Dear HR Folks,

I want to share an interesting case study, I will need solutions from your end.

1. A contractor has defaulted to make statutory payment to its workers & authorities from past 5 months, on the grounds that it is bankrupt & all its account is freezed.He is not raising bills upon principal employer too.

2. Workers has filed a case, to absorb them permanently in the principal employer establishment.

3. As per judgement, it is mentioned that the existing labour has to be employed with the new contractor in future.

4. Also it is mentioned, if the existing contractor fails to continue further it has to arrange alternate contractor who could continue the existing work for the principal employer establishment

5. The old contractor is not willing to raise bill & make payment, instead he is saying that the alternate contractor will make the 5 months due payment & continue business as per agreement between them. (I want to know whether this is possible).

6. What is the responsibility & role of principal employer in this case.

Please suggest how can a principal employer ensure statutory payments to be done to workers & authorities.

From India, Thana
1. The matter depends upon the contents and the order of the hon'ble court as per judgment in the case as mentioned by you. It is also important whether the employer has challenged the order of the hon'ble court in appellate court/authority. It is also doubtful whether it will be a valid direction by the hon'ble court to principal employer to engage a new contractor and engage all such old contractor employees by such new contractor.
2. Both principal employer as well as contractor (who had engaged the workers) are liable for payment of wages and dues of such contractor employees by virtue of provisions contained under section 21 of the Contract Labour (Regulation and Abolition) Act, 1970. Kindly see the provisions of said Act as relevant to the facts of this case.

From India, Noida
Dear Friend,

1: A contractor shall be responsible for payment of wages to each worker employed by him as contract labour.

2: Every principal employer has to nominate a representative duly authorized by him to be present at the time of disbursement of wages by the contractor and it is his duty of such representative to certify the amounts paid as wages.

3: In case the contractor fails to make payment of wages within the prescribed period then the principal employer shall be liable to make

payment of wages in full or the unpaid balance due, to the contract labour employed by the contractor and recover the amount so paid from the contractor either by deduction from any amount payable to the contractor under any contract or as a debt payable by the contractor.

4:- To keep check on above & record for statutory purpose register has to be maintained (Muster roll, Wage, Advance, Fine, Damages, Accident ).

5:- As in your case, contractor is not raising the bill; At first principal employer has to pay all dues (Wages). Later, Principal employer can pull contractor to labour court. (May be court can award seizing his immovable/movable properties & shall make payment to principal employer selling the same).

From India, Pune
Thank you Sir for your valuable inputs.
The contractor is not raising bill upon principal employer for past 5 months and as per the judgement passed he has arranged alternate contractor who will raise bill upon principal employer and make statutory payments and continue the business.
Is there any provision for making payment by alternate contractor.
If alternate contractor cannot make payment, how can principal employer make payment as he wont be able to recover it from contractor because he is unwilling to continue further.
Please suggest.

From India, Thana
The judgement passed is the contractor if is not abe to continue service, will arrange for alternate contractor and the same workers will be employed with the contractor.
It is in the light of workers filed case for getting permanent with principal employer establishment.

From India, Thana
1.So far as I understand, there are no provisions in law vide which a non-contracting party will bear the burden of wages of employees for past periods. Even if new contractor is engaged as directed by the Hon'ble Court, his liabilities will start from the date he undertakes such work.
2. However, in order to avoid levy of any damages or penal action under relevant laws for non-payment of such wages to contractor employees, in my opinion, the principal employer should discharge the liabilities of payment of wages to contractor employees immediately by virtue of provisions of Section 21 of said Act.

From India, Noida
Dear Karan.Hunurkar
Which court has passed this judgement? Can you please share the information?
Please follow the advise of Harsh Kumar ji by paying the wages to contractor's labour and discharge your liability by virtue of provisions of Section 21 of POW Act.
Please ask your contractor to raise the pending bills for past 5 months. You can recover the amount paid to his labour. Needless to say, you need to have all the relevant records / documents.

From India, Mumbai
Dear Korgaonkarji,
1. Thanks for appreciating my views as mentioned in remarks as above.
2. I may, however, point out that Section 21 relates to the Contract Labour (Regulation and Abolition) Act, 1970 and not Payment of Wages Act as mentioned by you in your comments as above.
3. However, similar provisions exist in Section 3 of the Payment of Wages Act, 1936. The recovery procedure by way of attachment of properties and penalties have been provided under sections 17A and 20 of the said Act.

From India, Noida
There are 2 parts of the problem.

One is that the contractor has not paid wages or statutory dues for 5 months.

We're you and your team sleeping ? Why did you not take immediate action ? Surely the workers would have complained. (Apart from the fact that your representatives should have present during payment of wages and should have known the problem)

You are very lucky that the court only asked to appoint a new contractor and didn't make the employes permanent.

So first, you need to pay the wages of the previous period. You need to do that directly. You can do that and recover (or try to recover) the same from the contractor.

Similarly, you need to pay the statutory dues. Both PF and Esic websites have separate page for allowing principal employer to deposit PF / Esic for contract workers.

Waiting for a new contractor to do this for previous period before he started would be both wrong and risky.

The second part of the problem is in monitoring to ensure that no such non complaince takes place again in future. There are details discussed in this forum and also told by one member earlier in this thread.

I see you are not willing to,share the details of the judgement on the forum for obvious reasons. However, this interest me and I would appreciate of you can message me your contact details so I can speak to you and understand it better.

From India, Mumbai
I fully agree and endorse the views and advise posted by both Shri. Harsh Kumar Mehtaji and Saswat Banarji. They have very correctly discussed and analysed the situation and have suggested what is to be done in the case.

What is alarming now-a-days is that, there is a growing tendency of Principle Employer to shrink his responsibility under the garb of contract employees. You want good quality, quantity and timely work from contract workers, but when the question of providing certain amenities on par with regular company workers is raised, big show is made by the officers of Principle Employer. Are we not going to learn anything from the Maruti-Manesar Plant incidence? A statutory duty is cast on Principle Employer to pay the wages when he engages a Contractor who fails to pay wages and dues.

Apart from the Legal points of the case, we have to design our policy through HR aspect. There must be a time bound rehabilitation of contract workers, which not only reduces the disparity in benefits, but also helps to reduce the grievances.

Adv. K. H. Kulkarni

From India, Kolhapur

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