Employment Law Newsletter – Regularization Rights Of Long-Serving Contractual Employees: May 2025
Regularization Rights Of Long-Serving Contractual Employees
Recent landmark judgments have decisively affirmed that long-serving contractual employees performing continuous, essential duties cannot be perpetually relegated to temporary status simply by contractual label but are entitled to regularization under Articles 14 and 16 of the Constitution and under provisions of the Industrial Disputes Act, 1947 (“ID Act”). These judgments underscore the doctrine of “substance over form,” mandating that employers equitably treat similarly placed workers and avoid arbitrary exclusions or discriminatory regularization practices. This article examines these judicial precedents and distils critical compliance checkpoints for both private and public-sector employers.
The Doctrine of “Substance Over Form”
- Continuous, Essential Service: The courts have established a strong position that contractual labels cannot override the factual continuity and indispensability of work. In Jaggo v. Union of India & Ors1, four long-serving ad-hoc appointees of the Central Water Commission -some with tenures of nearly two decades -were abruptly terminated despite performing duties identical to regular employees; the Supreme Court held this to be an arbitrary penalty and ordered reinstatement with regularization.
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Prolonged Temporary Engagement: When temporary engagements extend beyond a reasonable horizon without reaffirmation of their short-term nature, they metamorphose into de facto permanent roles. In Vinod Kumar & Ors. v. Union of India & Ors2., employees serving over 25 years on “temporary” terms—promoted by departmental committees and discharging substantive functions—were reclassified as regular, as indefinite temporary status violated equity and fairness principles. Similarly, in Ushaben Joshi v. Union of India & Others3, the Supreme Court made it clear that when contractual staff carry out the same duties as regular employees over an extended period, they must receive identical regularization benefits—any arbitrary exclusion is a denial of their fundamental right to fairness and equality.
Equal Treatment & Non-Discrimination
- Article 14 of the Constitution of India guarantees equality before the law, and Article 16 ensures equal opportunity in public employment. The Supreme Court in Jaggo v Union of India & Ors emphasized that denying regularization to some long-serving workers, while others with similar or lesser service were regularized, constituted discrimination and violative of both the aforementioned Articles.
- Selective Regularization Prohibited: The Mahanadi Coalfields Ltd.4 judgment reinforced that selectively regularizing 19 out of 32 identical coal-transport contractors was unjust. The Court ordered the remaining 13 be regularized, noting that all 32 performed “perennial and regular” tasks under the Industrial Disputes (Central) Rules, 1957, Rule 58.
Statutory Anchors for Regularization
- ID Act: Under Section 25F of the ID Act wrongful termination remedies include reinstatement and back wages, which apply equally to long-serving contractual staff whose services are akin to regular employees.
- Contract Labour (Regulation & Abolition) Act, 1970 (“CLRA Act”): The Contract Labour Act prohibits outsourcing core and perennial functions. Employers must distinguish between genuinely temporary jobs and permanent operational needs to avoid contravening this statute.
Practical Implications for Employers
- Justified classification: Employers should establish clear job classifications that reflect the actual duties performed, distinctly separating permanent positions from contingent or casual roles Any work that is continuous or integral to the business cannot be treated as contract labour and must be reclassified as a regular, permanent role.
- Need for Internal Audits: Organizations, especially in sectors prone to contract staffing, should audit long-term engagements, verifying whether roles have become de facto permanent and warrant regularization under these precedents.
- Document Temporary Terms: To sustain genuine temporary engagements, clearly define contract duration and periodically reaffirm the temporary nature in writing; failure to do so risks judicial reclassification.
- Equity in Regularization: Where regularization benefits are extended to some workers, employers must uniformly apply the same criteria to all similarly placed employees to avoid legal challenges under Articles 14 and 16.
- Update HR Policies: Revise HR manuals to incorporate regularization protocols, statutory references, and compliance checklists reflecting the principles laid down in the Mahanadi Coalfields, Jaggo, and Vinod Kumar rulings as follows:
- Regularization should only be considered where the appointment is against a sanctioned post, made through proper statutory recruitment processes, and is not the result of irregular or backdoor entry.
- Tenure alone cannot form the basis for claiming regular employment.
- HR policies should clearly differentiate between temporary, contractual, and permanent roles, and must emphasize that long service in an irregular appointment does not confer a right to regularization.
- HR Manuals should also include compliance checklists to verify the existence of sanctioned vacancies, adherence to recruitment norms, and documentation of employment terms.
- Regular audits must be mandated to detect de facto regularization risks.
This approach will help ensure that internal policies are not only legally compliant but also insulated from constitutional challenges under Articles 14 and 16.
6. Engaging the Workforce: Beyond legal compliance, fair regularization practices boost morale, reduce attrition, and strengthen employer brand. Transparent communication—demonstrating how contractual roles pivot to permanent careers—helps nurture loyalty and minimizes disputes.
Conclusion
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