Delhi High Court Confirms Regularization Of Long-Serving Central Government Health Scheme Contract Workers, Calls Outsourcing A Sham

In a significant reaffirmation of substance-over-form in public employment, the Delhi High Court, in Director, Central Government Health Scheme (CGHS) & Ors. v. Ram Chander & Ors. LPA 3/2025, by its judgment dated 17 December 2025, has upheld the regularization of 267 Data Entry Operators (“DEOs”) engaged under the Central Government Health Scheme. The Court found that the prolonged engagement of these workers through placement and outsourcing agencies was merely a façade, masking a direct employer–employee relationship between the workers and CGHS.

The dispute arose from the long-standing engagement of the DEOs, who, despite being labelled as contractual workers, had rendered continuous service for over a decade. The Court noted that they were deployed against sanctioned posts of Lower Division Clerks (“LDCs”) and performed duties indistinguishable from those carried out by regular CGHS employees. Crucially, their work was carried out under the direct supervision, control and administrative authority of CGHS officials, leaving little room for doubt as to who exercised real control over their employment.

On a close examination of the record, the Court highlighted several decisive indicators of a direct employment relationship. CGHS authorities were found to have sanctioned leave, issued identity cards, passed transfer and termination orders, supervised day-to-day work and exercised disciplinary control over the workers. These factors, taken cumulatively, led the Division Bench to conclude that the so-called outsourcing agencies functioned only as intermediaries on paper, while CGHS was, in substance, the true employer.

The Court firmly rejected CGHS’s reliance on the Supreme Court’s ruling in Secretary, State of Karnataka v. Uma Devi, clarifying that the bar on regularization of irregular appointments laid down in that decision does not automatically apply to workmen governed by the Industrial Disputes Act, 1947. The Bench emphasized that the present case was not about backdoor public appointments, but about workers who had been systematically engaged for years to perform perennial and sanctioned work, thereby attracting the protective framework of labour law. It held that such prolonged engagement through contractors amounted to an unfair labour practice, offending the guarantee of equality under Article 14 of the Constitution.

While affirming the Labour Court’s conclusion on regularization, the High Court partially modified the relief. It directed that the workers be regularized upon completion of one year of service, with salary and allowances payable prospectively from 1 April 2026. The Court further directed that arrears arising from the Labour Court’s award dated 23 August 2019 be cleared by 30 June 2026, failing which the amount would carry interest at 6% per annum.

The judgment is a strong reminder that courts will closely scrutinize long-term contractual and outsourcing arrangements in public employment, particularly where they are used to deny workers parity, security and statutory protection. By reiterating that the real nature of employment must be determined by actual control and functions, not contractual labels, the Delhi High Court has reinforced a core principle of labour jurisprudence: exploitation cannot be legitimized by form, when the substance tells a very different story.