Are There Legal Limits on Using Contract Workers in Production and Wage Obligations?

Hi there!

One of the good industrial organizations is engaging contract workers in the main production or manufacturing process to support their regular workers. Are there any restrictions under the law for engaging such contract labor in the main production activity for any organization? Also, if the contractor is not paying minimum wages as per the prescribed applicable Minimum Wages Act, is there any obligation for the principal employer to pay the wages according to the law? (or should they pay the difference between the decided minimum wages and the actual wages paid by the contractor) Please advise on this matter, possibly through email.

Atul atulsmalve26@yahoo.com

Hi,

You should study the Contract Labour Regulation and Abolition Act of 1970. It is applicable to establishments, including industrial establishments, employing 20 or more contract labor. It is also applicable to contractors who are employing 20 or more contract workers.

Subject to the applicability of the act, if the work being done by the contract workers falls under the 'prohibited category' for which there is a notification, then you cannot employ contract labor in such jobs. If the jobs do not fall under the prohibited category, then you can engage contract labor. However, their working conditions are to be regulated as provided under the Act.

As per the terms of the license, the contractor must pay the minimum wages to his workers, and the payment of wages should be witnessed by the principal employer's representative. Contravention of this provision will invite prosecution.

As mentioned by you, if similar jobs are being done by regular workers, this will make your position vulnerable as under section 10(3). Jobs that are permanent and perennial in nature can be prohibited by the Government.

In short, you can engage workers on a contract if the work is not under the prohibited category. The contractor must pay the minimum wages, and as the principal employer, you have to ensure that the payment is disbursed in the presence of your representative.

Cyril

Hi,

Contract labor can't be engaged for principal employer regular nature of work.

1. Gujrat E.B. Thermal Power Station, Ukai, Gujarat Fs Hind Mazdoor Sabha & Other 1995 LLR 552 (SC)

2. Cipla Ltd Vs Maharashtra General Kamgar Union, 2001 LLR 305 (SC)

3. Secretary, Haryana State Electricity Board Vs. Sourish & Others etc. 1999 LLR 433 (SC)

4. Steel Authority of India Ltd. Fs National Union Water Front Workers LAR 2001 SC 961

If the work is of a perennial nature and is an integral part of operations, there is a likelihood of its abolition and in the event of abolition, there may be a demand for its absorption by the Principal Employer.

The trend-setting Judgment delivered on 30th Aug 2001 LAR 961 S.C. by a Five Judges constitution bench has far-reaching implications.

PSU, which had been severely affected besides other industrial establishments by Air India Statutory Corporation and others Vs United Labour Union & others Case 1997, (9) SCC 337, which had prohibited the employment of contract labor even in menial work like cleaning, sweeping, dusting, and the security watchman etc., and they had to be absorbed. The constitution bench reversed the Air India Judgment. The apex court interpreted:

1. the true and correct import of the expression "Appropriate Government".

2. Automatic absorption of contract labor, working in the establishment of the principal employer as regular employees following the issuance of a valid notification u/s 10 (1) of the CLRA Act prohibiting the contract labor in the concerned establishment.

So we can't employ contract labor in Core Activity.

The provisions of the Minimum Wages Act, 1948 are applicable to the Contract Labor if the employment in which they are engaged is duly covered by the Minimum Wages Act 1948.

Rule 25 (IV) of Contract Labor (Regulation and Abolition) Rules stipulates terms and conditions for a license.

The rates of wages for contract workers shall not be less than the rates prescribed under MWAct.

Regards,

Anuj

Hi,

In order to understand the provisions of the CLRA Act and its implications, we normally classify the employment of contract labour into three zones:

1. Critical zone: All jobs that fall under the prohibited category. No contract labour should be engaged in such jobs.

2. Danger zone: Jobs that are permanent and perennial in nature and fall under clause 10 of the Act. If notifications prohibiting such jobs have not been issued, one can engage contract labour but must be prepared to face the implications of their regularization if a notification is eventually issued.

3. Safe zone: Contract labour is employed for temporary work or work of a casual nature, and for jobs that are not permanent and perennial in nature.

Cyril

Dear Cyril and Anuj,

Thank you for providing such valuable information. It will be very helpful to me.

One more question has come to mind: If a contractor is engaging his laborers through a contract, and they have been working with him for the last 4 to 5 years in a continuous manner, is there an obligation for the contractor or the principal employer to designate these laborers as 'permanent' or provide them with all the benefits that permanent laborers receive?

Furthermore, if a worker has been continuously working with a contractor for more than 180 days, is the contractor bound to classify them as 'confirmed' or 'permanent'?

I would appreciate it if you could clarify this for me.

Best regards,
Atul
Email: atulsmalve26@yahoo.com

Hi, I am Rajesh.

One question is for Cyril/Anuj: what is your opinion about if we hire a contractor and allow them to use our PF/ESI code to comply with the regulations, are there any obligations on us under the Industrial Disputes Act regarding the employee's claim for permanency in our organization?

Dear sir,

What is the minimum wage for skilled workers in a power plant in Andhra Pradesh? Kindly provide the appropriate wages for unskilled, semi-skilled, and skilled employees in AP.