Canteen Workers Employment Status

Source: Supreme Court 

Why in News? 

The bench of Justices J.B. Pardiwala and Sandeep Mehta in the case of General Manager, U.P. Cooperative Bank Ltd. v. Achchey Lal & Anr. (2025) set aside the Labour Court award and High Court judgment that had directed reinstatement of canteen workers with back wages, holding that the workers were employees of the cooperative society running the canteen and not of the bank. 

What was the Background of General Manager, U.P. Cooperative Bank Ltd. v. Achchey Lal & Anr. (2025) Case? 

• The appellant U.P. Cooperative Bank Ltd. was registered under the Cooperative Societies Act, 1912 in 1959. 
• Employees of the Bank formed a separate society registered under the Act, 1912 named "U.P. Cooperative Bank Employees Society Limited" to provide canteen facilities to its members. 
• The Bank took a policy decision to permit the Society to run a canteen and worked out modalities regarding subsidies and infrastructure in consultation with the Society. 
• The four respondents (Achchey Lal, Satya Prakash Srivastava, Vijay Kumar, and Leela Dhar) were appointed by the Society as employees to run the canteen, though formal appointment orders were not on record. 
• In a meeting dated 14.09.1982, the Bank, Society, and Employees Union resolved that 75% of wages would be borne by the Bank and 25% by the Society. 
• On 28.06.1989, the Bank enhanced the subsidy by 30%. 
• In 1995, the Society requested enhanced subsidies from the Bank, which was declined. 
• The Society consequently decided to close the canteen and terminated the services of the four respondents with effect from 31.05.1995. 
• This led to an industrial dispute, and the State Government referred the matter to the Labour Court for adjudication. 
• The Labour Court, vide award dated 14.09.1999, held that the workers were employees of the Bank and their termination was illegal, directing reinstatement with back wages. 
• The Bank challenged the award before the High Court of Judicature at Allahabad, Lucknow Bench. 
• The High Court, vide judgment dated 08.10.2012, dismissed the Bank's writ petitions and affirmed the Labour Court's award. 
• The Bank appealed to the Supreme Court. 

What were the Court's Observations? 

Court's Analysis: 

• The Court emphasized that to establish employer-employee relationship, relevant factors include: (a) who appoints the workers; (b) who pays salaries/remuneration; (c) who has authority to dismiss; (d) who can take disciplinary action; (e) whether there is continuity of service; and (f) extent of complete control and supervision. 
• The Court noted the respondents were engaged by the Society, which had its own Committee of office bearers and approximately 1000 employees. 
• While the Bank provided infrastructure, finance, and subsidies (75% of expenses), there was nothing to indicate the Bank had a direct role in managing the canteen's affairs. 
• The Court distinguished the case from Indian Overseas Bank v. I.O.B. Staff Canteen Workers' Union (2000), noting that in that case workers were enlisted in the Bank's welfare fund scheme, eligible for medical check-ups by Bank doctors, and admitted to provident fund benefits. 
• The Court applied the test of "complete administrative control" as laid down in Balwant Rai Saluja v. Air India Ltd. (2014). 
• The Court relied on State Bank of India v. State Bank of India Canteen Employees' Union (2000) and Employers in relation to Management of Reserve Bank of India v. Workmen (1996). 
• The Court held that subsidies and infrastructure support alone, without direct control over appointment, management, and disciplinary matters, do not establish employer-employee relationship. 
• The Court noted that facts vary from case to case and conclusions must be based on evidence in each particular case. 

Court's Directions: 

• The Supreme Court allowed the appeals filed by the Bank. 
• The impugned judgments and orders passed by the High Court were set aside. 
• The award passed by the Labour Court was also set aside. 
• The Court held that the Labour Court and High Court committed an egregious error in concluding that the respondents were employees of the Bank. 

What are Statutory vs Non-Statutory Canteens? 

Statutory Canteens: 

• Under Section 46 of the Factories Act, 1948, it is statutorily obligatory for certain establishments to provide and maintain canteens. 
• When a canteen is run pursuant to statutory obligation, it becomes part of the establishment. 
• Workers in statutory canteens are generally considered employees of the management, subject to the test of control and supervision. 

Non-Statutory Canteens: 

• Non-statutory canteens are those not mandated by law but provided as a facility or welfare measure. 
• The obligation to provide a canteen must be distinguished from the obligation to provide facilities to run a canteen. 
• Canteens run pursuant to the latter obligation do not automatically become part of the establishment. 
• Employment status depends on various factors including control, supervision, appointment authority, and integration with the main establishment.