The Contract Labour Regulation and abolition Act (CLRA) defines the term contractor in section 2(c)- meaning" a person who undertakes to provide a given result for the establishment ........through contract labour, or who supplies contract labour for any work of the establishment and includes a sub contractor".

My question is, what happens if an Agency or a firm who is taking up contract work, has its own employees on rolls with proper service conditions. These employees are NOT engaged to work in a particular establishment. In short even after completion/termination of contractual work of establihment, the Agency or the Firm depoloys the employees else where. The firm is a running establishment and not dependent on work in a particular establishment.

Whether such a Firm or the Agency will be regarded as a Contractor under the CLRA Act? There is a High court decision in Basant kumar Mohanty vs State of Orisssa (cr no. 550/1987 dated 8th july 1991) where the Court has held that if the a workman has not been hired to work in a particular establishment, the firm or an agency will not be a contractor.

We had sought a legal opinion on this and were advised that so long as the workers are the whole time employees of the Agency/firm and can be shifted from one establishment to another, such an agency is not a contractor.There by meaning, you do not come under the provisions of CLRA Act.

I am not aware whether this matter has been decided by the Supreme Court. I shall be happy to receive a feed back/comments on this subject.


From India, Nagpur
Dear friend
I understand that you have hired an agency which does some specialised job in your establishment for short period. The job is not of permanent nature and the agency being specialised for that job, undertakes such job of various clients.
As per CLRA, there is no such distinction for contract of temporary or permanent nature or contracts for short or long period. If there is employment of outside manpower under a contract oor work order, it will attract provisions of CLRA/ PF/ ESIC ect. The basic condition under CLRA is that if the contractor employed 20 or more person, he should take a licence. Licence may be for one year or for shorter period as per requirement of the job. The cases decided by courts may have different facts and circumstances.
I, therefore suggest yoy to ask the agency to take a license under CLRA

I have one clarification based on manpower count employed more than that the specified 20 is applicable According to CLRA act against Contractor is Country wise 20 or State wise may it gets differed
Thanks & regards
Dhinesh paramasivam

From India, Madras
I agree with Cyril that if a Employer-contractor engages his own employees to execute work in another establishment then he would not be a contractor under CLRA.

CLRA defines contractor to mean someone who produces a given result through the engagement of Contract labour.If those engaged are the permanent employees of the contractor they are are not contract labour.

Permanent employees would be eligible for Bonus,Gratuity,retrenchment compensation as applicable to the contractor as an establishment covered under the definition of industry under the ID Act.Contract labour would not be eligible for any of these benefits.

For instance Bonus would be paid to the regular employees of the contractor based on the profits-allocable surplus- of the employer-contractor,gratuity would be paid based on the total-service rendered by the employees in the employment of the employer-contractor(not limited to only service rendered in one contract) etc.If at the end of the contract the employer should terminate the permanent employees they would be eligible for retrenchment compensation and other compliances under the ID Act would be required to be followed for retrenchment.This would not be the case if he had engaged contract labour-no bonus,no gratuity,no applicability of retrenchment provisions of ID Act.

In short in the former case he is an employer in the nature of an industry covered under ID Act.In the latter case he is a Contractor under CLRA in which case only the CLRA would apply.


From India, Ahmadabad

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