Facing Labor Law Challenges: How Should We Handle Retrenchment Benefits for Contract Workers?

Recently, our company asked the labor contractor to reduce the manpower, resulting in the removal of services for some selected employees. Subsequently, these employees approached the conciliation officer (Labor Department) for redressal. The labor officer issued a notice for the termination of services of such employees. Some employees had completed 240 days of service with us. As they were not on our payrolls, we deemed that there could be no compensation for those employees. The labor officer has a different perspective; he insists that we must provide them with retrenchment benefits, issue termination notices, and refer to labor laws.

Please suggest what I should do. Is there any reference in the law that states we are liable to pay in such a case?

Hi, when you go for retrenchment, then certainly follow the rules as per the ID Act. There is compensation for the same, so follow the rules – for each completed year, pay 15 days' base salary. Otherwise, the principal employer has the total liability. Secondly, put the notice in advance on the notice board. Follow the Factory Act and ID Act. Regards.

Dear Arun,

Thank you for your suggestion. In fact, we are the principal employer, and if compensation is mandatory, it should come from the employer first and then to the Principal Employer. However, in this case, even their employer has not retrenched them, nor have we terminated their services. These employees have not been reporting on duty to their respective employer since the 1st of May 2009 but are approaching/complaining to the labor officer.

Dear Yogesh,

As per the ID Act of 1947, if an employer wants to terminate the services of their workmen, they should be given a notice of 1 month or 3 months based on the criteria mentioned. However, as you mentioned, if the workers are on contract, then you do not need to provide any notice or compensation. Please refer to the service agreement made with the contractor. If the clause regarding compensation is included, then you will need to make the payment accordingly.

Thank you.

Dear Yogesh,

We do not find the Labour Officer-cum-Conciliation Officer of the area on the right footing in asking you, in the capacity of P.E., to give notice of termination and other payments to the contract workers on your behalf. If these are the workers of the contractor, then the contractor is to see how he manages to reduce the workers.

Regards,
R.N. Khola
(Labour Law & Legal Consultants)
09810405361

Thank you all for the suggestions. Please advise if we can ask under RTI to the labor officer why he is issuing notices to us and not to the respective contractor?