1. Introduction
Indian labour laws classify the workforce into workers and employees. In any dispute, it is necessary to determine whether the individual qualifies as a worker or employee. This, however, has practical challenges, especially in the case of individuals engaged through contractors who sometimes claim to be employees. The lines between employment and third-party contractors are difficult to draw and often contested. Resolving and interpreting the existence of an employer-employee relationship is a matter of judicial assessment. Indian courts have prescribed certain tests to determine existence of such relationship and repeatedly emphasized the burden of proof lies on the person asserting the relationship, typically the employee. This settled position of law was reaffirmed in a recent Delhi High Court judgement in Prasadi Lal vs. The Presiding Officer, Labour Court, New Delhi & Anr.
This newsletter discusses the aforesaid judgement and analyses its impact on the burden of proof, highlighting impact for disputes and why documentation remains critical for both sides.
2. Prasadi Lal Case
Prasadi Lal judgement originated from a petition filed by an individual before the Delhi High Court alleging wrongful termination of employment.
2.1 Facts and Contentions: In 2015, the petitioner Prasadi Lal had filed a complaint before the labour office that the termination of his employment by a company was bad in law and he ought to be rehired or paid his dues. He claimed he was hired for manual labour in the position of “General Worker” in 1978. He was receiving a salary of around INR 9,000 per month but was not issued salary slips and not granted benefits such as leave. After he raised concerns in 2013, the company paid him only a portion of his salary in June that year, and subsequently terminated his services in April 2014. Following repeated failed requests to be rehired, he approached the labour office which referred the matter for adjudication to the labour court. To support his claims, the petitioner primarily relied on an appointment letter purportedly issued by the company in 1978. The company denied any employer-employee relationship and argued he was working as a helper on a freelance basis. The proprietor of the company denied having signed the alleged appointment letter. After considering the evidence on record, the labour court held that the petitioner failed to prove his employment with the company. Challenging this decision, the petitioner approached the High Court.
Amongst other issues, the court had to decide whether an employer-employee relationship existed and whether his services were terminated illegally in 2014.
2.2 Findings and Decision of the Court: Following the company’s denial of the employment claim, the onus fell on the petitioner to establish the employer-employee relationship. The company specifically disputed the appointment letter relied upon by the petitioner and denied the rubber stamp and signature on the letter belonged to it. Moreover, the letter was not on the company letterhead. Therefore, the labour court rejected this letter. Apart from this, the petitioner failed to produce any relevant evidence. He claimed his salary was paid in cash and his signatures were taken on a salary register. However, he neither issued a notice to the company nor filed an application before the labour court to compel the production of these records, which weakened his case. In contrast, the company submitted attendance records which did not reflect his name as an employee.
Consequently, the court upheld the labour court’s decision and ruled that the petitioner had failed to prove he was employed by the company.
3. Burden of Proof: An Analysis of the Judgement
The Prasadi Lal case is an important reiteration of the consistent stance that, before any claim for benefits or wrongful termination can be examined on merits, the threshold issue of existence of employment must be clearly established by the claimant employee. Once the petitioner alleged having been employed for decades which the company expressly denied, the court placed the burden of proof on him. Despite claiming he was hired at a formal designation of “General Worker,” the court upheld the view that mere oral assertions without corroboration are insufficient. Therefore, this judgement aligns with long-standing judicial precedent that the initial burden of proving employment is on the person claiming to be an employee, though the standard of proof varies from case to case depending on the specific facts. The employee must first make reasonable efforts to support their claim by themselves producing credible evidence such as the employment contract, making an appropriate application in court calling on the management to produce them, or providing sufficient circumstantial evidence.
Notably, in the period leading up to the Prasadi Lal judgment, the Delhi High Court adopted similar reasoning in a case with similar facts. In that case, the claimant argued that, since 1995, he had been working with the organization in a permanent role, but was shown in its records as a daily wager and not provided statutory benefits given to other permanent employees. When he raised a dispute, his services were terminated. The organization denied his employment, stating he worked briefly on cleaning duties, had no appointment letter, was free to work elsewhere, and was paid only for the days he worked. It was also contended the claimant was not employed against any permanent post and its entire staff comprised only one office manager and no other employee. Therefore, there was no occasion of granting any statutory benefits to anyone. He was removed from work because of indiscipline. After hearing the arguments, the court noted the onus was on the individual to prove employment. He failed to mention his position, produced no appointment letter, and made no effort to summon employment records. His only evidence was payment vouchers which merely showed daily payments for cleaning services. The court held this was insufficient to establish employment.
Evidently, an important determination in labour disputes is whether an employer-employee relationship exists between the claimant and company. Labour laws do not expressly spell out the criteria for identifying this relationship and, therefore, courts examine formal documentation such as the employment contract or appointment letter. An established principle of judicial interpretation is to examine the form and substance of a document, rather than relying solely on its title or nomenclature. Therefore, courts determine the relationship on the basis of the nature of work, work conditions, and written terms of engagement like designation, duration of work, and responsibilities and benefits. They evaluate a range of factors including whether (a) individual is required to work fixed hours, obtain employer’s permission for absence, meet prescribed qualifications and minimum output expectations; (b) individual is paid regular wages as opposed to commission, (c) employer exercises disciplinary oversight, authority over task allocation, and power to hire and fire; (d) employer maintains attendance or payroll records and provides the workspace, tools, equipment, etc.; and (e) individual is central to the business.
Such thorough consideration of factors is not novel and was seen in a case in 2015, demonstrating the varying degree of burden of proof depending on the circumstances. In the case, respondent Ved Sharma claimed he was appointed as a full-time employee in 2003 in the position of “Recovery Officer and Field Staff” by the petitioner Shree Ji Sarees Pvt Ltd. He was paid a salary and promised 1% commission on sales. In 2009, his employment was terminated without notice and he was not paid any compensation or legal dues. In response, the company argued the respondent was not their employee, but merely a freelance worker who would get paid a commission on sales whenever he would bring customers. The respondent produced an appointment letter allegedly issued by the company to prove his employment. The court noted this letter relied on by the respondent was on company letterhead, but the management denied signing the letter and the authenticity of its seal. Moreover, this was only a photocopy and not an original. The contents of the appointment letter also did not match his claims. For instance, he claimed he was entitled to paid leave, but the appointment letter did not mention it, casting reasonable doubt on the veracity of the letter. Additionally, to support his claim, the respondent produced certain records of payments which he allegedly received from customers on behalf of the company. The courts examined the contents of the records and noted they were merely diary entries of payments, but did not, in any way, establish the payments were given to him for onward payments to the company. The court imposed a high initial evidentiary burden on the respondent to substantiate his employment claim. Merely producing an appointment letter or payment records was insufficient; it was incumbent upon him to establish the authenticity and reliability of the contents of these documents to the court’s satisfaction. The court held that when a person claims to be an employee which the management denies, the duty primarily rests on the person so asserting to give positive evidence in his favour and discharge his initial burden. Only once they do so to the satisfaction of the court, the burden will shift on the management to give evidence to counter such claims. The respondent failed to discharge this burden and court could not blindly grant relief where the relief sought was not established by evidence on record.
In any event, the principle remains well-settled – the employee bears the burden of producing documentary evidence sufficient to enable the court to assess the relevant factors and determine the existence of an employment relationship. In Prasadi Lal, the petitioner failed to present credible evidence to counter the claim of being a freelancer. As a result, the court had no material before it to evaluate the nature, terms, or conditions of his engagement. Having failed to discharge the burden of proof, the petitioner’s claim was rightly rejected.
4. Conclusion
The Prasadi Lal judgment is not merely an affirmation about onus but also a cautionary note for employees. The courts are right to insist on substantive proof before granting protection since they can only take a decision based on documentary evidence before them. They have repeatedly adopted a fact-sensitive approach in determining employment status and scrutinise the substance of the arrangement, including employment terms like payment, incentive and role of the employee in the business. In doing so, the court walks a careful line between protecting genuine workers and shielding employers from unsupported claims. When proper documentation is not produced, the claim of employment becomes difficult to sustain, no matter how genuine it may be. Therefore, for employees, judicial precedents such as Prasadi Lal serve as a reminder that, along with the formal contract or appointment letter, other evidence should be preserved to substantiate any claim.