Industrial Relations And Labour Laws
Partner - Risk Management
Harsh Kumar Mehta
Consultant In Labour Laws/hr
2. You have not clarified whether the said "outsourced" supplier is also covered under said Act separately or not ? Whether the said outsourced supplier is doing similar work for other units also ? Whether the said outsourced supplier is separately covered or registered under various other laws like Sales Tax, Excise and labour laws ? Whether the said outsourced supplier is manufacturing or finishing the goods, (which is being supplied to you) at his own premises and has proper registration under the Shop & Commercial Establishment Act of the concerned State ?. It is also of some importance whether the employer of said outsourced supplier is related to the owners of your unit.
3. There are various factors on the basis of which a unit (even if working at a distance from any unit) can be clubbed with the main unit. Geographical location/separation, in my opinion, has very less relevance in such cases. This depend upon facts of each and every case. Hope you may discuss the issue with concerned officials of the above department and act in accordance with law/decision of the authorities concerned.
13th July 2016 From India, Noida
That being the case, and you are not liable for statutory dues of your supplier. It's for them to decide whether they are covered and pay. Since you are only giving them work as a normal vendor and not as contractors the liability does not fall on you
13th July 2016 From India, Mumbai
In case the establishment which undertakes the work is doing work for various others, then the workers will not be covered. Here the most important thing to be noted is the control and supervision during the course of manufacturing. Ultimate supervision or an overall quality check of the product when the article has reached the principal employer's place will any be there but apart from the right to reject the product having non conformities, if there is present any supervision at the site of manufacturing (outworker's place) during the different processes of its manufacture, the same will be deemed as employer employee relationship. This will lead to cover the employees of outworker under ESI and EPF.
Therefore, it will be the kind of supervision exercised over the employees of the outworker that will decide the coverage of these workers into ESI and PF.
13th July 2016 From India, Kannur
In case EPF, As per EPF Act, any establishment, factory, manufacturing unit, etc. 20 or more employees have working or have been working should cover under EPF . Here i would like to tell you one thing i.e at the time of getting EPF code the employer should show 21 employees. In any establishment or Manufacturing unit the employees may left from their job , hence the employer get lesser employees rather than 21 employees. In this case the employer is to pay PF contribution every month for the employees retaining with him.
So employer should pay for any number(even 1 employee) of employees once he covered under EPF of india.At the time of first coverage only he need 21 employees.
13th July 2016 From India, Hyderabad
The definition of contract labour is as below :
A workman is deemed to be employed as "contract labour" in or in connection with the work of an establishment when he is hired in or in connection with such work by or through a contractor, with or without the knowledge of the principal employer. Worker has been defined under the Act as meaning any person employed in or in connection with the work of any establishment to do any skilled, semiskilled or un-skilled manual, supervisory, or clerical work for hire or reward, whether the terms of employment be express or implied. But the following are not included-
- one who is employed mainly in a managerial or administrative capacity; or
- one who being employed in a supervisory capacity draws wages exceeding five hundred rupees per mensem or
- one who is an out-worker, that is to say, a person to whom any articles and materials are given out by or on behalf of' the principal employer to be made up, cleaned, washed, altered, ornamented, finished, repaired, adapted or otherwise processed for sale for the purposes of the .trade or business of the principal employer and the process is to be carried out either in the home of the out-worker or in some other premises, not being premises under the control and management of the principal employer.
The last line says that it excludes an out worker. So if the worker of the contractor is doing the work at his factory, and never steps into the fire alarm factory, he is not a contract worker. If he is not a contract worker, the main Comoany is not liable for any of the statutory dues of the contractor / vendor. Them the supervision etc is not a factory at all
14th July 2016 From India, Mumbai
It is also not disputed that as per the present law, there should be at least 20 (not 21) employees to make an establishment covered under the EPF & Mis Prov. Act and an establishment once covered will continue to be covered even if the number of employees come down drastically and become zero. This is available in all the Labour Acts.
The question here is will there be any employer employee relationship between the employees of outworker and the principal employer and I have put my views on it. To make it more clear, I would say that the degree of supervision and control over the workmen of the contractor would be the deciding factor in all cases where the outsourced work is carried out outside the factory premises of the principal employer. By supervision means supervision during the course of manufacture. Supervision is absolute when the contractor undertakes work only for the Principal employer whereas if he carries out similar work for others, then establishing supervision becomes difficult. Then it will be the responsibility of the Social Security/ Enforcement Officer to find out whether there exists any control and supervision and if yes, naturally the workers of contractor will be covered by ESI/ PF.
Now, in the event of contractor not having separate registration, the workers of the contractor should be enrolled under the Principal employer's registration.
14th July 2016 From India, Kannur
2. I may further submit, when we see the past judgments of Hon'ble Supreme Court of India, we find that in the case-P.M.Patel & Sons -vs- Union of India (& EPFO) ( decided on 25/9/1985), the court had declared that even the home workers rolling beedis at home are employees within EPF & MPs Act, 1952. Similarly, in another case -L.N.Gadolia & Sons -vs- RPFC (EPFO), (decided on 26/9/2011), the Hon'ble court had decided in favour of clubbing of some units. In these judgments, the facts of the case may be different, but my point for submission is that every case is decided on facts and merits of each case. This is the reason, that I have opined in my remarks as above that the initiator of the thread,if desired proper, may get views of the appropriate authorities of ESI & EPFO in the matter.
3. With due regards to Sh. Madhu T.K.ji, I may submit that if any expert/senior has any information whether the above judgments (as mentioned by me in para 2) have been reversed by any subsequent judgments of Hon'ble Supreme Court, then the same may kindly be intimated/ indicated so that I may be able to refresh/update myself in right direction.
14th July 2016 From India, Noida
14th July 2016 From India, Kannur
To the best of my knowledge, neither PF nor ESIC act actually has any provision making the principal employer liable for statutory dues of contract worker, out worker or any factory doing job work. The provision making principal employer liable for statutory dues of contract employees comes only in the contract labour act.
In view of the above, you need to see whether they are contract workers under the act or not. If not, then there is no law requiring the outsourcing factory to ensure statutory compliance of the outsourced company.
Please let me know if you know of any provision other than CLRA that makes this mandatory.
15th July 2016 From India, Mumbai
2. Further both ESI Act, 1948 as well as EPF & MPs Act, 1952 are self - contained codes and do not depend in any manner on CLRA. In ESI Act the words "contractor" has not been used. In ESI Act, 1948 some definitions can be referred only from the Industrial Disputes Act, 1948 ( ref section 2(24).
3. So far as provisions of ESI Act, 1948 and EPF & MPs Act, 1952 are concerned, the provisions of CLRA are neither applicable, nor the same have any relevancy because the provisions of CLRA are applicable in respect of those functions/subjects as mentioned in its preamble. This is the matter of interpretation and I think, you can find various judgments of Hon'ble courts on interpretation of relevancy of provisions of other Acts.
15th July 2016 From India, Noida
2. I also feel that Advisors and Consultants, who are working in the field are having vast experience and can serve better to the poor workers/employees by providing social security through their connections and clients by correct interpretation of various labour laws and procedures enacted therein.
16th July 2016 From India, Noida
I have one more doubt with regards to the thread. In that case, on what basis / terminologies the bill should be obtained from the supplier. Because if the supplier has mentioned the bill as "Labour Charges", will the principal employer is liable for the statutory norms of PF & ESI.?
18th July 2016 From India, Chennai
For labour charges, you will have an issue with service tax and reverse charges.
That finally has an impact on your cost, in terms of available or disallowed can at credit and vat input credits. Please speak to your auditor as he can comment based on all parameters, as to which is more cost effective for you.
19th July 2016 From India, Mumbai