Umakanthan53
Labour Law & Hr Consultant
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Kadam Rupali
Assistant Manager - Hr And Admin
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We are Medical device manufacturers located in Navi Mumbai region. Manpower employed under contractor is 221 and on company roll 100.
If due to to lack of order we (the Principle Employer) ask to the contractor to provide only 150 workers, then is there any liability of Principle employer for said retrenchment?
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Strictly speaking, it depends upon the terms of the contract entered into between the principal employer and the contractor. Generally, if you reduce the no of contract labour to be engaged based on work availability, it is not necessary such surplus labour to be retrenched by the contractor. He can divert them to some other establishment under his contract.
Dear Sir,
Thank You for your guidance.Our industry is only 2 and half years old manufacturing industry.We didn't paid any statutory bonus to contract worker and staff as it is not applicable to us, though contractor asked us about bonus.After bonus and Gratuity act applicability,is bonus and gratuity is contractors liability and if he don't pays then it is principle employers liability?
Kindly guide.
Dear Rupali,

Your present question needs a deeper introspection into the very purpose of the passing of the Contract Labour ( Regulation and Abolition ) Act,1970. Resorting to the evil practice of engaging hired labour indirectly under the pretext of contract labour system so as not only to make hiring and firing flexible but also to deprive them of the statutory benefits available to regular workmen is found to be on the increase more now-a-days than it was earlier when the CLRA Act was brought into force. Therfore, when certain questions of law like your present one arose, the Courts answered them primarily keeping the purpose of this special legislation in mind rather than adopting a strictly legalistic approach. The judicial interpretations thus rendered so far were based on the premise that the primary object of the CLRA Act is to first abolish the system of CL wherever possible and if not to discourage the practice by imposing certain regulations. Probably, owing to the nascent origin, your industry is in the period of " bonus holiday" which is the reason cited by you, I suppose, for non-payment of the statutory bonus. Legally, it may be correct if you have not derived any profits in any year so far. But, in the case of the contractors establishment, the element of profit is certainly there in the contract for service he entered into with you and as such he has to pay statutory bonus to his workmen and this additional monetary burden would be a part of his charges. Even if such a provision is not made either directly or indirectly in the charges, my personal view is, the principle of vicarious liability would make you responsible for payment of bonus to contract labour, if the contractor fails to pay.
Dear Rupali,

Umakanth sir has given you a wide and legal opinion on the matter. I would like to know whether you have obtained RC under CL (R&A) Act 1970, which is mandatory, if 20 or more contractual menpower is being deployed on contractual (Third Party) basis. Even the contractor is also bound to obtain Labour Licence. If you have not obtained, it is an offence under the Act.

Though the payment of Statutory benefits is a mandatory obligation, exceptional cases it can be avoided. If you want to reduce the menpower, you have to give one month notice to the contractor. As said by Umakanth sir, may be the contractor engage them with some other work, but if he is unable to do so, he has to give one month notice to the labour.

The major part for payment of statutory is depend upon the Agreement terms and Contract Price between you and the contractor. If the contract price is inclusive of Statutory benefits, the contractor must pay same to the labour.

However, before coming to any decision, take valued advice from Legal Dept,, coz this can lead to some labour dispute/s. Being PE last responsibility is yours.
All said and done, though the primary statutory liabilities cast on the Contractor but the ultimate liability lies with the Principal Employer. Therefore in case of any dispute resulting in benefits payable to the CL, the PE has to discharge the statutory liabilities under various labour laws in case the Contractor fails to comply with. In a country like India where escapists PE are in the majority and the Tribunals & courts' decisions on labour related disputes always delayed the CL have no ready made/quickfix solutions to their problems.
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