On Contract Labour

Chapter IV of the Constitution of India contains the Directive Principles of State Policy.  These principles though not enforceable, judicially, like the fundamental rights are treated as fundamental in the governance of  the country.  The State has a duty to apply these principles in making laws.

The Contract Labour (Regulation and Abolition) Act, 1970 was passed as a measure to achieve some of the objectives contained in the directive principles.  Human beings are exploited by unscrupulous persons practising the labour contract system by which the benefits of the sweat and work of a contract labour are taken away by the contractor and the employer.  The preamble to the Act states the purpose of the Act viz.(i) to regulate contract labour where necessary and (ii) to abolish contract labour in certain circumstances.  For this purpose, the Act requires the registration of the principal employer and the licensing of the contractor and the employment of contract labour through licensed contractors.  If the employment of  contract labour is done through any other intermediary, they would be deemed to have been employed by the principal employer himself.  However, the Act nowhere provides that such labour employed through a contractor would become employees of the principal employer himself.  It legalises the employment of contract labour by any establishment through a contractor provided the establishment obtains the requisite registration as principal employer and provided also that the intermediary contractor obtains a licence.  In the absence of such a registration or licence, the workman would ‘ipso facto' attain the status of the workman of the establishment itself, but the Act nowhere specifically provides that such employees employed through a contractor would become employees of the principal employer. 

Temporary labour is employable in industry for work of a purely temporary nature or as a temporary substitute of a permanent worker who is absent.  Contract labour is usable only in activities which do not form the normal part of an industry's main functions.  Both these provisions of law are based on the need to prevent adventurous employers who tend to resort to these types of employment to deny permanency and other fringe benefits of permanency to temporary and contract labour.  Normally, resort to such labour is done in the areas of house-keeping and sanitation, pollution control, security services, canteen etc. and the contractor gets these assignments done on an ongoing basis, but supervised by the management.  Similar is the case when time-bound, penalty-oriented jobs are being done by an employer or when there is ‘unstructured absenteeism' deliberately resorted to by permanent workers.  In all these cases, it is seen that the quantum of work done by contract labour is invariably more than that done by similarly employed permanent workmen.

If use of contract labour is banned and strictly enforced, almost 80% of  the industries, especially public sector industries, will have to close down.  This is not because managements are nasty or unfair, but the Act does not reckon with industrial compulsions.  Our laws relating to labour are based on social justice, not industrial justice and equity.  Because of this, they cannot be enforced and are rarely enforced.  The fact of the matter is that, in the context of to-day's high industrial wage costs, contract labour to some extent is unavoidable and is a reality to be reckoned with.  All that an industry should attempt to do is to conform to the laws as much as possible, in order to avoid embarrassing and expensive penal action by the enforcing authority.

We shall now see the salient provisions of the Act, and I will only try to present them as statutory obligations and guidelines to be followed by you as Principal Employer:

REGISTRATION :

If  you are a Principal Employer of an establishment engaging 20 or more contract labour, get your establishment registered under the Act for which apply in the prescribed form to the Registering Officer, pay the fees prescribed depending on the number of contract labour and furnish any additional information required by the Registration Officer. Intimate any change that may occur and get the Registration Certificate amended accordingly.

LICENCE :

a)  Get your contractor(s) obtain a licence from the Licensing Officer

b)  Give the requisite certificate in form V to your  contractor for obtaining licence.

c)  Ensure that he obtains licence and renews it every year as required.

ENSURE THAT THE CONTRACTOR:

a)  Pays minimum wages fixed by the government if, any, or

b)  Pays wages as may be fixed by the Commissioner of Labour.

c)  In their absence pays fair wages to contract labour.

d)  Complies with all the legal requirements of the Act .

e)  Maintains various registers and records, displays notices, abstracts of the Acts, Rules etc.

f)   Issues employment card to his workmen, etc.

SUPERVISE:

Appoint a Representative to supervise the payment of wages by the Contractor(s) to the Contract Labour. In case of failure to pay wages by the Contractor to his men, the Principal employer shall arrange to pay the legal dues of the contract labour and recover the money from the sum payable to  the  contractor

FACILITIES

Ensure that Contractor provides the following services and facilities:

1.  Canteen (if employing 100 or more workmen in one place) and if the work is likely to last for 6 months or more.

2.   Rest rooms where the workmen are required to halt at night and the work is likely to last for 3 months or more.

3.   Requisite number of latrines and urinals - separate for men and women.

4.   Drinking water.

5.   Washing facilities.

6.   First Aid box

FURTHER

a)  If  the principal employer can allow the contract labour to use above mentioned facilities which he has provided to his direct men, it is not necessary for the contractor to provide them separately to the contract labour

b)  If the contractor fails to provide the above facilities, the Principal Employer has to provide these facilities  to  the  contract labour and recover costs for the same from the contractor.

From the industrial relations point of view it is  desirable to extend the same facilities to contract labour which the principal employer is providing to his direct men like canteen, rest room, latrines/urinals, drinking water, washing and first aid facilities and you may make adjustment in the rates/money payable to the contractor for providing these services directly to the contract labour.

REGISTER

Maintain  register of contractors in Form VII and produce the same when required by the Inspector.

AVOID DEFAULT

In short, ensure that the contractor(s) comply with all the formalities and requirements of law and there is no default on his part.

LIABILITY

If you fail to register your establishment or the contractor does not obtain a licence, the contract labour shall be deemed to be your direct workmen and you will be fully liable for the wages, services and facilities of the contract labour etc.  You are really buying trouble for the Company and for yourself.

INTIMATION

As soon as  the  work of the contractor with you is over, ask him to send an intimation to the Inspector regarding the completion of his job.  For caution, you may also send the intimation, in addition.

PRECAUTIONS

While entrusting  work on contract basis to a contractor, explicitly stipulate that he and his sub-contractors shall fully comply with the following enactments:-

a)  Contract Labour Regulation and Abolition Act, 1970

b)  Minimum Wages Act, if applicable

c)  Payment of Wages Act, if applicable

d)  ESI Act, 1948, if applicable

e)  EPF Act, 1952, if applicable

f)  Any other law, if applicable

2.  The contract should specify that the Contractor shall be solely and fully responsible for all the contract  labour employed by him or by his sub-contractors.

3.  In case of any failure to comply with a statutory liability by the Contractor, the same shall be done by the Principal Employer and the expenses so incurred by the Principal employer shall be deducted from the sums payable to the contractor and if no money is due, the same shall be recoverable from the contractor otherwise.

4.  To avoid any industrial relations problems that may arise out of employment of contract labour vis-a-vis the direct workmen of the Principal Employer or their Union(s), it is better to come to a clear understanding (by a written agreement wherever felt necessary and possible) with direct workmen and/or their Union(s) regarding areas/function/processes which will be carried on with the help of contract labour and stipulate that they shall not dabble with areas of contract labour.

5.  In case of any confrontation with the direct workmen on any issue, the first attack will be on contract labour employment and the Principal employer should be ready with a contingency plan to deal with the situation.

6. Wherever the contract labour organises and raises any demand for not only improvement of their service/conditions but also their absorption by the Principal Employer, advise the Contractor to improve the service/working conditions of his contract labour and enhance the contract rates to enable the contractor to bear the additional burden to the extent possible.

7.  In case your own Union raises a demand for abolition of contract labour and employment of direct workmen, resist it to the last, lobby with the authorities concerned, Advisory  Board, particularly the representatives of the employers on the Board with a view to persuading them not to recommend abolition of contract labour in the concerned process/work etc. which are carried on, on a regular basis.

8. With a view to avoid the contingency mentioned in clause 7 above, ensure that the Contractor not only complies with all the labour laws applicable to him both in letter and spirit, but also offers slightly better terms and conditions to his labour and keeps a constant watch on and touch with his men.

9. Wherever the contract labour is not covered by ESI, advise the contractor to fully insure them under Workmen's Compensations Acts, cover himself against all claims and extend the accidental insurance benefit to the injured workmen.

10. Be careful in entrusting work on contract basis to well established and reputed  contractors and not to novices even though it may mean paying slightly higher rates to the contractors.

11. Finally, you keep your men, the contractor(s) and the contract labour happy by being fair, considerate and yet firm and that will pay the principal Employer rich dividends in the long run.