Is Our Business Agreement Actually Contract Work? Understanding the Contract Labour Act's Applicability

Applicability of Contract Labour (Regulation & Abolition) Act.

An agreement was entered into between ABC company and XYZ firm (who are into production management) for production work. The raw materials, the specifications, and also the machines were provided by the ABC company to XYZ firm at the ABC company factory premises. The Occupier of the ABC company is one of the Directors, and the Factory Manager is one of the officers of the ABC company. The rates were fixed for the work. XYZ has full rights to recruit persons he likes to carry out the work. The labor officer, on his visit to the factory premises of the ABC company, says that provisions of the Contract Labour (Regulation & Abolition) Act apply. It is contract work. The contention of the ABC company is that it is a business-to-business agreement and thus the provisions of the Contract Labour (Regulation & Abolition) Act do not apply here.

Sir, please let us know:

(1) whether the provisions of the Contract Labour (Regulation & Abolition) Act are applicable to the ABC company in this scenario?

(2) Does it amount to outsourcing of work?

Kindly enlighten us on this issue.

Dear Friend,

The provisions of the Contract Labour Act are applicable when the employment of contract labour exceeds the statutory limit (as per State Rules in this case) on any day during the preceding 12 months and do not depend on the agreement or arrangement between two companies.

Regards

Relations Between Principal Employer and Contractor

Relations between the principal employer and contractor are established in this case; hence, this attracts the Contract Labour Act (CLA).

Regards,
ANNAD

If you read this statement "The raw materials, the specifications, and also the machines were provided by the ABC company to XYZ firm at the ABC company factory premises," CLRA applies in this case because it amounts to outsourcing.

Furthermore, the employees can go to court and claim that they are the employees of ABC company because it is managed by the employees of ABC Company, and there is a clear-cut demarcation between the two companies.

Dear MANJESHSGR,

You are required to maintain all statutory registers under the Contract Labour (Regulation and Abolition) Act, 1971, including the labor license. If you are engaging interstate workers, you must also maintain an Interstate Migrant Workers license. Additionally, you need to register under the Building and Other Construction Workers Act and issue welfare ID cards to the workmen you employ. It is essential to file annual returns with the labor inspector every year.

Regards,
Ratna