What Are the Risks of Hiring Contract Labor Without Government Approval?

Dear All,

What will be the consequences if an organization engages contract labor without obtaining permission from the appropriate government? Additionally, what happens if the contractor does not have registration under sections 7 and 12, respectively?

Regards,
Manjeet Singh
Amritsar

Dear Manjeet,

This indeed is a serious issue. The Supreme Court has ruled that in the absence of a registration certificate and license of the contractor, all the laborers who have passed the 240-day test will be considered as regular employees. If any of the CL approaches the labor authority for regularization, then the company is at risk.

Regards,
Roopa

Hi Manjeet,

In the case of mines or underground construction, as well as seasonal labor, the dates are reduced to 120 days. Hence, it is preferable to either ask the contractor to get a Memorandum of Understanding (MOU) signed with a major contractor whose license can be used if the prequalification of the contractor is not possible or start looking out for legal options to secure your company.

Regards,
AJ

Dear Bunu_roopa/All,

I have in my mind the view as Mr. Bunu has given, but according to one prominent body's views which are given below, I have started this discussion. If CL are not liable to be absorbed by the Principal Employer, then what will be the possible effects on the Principal Employer?

"It has been well settled by the various judgments of Apex Court & High Courts that the contractor's employees will not become the employees of the principal employer, even if the principal employer does not get registration and the contractor does not hold a license. Employing contract labor without obtaining registration or without obtaining a license is an offense under the Act. Also, if the principal employer terminates the contract of the contractor and thus the employees of the contractor become surplus, it is not obligatory for the principal employer to absorb the employees of the contractor. The Supreme Court has held that neither the Contract Labour (Regulation & Abolition) Act nor the rules made thereunder provide that upon the abolition of the contract labor in any establishment, the said labor should be directly absorbed by the employer of that establishment."

Kindly comment on this important aspect.

Regards,

Manjeet Singh Tarn Taran (Amritsar)

Hi, I would like to highlight that all such judgments should be read in totality. If an organization is not registered under the Contract Labour Act and it employs contract labor through a contractor who does not have a valid license, it may create a lot of hassles in terms of proving that the said contract laborers are employed through a contractor. The onus of proving the same is further difficult as it depends on a lot of issues, and all courts will consider the entire subject in totality and award such judgments.

Dear Manjeet,

Consequences of violation of Sec 7 of Contract Labour Act are given under Section 8, i.e., Effect of Non-Registration, wherein it is clearly written that the establishment cannot proceed with the work by hiring contract laborers. Sections 23 and 25 provide provisions for penalties in case of any violation of the Act. It includes imprisonment of 3 months and a fine.

Very soon, you will receive a notice/show cause notice regarding your company's MD if you have not liaised with the LEO of the concerned area.

Regards

The well-known judgment is with the case of "Haryana Electricity Board," wherein the case is very similar to your situation. It has been established that such an arrangement is bogus and camouflaged, and therefore, CL is entitled to relief as requested.

Address the issue promptly and complete the paperwork formalities at the earliest.

Regards,
ACCHR