggo v. Union of India, where the Supreme Court held that employees initially appointed by the state and later outsourced cannot be denied regularization. Here, the respondents were never directly employed by PRTC.
Addressing the respondents’ reliance on the regularization of other contractual employees by PRTC, the Court clarified that those employees were directly appointed by PRTC and not outsourced, marking a clear distinction in employment status.
Consequently, the High Court set aside the Single Judge’s order and dismissed the writ petitions filed by the respondents. The Court emphasized that broad principles such as lifting the corporate veil cannot be indiscriminately applied to convert outsourced employees into regular employees, especially when it would impose undue financial burdens on the organization without proper legal basis.
This ruling reinforces the legal principle that outsourced employees, engaged through private agencies, cannot claim the status and benefits of regular employees of the host organization in the absence of a clear master-servant relationship established through written documents.
Bottom Line:
Outsourced employees working through private agencies cannot claim regularization as employees of the organization where they are deployed unless a master-servant relationship is established through written documents or appointment orders.
Statutory provision(s): Punjab Ad hoc, Contractual, Daily Wage, Temporary, Work Charged and Outsourced Employees' Welfare Act, 2016; PEPSU Road Transport Corporation Employees (Conditions of Appointment and Service) Regulations, 1981; Industrial Employment (Standing Orders) Act, 1948
