Can Trainees Legally Challenge Their Return to Contractor Due to Project Slowdown?

There exists a contract between employees and the contractor for staying 4 years with them (contractor). The contractor has deputed those employees as trainees to the principal employer. Once the trainees complete their training period with the principal employer, they will be absorbed by the principal employer. Till that time, they will be paid by the contractor and they will be on the rolls of the contractor.

Within a year, due to a slowdown in projects with the principal employer, the principal employer could not further train its trainees as a cost-cutting measure and told the contractor to take all the trainees back by giving a 1-month notice period. The contractor also issued notices to all its employees who were deputed to the principal employer.

My question is: Is there any possibility for the employees (trainees) to proceed legally against the principal employer? Whether this issue comes under the Contract Labour Act, Industrial Disputes Act, or Apprenticeship Act?

In the first case, the contractor will supply manpower as per the provisions of the Contract Labour (R&A) Act, i.e., they will provide unskilled, semi-skilled, and skilled manpower. There is no question of a contractor supplying trainees to the organization.

Secondly, the contractor also has to ensure that all statutory payments are made for the staff on their rolls and deployed at any place.

Thirdly, the principal employer is responsible for any default committed by the contractor. Therefore, in this particular case, the staff can approach the labor court for justice.

Sai