Navigating Labor Laws: Do Contractors with Fewer Than 20 Workers Need a License?

Dear Seniors, I am working at the project site of a power plant where 84 contractors have been engaged for various works. Some of them have obtained the labor license under the CLA 1970, allowing them to employ more laborers as specified by the Act (20 in number). The remaining contractors have employed fewer than 20 workmen.

Sir, could you please advise if they are required to obtain the LL under the CLA? If not, under which Act should they register so that the liability on the principal employer can be minimized? This will enable us to issue the work order to them.

Do you have the registration certificate of the "Principal Employer"? If yes, then ensure that the contractor is complying with all the statutes applicable to your industry.

Insist that all contractors take the Labor License (LL). On construction sites, they may need to increase manpower at any time depending on job requirements. It is advisable for them to take the LL; otherwise, you may face difficulties as the Principal Employer.

Regards,
Pon

Dear Ashish,

Ways to Address the Labor License Issue

There are two ways to address this issue:

1. You have to insist that all the contractors take the Labor License (LL) at the earliest.
2. Otherwise, you have to instruct the contractors whose laborers are fewer than 20 to consolidate them with those whose laborers are more than 20, take the LL, and ensure compliance with all statutory requirements of the Labor Laws.

However, if the organization grows and the need increases, you will encounter the same problem again. Therefore, I suggest guiding all the contractors to understand the importance of LL and to take it promptly. I have applied the same approach and achieved positive results.

Regards,
Ruth
HR & ADMIN MANAGER

Dear Ruth, As you have advised, I've already presented this issue to the contractors, but they are not convinced due to the following reasons:

1. When they engage contract laborers fewer than 20, they are not interested in complying with the Act.
2. The labor inspector is charging a significant amount to provide a license, approximately 35,000/- per license.
3. Due to the nature of their work, which lasts only for 3 months, they are reluctant to pay such a high amount for such a short period.

Now, please advise.

Regards,
Ashish

Dear Ashish, You should have issued a work order to each contractor, mentioning the nature of the work to be done, the estimated completion date, and cost. In that, all should have signed to comply with all legal matters pertaining to that work order. You may estimate the number of workmen required to complete the task. You have the full right to check whether they are employing fewer than 20 employees or if it's the actual number. They may hold a temporary contract license. They must contribute towards EPF and ESI; if they don't have registration, they can obtain it or contribute under your registration. The principal employer is accountable for non-compliance with statutory obligations.

As Mr. Shaikh mentioned, you can instruct the contractors who have been working for 3 months to obtain a temporary contract license. However, there should be more than 20 employees for this requirement to apply. If the number of employees is less than 20, then there is no issue with LL.

I hope this clarifies things for you.

Regards, Ruth

Dear Ashish, Firstly, you are designated as the Contract Labour (CL) under the Contract Labour Act (CLA) in the capacity of principal employers. If you have included the name of the contractor in the list of contractors that have been amended, there should be no issue regarding the number of workers. However, the main concern lies in maintaining the Contract Labour Register as per Form No. 12 under the CLA Act.

Regards, Rakesh