Karnataka High Court, in Assistant Director, ESI Corporation vs. M/s. Sansera Engineering P Ltd (MFA No. 3687 of 2016), held that labourers engaged through contractors for construction, maintenance, and repair works within factory premises fall within the definition of “employee” under Section 2(9) of the Employees’ State Insurance Act, 1948 ( “ESI Act”). The Court observed that the definition of “employee” is expansive, covering not only those directly employed by the principal employer but also those engaged through contractors, provided their work is connected with the functioning of the factory. The Court noted that activities such as the construction of sheds, installation of units, and renovation or repair of structures are integral to the factory’s efficient functioning and cannot be treated as detached or non-core activities. Accordingly, the Court directed the principal employer to pay the statutory contributions for such contract labourers. Emphasising the welfare nature of the legislation, the Court held that the provisions of the ESI Act must be construed liberally to advance its beneficent purpose.
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