"No employer black hole"
Plight of outsourced workers
There has been a recent tendency of corporations to outsource the security, cleaning, product packaging, labelling, product delivery and transport departments of their organisation. Such outsourcing strategies are becoming increasingly prevalent and are used by corporations to have certain tasks carried out by external people without going through the trouble of hiring them permanently. The outsourced workers cannot claim the same benefits as permanent workers of the corporation, despite providing the same service as permanent workers. While this is considered a cost-reduction strategy for corporations, it hampers workers' rights. This article looks at this situation through a critical lens by focusing on the changing landscape of the concept of "employer" when de facto employers do not want to bear the liabilities attached to legal employers.
"No employer black hole"
The unitary character of "employer" as a concept has received a major blow with the rising popularity of outsourcing workers. The outsourcing of workers has decentralised the concept of employment. "Employers" used to be a single and separate legal entity that hired, fired, instructed and paid both permanent and temporary workers. Therefore, these workers received all kinds of benefits from a single employer. But to avoid such worker benefit costs, employers are increasingly using outsourcing strategies to reduce business costs and generate profit.
It has been pointed out(1) that in cases of outsourcing, the concept of "employer" needs to be revisited and perhaps revised because outsourcing raises a significant problem in ensuring workers' rights. The workers fall in a "no employer black hole" (NEBH). In an outsourcing arrangement, a business entity hires another business entity to supply workers. The worker supplying business entity (WSBE) may or may not have a written contract with the worker. If they do have a contract, it is most likely not a contract of employment but a contract of service. Under such a contract of service, the WSBE will pay wages to the worker in exchange for a service.
These employees also do not have any employment contract with the instructing entity that exercises control and supervision of them – the service enjoying entity (SEE). It seems that these outsourced workers are employed neither by the WSBE nor by the SEE. While the avoidance of employment benefits might be of pertinent interest to the employers, such practices make a paradigm shift in the unitary concept of "employer" under the Labour Act 2006.
Outsourced workers have no say in either their contract of service with the WSBE or the contract between the WSBE and the SEE. Thus, the rights of these workers almost always remain unrealised. Recently, in Fazlul Haque Sardar v Grameen Phone (2020), it was argued that Grameen Phone should treat outsourced workers as permanent workers and provide them with the resulting rights. Smart Services Limited (SSL)/Jamsons International (Jamsons) were the WSBE in this case and Grameen Phone was the SEE.
Grameen Phone argued that there was no contractual relationship between Grameen Phone and the outsourced drivers. Grameen Phone only had a contract with SSL/Jamsons, which provided drivers on an outsourcing basis to drive Grameen Phone cars. Grameen Phone paid SSL/Jamsons for supplying such service. SSL/Jamsons paid the salaries and other benefits to the drivers out of the payment made by Grameen Phone. The drivers came to court to ask to be treated as permanent workers of Grameen Phone under section 4(l)(e) of the Labour Act 2006 and proved that they had been driving Grameen Phone's motor vehicles for a continuous period of two to 10 years on the date that the case was filed with the lower court, which was admitted by all the parties. However, Grameen Phone argued that the drivers were not workers of Grameen Phone, rather that they were workers of SSL/Jamsons, the WSBE, in accordance with the terms of the contract Grameen Phone had with SSL/Jamsons.
Despite being a relatively new concept in Bangladesh, "outsourcing" was incorporated in the Labour Act by way of an amendment in 2013. The Grameen Phone judgment by Justice Imman Ali acknowledged that the 2013 amendment makes it clear through its newly introduced section 3A(3) that workers supplied by contracting agencies will be treated as workers of the contractor concerned. On this ground, the Appellate Division of the Supreme Court ruled in favour of Grameen Phone, stating that those drivers were not workers employed by the SEE, Grameen Phone.
SSL/Jamsons received remuneration from Grameen Phone, and they recruited the drivers on a temporary basis as drivers for Grameen Phone and as employees of SSL/Jamsons. The Court observed that Grameen Phone did not appoint the drivers on a temporary or permanent basis and did not issue any letters of appointment to them or give them any assurance that they would be absorbed permanently into the employment of Grameen Phone. Thus, although Grameen Phone was the SEE in the arrangement, it did not, legally, need to bear the liabilities of providing rights to the outsourced workers. In making its judgment, the Court relied on the previously decided case Karnaphuli Paper Mills Workers Union v Karnaphuli Paper Mills Ltd.(2)
The drivers were legally employed by SSL/Jamsons on an outsourcing basis. Therefore, despite SSL/Jamsons' declaration of an inability to pay compensation, under the Labour Act 2006, the outsourced workers were entitled to the benefits from their true employer, SSL/Jamsons. Notably, in this particular case, Grameen Phone offered the outsourced drivers a reasonable and rational lump sum to settle the case. Nevertheless, in such a situation, the outsourcing workers will again need to bring an action against their employer, SSL/Jamsons, resulting in repeated litigation costs for them.
In the NEBH, it is the outsourced workers who suffer the most. The outsourced workers must be given a say in the subcontract between the WSBE and the SEE. Meanwhile, in outsourcing arrangements, the Ministry of Labour should intervene by issuing a minimum benefits template contract for all three parties to sign, stating the joint but separate liability of the legal and de facto employers. This has already been done in China, Indonesia and Turkey. In addition, the names of the outsourced workers should be registered in a government directory. Such directory can form the basis of the arrangement of a welfare trust fund that the government would establish for different communities as a stopgap measure.
In the Grameen Phone case, although the Court was ready to impose an obligation on SSL/Jamsons, they did not need to bear any additional responsibilities because Grameen Phone cut a reasonable and rational deal with the outsourced workers. The legal team of the SEE needs to learn from this and regularly audit the standing of the WSBE with their workers to ensure maximum protection from outsourced contracts. The SEE can also put a clause in its contract with the WSBE that empowers it to retain a reasonable amount of payment if the full performance of labour obligations is not accomplished.
While the plight of outsourced workers cannot be denied, workers going after the organisation with the deepest pocket is also a demonstration of bad faith. The workers should have clear idea about their employment conditions at the time of their appointment. Under the Labour Act, one possible solution is to require the employers to approve their employee handbook. The workers may still be concerned that a retrospective judicial remedy is not an effective remedy per se, but a summary procedure as prescribed in the Labour Act (section 215) may be adequate relief for them. The government only gains legitimacy to ask for increased due diligence requirements in the supply chain when they are performing their existing responsibilities perfectly.
For further information on this topic please contact Azhar U Bhuiyan at A.S & Associates by telephone (+880 182 222 2272) or email ([email protected]). The A.S & Associates website can be accessed at www.as-associates.net.
(1) Jeremias Prassl, The Concept of the Employer, Oxford Monographs on Labour Law, 15 November 2016.