Contract

Labour

(Regulation

& Abolition)

Act, 1970

Applicability

Establishment

20 or more contract labours

On any day of the preceding 12 months

Contractor

ExceptionAct not applicable to any establishment in which work of intermittent or casual nature is performed

Important Definitions

Contract Labour (S. 2(1)(b))

• He must be a workman

• He is hired by or through a contractor

• He is hired in or in connection with the work of an establishment

• Knowledge of his engagement to the Principal Employer is immaterial

Workman

• Defined under section 2(1)(i) of the Act• Does not include:

• Manager or Supervisor (earning more than Rs.500)• Out worker

Out worker• Person to whom articles given for processing • Processing carried out in out-worker’s home or any

premises outside PE’s control

Important Definitions..

Contractor S. 2(1)(c)

• A person who undertakes to produce a given result for the establishment through contract labour

• A person who supplies contract labour for any work of the establishment

• Sub-contractor

• Mere supplier of goods or articles of manufacture to establishment is NOT a contractor

Principle Employer S. 2(1)(g)

• Office or Dept of Govt HOD

• Factory Owner/Occupier/Manager

• Mine Owner/Agent/Manager

• Other cases Person responsible for supervision and control of establishment

Important Definitions…

Appropriate Government S. 2(1)(c)

• Reference to the Industrial Disputes Act, 1947

• Always decided with respect to the establishment and not the contractor

Why is the determination of AG important?

• Registration and Registering Officer

• License and Licensing Officer

• Abolition of CL u/s 10

Registration

• Application of registration to be made within the prescribed time from the date the Act becomes applicable

• PE cannot employ contract labour if registration not done

Forms

• FORM I Application of Registration

• FORM II Certificate of Registration

• Misrepresentation

• Suppression of facts

• Other reason rendering the registration useless/ineffective

Revocation of Registration

License

• Application of license to be made for each work that the contractor undertakes

• License may include conditions like hours of work, fixation of wages, etc

• Application to be made to Licensing Officer appointed by AG

Forms

• FORM IV Application of License

• FORM V Certificate by PE

• FORM VI License

• Misrepresentation

• Suppression of facts

• Failure to comply with the conditions of license

Revocation of License

Welfare amenities

Canteen

• Work requiring CL likely to continue for prescribed period (6 months)

• 100 or more CL ordinarily employed by contractor

Rest-Rooms

• Work requiring CL likely to continue for prescribed period (3 months)

• CL likely to halt at night in connection with the work of establishment

Other facilities

• Drinking water

• Latrines, Urinals & Washing facilities

• First-aid box equipped with prescribed contents

Wages

Wage

• As defined in Payment of Wages Act, 1936

• For Scheduled employments, wage cannot be less than Minimum Wage

• For same or similar kind of employment, wage should be the same as regular employees

• Wage period cannot exceed one month

• If CL<1000 in an establishment, wage to be paid before expiry of 7 days from last day of wage period

• If CL>= 1000, then 10 days

• Contractor to ensure disbursement of wages in the presence of the Authorised Representative of the PE

Liability of PE

• Amenities, if not provided by the contractor within the prescribed time, should be provided by PE

• Wages, if not paid by the contractor within prescribed time, or short payment is made, the full or unpaid balance should be paid by PE

• When PE provides amenities, and/or pays wages of CL, he can recoverthe amount from the contractor:

• By deduction from amount payable to contractor, or

• As a debt by the contractor

• These provisions ensure that the facilities and wages of the CL are secured

Prohibition (Section 10)

Appropriate Government

• Only AG can prohibit

• Courts cannot prohibit CL (SAIL II case)

Consultation with Board

• Consultation with appropriate Board mandatory

• AG not bound to accept the advice of the Board

Consideration of relevant

factors

• SAIL I case (Non-application of mind of AG)

• AG shall have regard to:

• Conditions of work

• Benefits provided

• Other relevant factors (s.10 (2)(a-d)

Notification • AG has to notify in the Official Gazette

Important Judgments

Dena Nath v. National Fertilisers Ltd

• If CL employed without registration/license, penal provisions will be attracted

• The CL so employed will not automatically become regular employees of PE

Air India Case

• Prohibition of CL automatic absorption of CL as regular employees of PE

SAIL I case

• Prohibition of CL will not lead to automatic absorption of CL (overruled AI)

• Consultation with Board and consideration of S.10(2) before prohibition

SAIL II case

• Labour Court or Writ Court cannot prohibit employment of CL

Risk Factors

Same or Similar Kind of work

• If CL perform same or similar kind of work as the regular employees of PE:

• Wage rates

• Holidays

• Hours of work

• Other conditions of service to be same as regular employees

Sham and Camouflage

• If proved that contract between contractor and PE a sham/camouflage, then CL will be declared employees of PE

• Gujarat State Electricity Board gives the following tests:

• Who pays the salary

• Who has the power to remove/dismiss or initiate disciplinary action

• Who has direction and control over the employee

Questions

from the Past

Canteen

In a particular factory of a leading FMCG major Hamesha Ulta

Limited, there are 220 permanent workmen and 45 contract

labour.

• Is the management legally bound to provide a canteen facility?

• If yes, should the management be reimbursed by the contractor

for providing canteen facility to the CL?

• Will your answer change if the number of CL becomes 150?

License

A leading FMCG major Piyo & Giyo wants to use CL for loading

and unloading raw material/finished goods inventory.

The Labour Commissioner refused to give license on the ground

that loading and unloading is a core activity (his contention is that

if loading and unloading is stopped the plant will also stop and

hence it is a core activity).

Mr Ninel the HR manager knows only employee engagement and

has no idea of labour laws. Give him some gyaan and help him

keep his job.

Prohibition of employment

In a particular motorcycles factory of Zero Corp, CL are deployed

for the daily cleaning and maintenance of machines. The Central

Government sent a notice to the factory manager declaring that

employment of CL in daily cleaning and maintenance of machines

was being prohibited from next week for that particular factory.

What options does the HR manager have now?