In a significant judgment in the case of General Manager, U.P. Cooperative Bank Ltd V. Achchey Lal & Anr., the Supreme Court of India clarified the principles for determining the existence of an employer–employee relationship under labour legislations such as the Industrial Disputes Act, 1947 and the Factories Act, 1948.

The Court outlined four key tests i.e., the (1) Control Test; (2) Organisation (Integration) Test; (3) Multifactor Test and (4) Refined Multifactor Test, being the key tests that have evolved through judicial precedents to guide courts in identifying the real nature of such relationships. 

The Court observed that the determination of an employer–employee relationship is a mixed question of fact and law, dependent on factors such as control, supervision, integration, and economic dependence.

1. Control Test: Being a traditional approach, it focuses on whether the employer controls not only what work is done but also how it is done. The Court, drawing from several leading precedents, observed that the essential distinction between a worker and an independent contractor rest on whether the work is carried out for one’s own benefit or for another’s, and further clarified that the mere involvement of external assistance does not, by itself, exclude the existence of an employment relationship. The Court observed that the control test is derived from common law application in vicarious liability claims.

2. Organisation (Integration) Test: Recognising the limits of the control test in modern workplaces, the Court referred to Silver Jubilee Tailoring House v. Chief Inspector of Shops and Establishments (1974), holding that the greater a worker’s integration into the employer’s business, the stronger the inference of employment, especially in professional or skilled roles where direct supervision may be minimal.

3. Multifactor Test: Moving beyond single-factor assessments, the Court endorsed a holistic approach considering indicators such as control, ownership of tools, profit and loss risk, mode of payment, power of appointment and dismissal, and integration into the business. In Workmen of Nilgiri Coop. Marketing Society Ltd. v. State of T.N. (2004) 5 SCC 514, it was reiterated that no single test is conclusive, and courts must assess the totality of circumstances.

4. Refined Multifactor Test: As reaffirmed in Sushilaben Indravadan Gandhi v. New India Assurance Co. Ltd. (2021) 7 SCC 151, modern jurisprudence emphasises a “sufficient degree of control” rather than absolute supervision. Factors such as economic dependence, nature of remuneration, and whether the work is performed for oneself or another must all be considered. The Court stressed that no rigid formula applies, and each case turns on its facts.

The case before the Hon’ble Supreme Court herein concerned four canteen workers of the U.P. Cooperative Bank, employed through a cooperative society of bank employees. The Labour Court and High Court had held that the bank was their employer and ordered reinstatement.

The Supreme Court, however, reversed these findings, holding that the bank merely provided infrastructure and subsidy and did not exercise managerial or supervisory control over the canteen’s operations. The canteen workers were appointed and paid by the society, not the bank.

Relying on Balwant Rai Saluja v. Air India Ltd. (2014), RBI v. Workmen (1996), and SBI Canteen Employees’ Union (2000), the Court ruled that financial assistance or provision of facilities does not establish employment unless there is control and supervision. Since there was no statutory or contractual obligation on the bank to run a canteen, the workers could not claim parity with regular employees.

The appeals were accordingly allowed, and the High Court’s judgment and Labour Court’s award were set aside.