I think that the entire outsourcing arrangement mentioned in the post comes under the purview of the CLRA Act,1970. At the same time I am not sure on whose behalf the query has been raised - whether the contract employee or the contractor or the principal employer.Whoever it may be, the answer is the same in terms of the CLRA Act.
As you are aware, the system of contract labour is the most disguised form of indirect employment easily capable of leaving the labour in the lurch. In order to discourage unionisation of regular labour, to circumvent the provisions of labour laws and to have flexible hiring and firing in employment depending on market conditions, now a days, all employers across the industrial spectrum prefer and encourage contract labour system. Hence the CLRA Act,1970. Realizing the ineffective implementation of the provisions of the Act and its Rules, the higher judiciary have also started enlarging the vicarious liabilities of the principal employers under the Act from time to time to the extent that the engagement of contract labour in strict compliance with the CLRA Act,1970 is in no way more advantageous than employing regular workmen.
Coming to your question, though the vicarious liability thrust upon the PE is limited to the matters set out in sections 20 and 21(4) of the Act as per the letter of the law, other conditions of employment like bonus, gratuity, compensation for employment accidents, contribution to EPF etc., have also been earmarked as the employers' liabilities in the spirit of the law. The actual contract of employment subsists only in between the contractor and his contract labour. Gratuity, being a terminal benefit based on certain minimum length of blemishless service under the same employer, the contract employee can not stake his claim for gratuity against the PE for whom he worked through his contractor for a lesser period. At the same time, it is open to the contractor to include the notional value of such indirect employment benefits into his charges.It depends on the fact whether the contract is a genuine one or sham as well as the specific terms of the contract entered into between the PE and the contractor.
However, the contract labour can not make a claim for gratuity against the PE i.e XYZ Company nor to transfer their services with continuity to the other PE viz., ABC Company. Since their services still continue under the same contractor only, any claim for gratuity consequent on their termination of employment if any after rendering the minimum qualifying service, can be made only against the contractor.
From India, Salem
From India, Kannur