Our company is facing severe financial distress and is unable to pay vendors through whom we engage contract workmen and in turn vendors are not paying their labourers. This has let some of the labourers approaching labour commissioner's office who has called us for a meeting. The letter from labour office is addressed to head of the organization.
1) Whether head of the organization can depute someone else on his/her behaf to attend the meeting
2) Since we are distress and don't have money to pending bills of the vendors what could be the implications
3) What orders or instructions are expected from labour commissioner

From India, Hubli
Asso.prof.(commerce & Management)
Hr Manager
Bhartiya Akhil
Deputy Commissioner Of Labour..a.p.
Management Consultancy


As the matter is referred to Office of Labour Commissioner, now then matter could be further pursued across the table in the presence of Labour Commissioner.

While the company is in financial distress, payment should be made for the services availed by the company from vendors or the employees of vendors. It is the primary responsibility of the Company - which is the PE. Labour Commissioner may address to the Chief of the Company only.

As far as possible the Head of Company should attend the meeting convened by Labour commissioner, as this shall be set as an over-riding priority.

Answering your queries:-

) Whether head of the organization can depute someone else on his/her behaf to attend the meeting.

ANS : Yes, Head of company can authorize his deputy to attend the meeting convened by LC, if the Chief has got unavoidable priority on the date which is convened by LC. However, Chief of company shall make a request in written addressed to LC, explaining the circumstances which prevents him from attending the meeting and also his intention to authorise his Second-In-command to attend the meeting on his behalf.

2) Since we are distress and don't have money to pending bills of the vendors what could be the implications:-

ANS: As the services are availed already by the Company, it shall be the responsibility of company to arrange payment. Somehow or the other company should mobilise fund to meet the payment.

3)What orders or instructions are expected from labour commissioner.

ANS: You explain your problems. LC's instruction is most likely in the favour of Contract workmen. However, LC with the powers vested in him, can give some lead time to the company, if the company is able to present the reasons, sincerely and honestly.

From India, Aizawl
Hi Kartik,
I endorse above suggestions. But may add, what's your rapport with the LC and how strong the Union? Are they agitative type or reasonable/cooperative. Considering ground realities, you also should have one to one discussion before hand with the LC and union individually to assess their thinking/plan of action. While doing so you should have your well thought out future plans. Are you in a position to accept/propose some commitments right now. What's going to be your Plan B if nothing goes well for an amicable solution.
For a question whether CEO should sit for discussion or not, I would say Yes and No. If both LC & Union are egoistics then CEO can sit. If co-operative, HR and/or Finance Head should deal the matter assuming no other matter except funds position is the crux of the problem. If necessary you should have your bank balance statt. in hand to convince the LC.

From India, Bangalore
Dear Kartik,

While endorsing both Mr. Nair and Prof. Kumar, I would like to add my comments with answer to your third question as under:

The bonafide reason for delay in payment is to be recorded with the the authority with supporting. You are not denying the payment due to the contractor, that also you have to record and ask for some time to make payment to the contractor under the circumstances.

As such making payment of wages to contract labour is the prime responsibility of contractor and when contractor fails to pay it, then the principal employer is under an obligation to pay it and get the same reimbursed from the contractor. And therefore, in my view the authority under the CLRA and also under the Payment of Wages Act has no legal right to call you.

You are in fault of not settling the bill of contractor under the civil contract. You are not liable to the Labour Commissioner strictly.

If the contract labours raise the Industrial Dispute then only the authority can call you along with the contractor. But the unfortunate thing is that most of persons in the position of the authority as well the owners or their representatives / hr do not know the law.

Answer to your third question, the authority may direct to make the payment of the delayed wages, together with payment of such compensation not exceeding three thousand rupees but not less than one thousand five hundred rupees or as prescribed in your State Rules. The authority may grant you some time to make the payment.

I further say that this Authority has no jurisdiction to entertain and decide claims involving

complicated questions of law and facts. You can make this matter complicated with the help of lawyer if you wish. It will be abuse of the process of law if the authority continues the proceedings. (Abdul Waheed v. Authority, Payment of Wages Act, (1995) II LLJ 1079)

From India, Mumbai

The agreement with the contractor is most likely that the contractor will execute the work and will be paid the agreed price for it. It may also have a clause that the contractor will discharge all statutory obligations and it is not linked with the payment received from the Principal Employer. The two are independent of each other. So the contractor has to discharge his liability irrespective of being paid by PE. The PE's liability to pay the contractor personnel arise only if the contractor fails to pay. So the contractor has to primarily answer the question before the Labour Commissioner and as PE its role is to highlight the above aspects of the contract with the contractor. Now coming to the queries:

1. While the notice from the Labour Commissioner would be in the name of its Head/CEO it is neither necessary nor desirable that such persons attend the hearing. These are not criminal proceedings to warrant the personal presence and can be represented by any person authorised to do so. Even if the organisation is proprietory, it still is not necessary for the proprietor to attend. In case he attends, there will be a lot of pressure on him by the labour unions as well as the Labour Department to announce certain decisions then and there which one may not be prepared for. An authorised person can wriggle out of such situations. This is particularly so as you are not in a position to pay the due amount.

2. The power of the Labour Commissioner is to persuade the parties to come to a mutual agreement. Their role is not judicial and is only conciliatory. If no agreement is reached the matter could be referred to adjudication. At any stage of the judicial proceedings, as and when the situation improves you can settle the matter by making due payment to the contractor and the contractor settles with his workmen.

3. As already pointed out, the Labour Commissioner has very limited role and the better option is bide your time, as the present situation is not likely to last long.

From India, Mumbai
Dear KK!HR,
Your first paragraph, I do agree with. In fact I said same thing.
However, it seems to me that you differ on rest what I said. You are Super Moderator. I request you to kindly re-look your response.

From India, Mumbai

Dear Akhil,

 Where there is a default in payment of wages by the contractor, the PE  is under statutory liability to make the required payment and deduct the same from the bills of the contractor. The PE has no escape but has to face the situation, the contractor could afford to be untraceable for the time being or may even join  hands with his employees and direct their ire against PE. These are the practical realities one has to face. The relationship between the PE and the contractor is based on the work order (a contract indeed) between them, but the present circumstances constitute Force Majecure (meaning  extra ordinary circumstance beyond the control of parties)  so the performance of contractual obligations stand postponed. So the legal rights of the  contractor against PE  are also limited. 


From India, Mumbai
Dear KK!HR,

Respected Sir,

You are endorsing what I said in the first part. You elaborated it. Thanks for that.

What I said in the first part is given verbatim:

"You are in fault of not settling the bill of contractor under the civil contract. You are not liable to the Labour Commissioner strictly."

However, your below given statements are contracting to my views and therefore I had to write on your post.

1. For the Head/CEO, it is neither necessary nor desirable that such persons attend the hearing.

2. Power of the Labour Commissioner is to persuade the parties to come to a mutual agreement ONLY.

One can have different views. But what I feel is, the authority has certain rights to call the PE also in certain circumstances and when the authority calls you, you can not just neglect or ignore it. If you feel the authority is exceeding its powers, you have a right to raise your points and fight legally.

From India, Mumbai
Ok sirs and solution requsted Karthiji
1.The company made contract with the contractors in a legal way.
2.whether the company pays the bills or not or delayed... the contractors have primary responsibility to pay salaries to their workers.
Literally speaking all those workers were called upon by the contractors to work in so and so company. So basically these workers should be paid by contractors.
If contractors failed to pay the salary dues of any contract workers the Principal Employee is liable to pay all dues and later amounts could be deducted from the contractor bills.
So the contractors in this case fingure pointed shown to the company management for reasons for not paying salaries.
So under contract labour act orders the principal Employer has to pay all dues in anyway even selling property or taking a bank loan.
There is no question of jurisdiction and powers of LC. He has sufficient powers. Moreover there is no necessity to file another case under IDAct. This complaint could be converted.And is enough for taking necessary decision on the principal Employer for payment dues. This Joint meeting is enough to call the management.
If the employer also neglects and denies to pay the dues the LC has powers to prosecute the PE under contract labourAct.
Both can not escape the primary duty of payment of salaries of daily contract labour whether financially yourself ok or not. You can convince your workers for instalment wise payment of dues if accepted.
The issue is not related to union is strong or not but it should be taken humanitarian angle and confirmed responsibility fixed by the Contractlabour Act for paying the dues even your contractor fails to do so.pls go through C. L. Act. Sir. Unless it leads to unrest industrial peace...

From India, Nellore

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