Can We Classify AMC Service Providers as Contractor Establishments? Seeking Your Insights

Hi all, in our organization, we have many AMC contracts for air conditioners, weighbridges, computer peripherals, etc. My query is, can we treat them as contractor establishments? Kindly give your views.

Regards,
Mantu71

Understanding AMC Contracts

AMC is not a labor contract under the Contract Labour (Regulation and Abolition) Act, but it is a work contract. Under AMC, a particular work, such as the repairs and maintenance of some assets, is given to an outsider, and the payment is fixed irrespective of the number of repairs done and regardless of the number of employees engaged for the purpose. Therefore, no element of an employee-employer relationship is present in such contracts.

Regards,
Madhu.T.K

In our organization, we have provided space for many food and snacks vendors to sell their food products. The food products are not provided at a subsidized price and are purchased by the employees. Will such vendors also be considered as contractors?

Regards,
R S Biswal

Since it is not a statutory canteen-like arrangement, they will not become contractors of your establishment.

Regards,
Madhu.T.K

Dear Mr. Madhu, I differ from what you said in your first post in this thread. The CLRA Act defines the term "contractor" in section 2(c) as follows: "contractor" in relation to an establishment means a person who undertakes to produce a given result for the establishment other than mere supply of goods or articles of manufacture to such establishment through contract labour or who supplies contract labour for any work of the establishment and includes a sub-contractor. This definition contemplates two types of contractors. Firstly, a contractor who undertakes to produce a given result for the establishment other than mere supply of goods or articles of manufacture to such establishment through contract labour. Secondly, a contractor who supplies contract labour for any work of the establishment. The term "contractor" includes a "sub-contractor" also. It is clear that the first part of the definition relates to work contract and the second part of the definition relates to labour contract. Therefore, my view is that both work contract and labour contract are covered by the provisions of the Contract Labour (Regulation and Abolition) Act, subject of course to the other conditions of the CLRA Act.

With regards,

Dear Mr. Madhu, I differ from what you said in your first post in this thread. The CLRA Act defines the term "contractor" in section 2(c) as follows: "contractor" in relation to an establishment means a person who undertakes to produce a given result for the establishment other than mere supply of goods or articles of manufacture to such establishment through contract labour or who supplies contract labour for any work of the establishment and includes a sub-contractor. This definition contemplates two types of contractors. Firstly, a contractor who undertakes to produce a given result for the establishment other than mere supply of goods or articles of manufacture to such establishment through contract labour. Secondly, a contractor who supplies contract labour for any work of the establishment. The term "contractor" includes a "sub-contractor" also. It is clear that the first part of the definition relates to work contract and the second part of the definition relates to labour contract. Therefore, my view is that both work contract and labour contract are covered by the provisions of the Contract Labour (Regulation and Abolition) Act, subject of course to the other conditions of the CLRA Act.

With regards,

Totally agree with your view, absolutely the interpretation is correct. But in these how will they manage the ESI & PF compliance or contribution of such employees who used to change every single day, today someone, day after tomorrow some other. Please advise.

I feel that this Act applies to every establishment where 20 or more workmen are employed. The definitions on which you have relied must fulfill this criterion first. Generally, AMC contracts consist of servicing and replacing the parts of machines, and this is not a continuous activity. This takes place even once in 3 months or 6 months as well. Therefore, I differ from your opinion, and in my view, the AMC contracts do not fall under the purview of the Contract Labour Act.

Regards,
[Name Removed For Privacy Reasons]

Clarification on ESIC Applicability for Coverage and Contribution

Please go through a circular of ESIC giving clarifications on various items regarding its applicability for coverage and contribution. It states that AMC is outside the purview of ESI contribution. Moreover, it is a payment given to an agency not based on the actual days of working or labor involved. There is no commitment that a specific amount of services should be done, and the principal employer does not know the number of persons engaged for the purpose.

It is reproduced in Hassan Cooperative Milk Producers' Society Union Ltd Vs. Asst Regional Director, ESI Corporation (2010 LLR 561) that if the employer has no idea about the number of persons to be engaged by the contractor, the principal employer-labor relationship cannot be proved. The case of AMC is also similar; moreover, it is a lump sum amount paid from which labor cost cannot be taken out separately.

Statutory Canteen and Its Implications

A statutory canteen is a concept in the Factories Act. If a factory employs 250 employees and the state government has issued notifications regarding setting up a canteen for the benefit of the employees, then that canteen will be treated as a statutory canteen, and the employees of that canteen will be covered by ESI and EPF. Therefore, if in an IT company a shop is functioning, then the employees will not become employees of the IT company. However, if there is a settlement or an understanding with the employees that they will receive the benefit of easy shopping within the compound either at a concessional rate or at a credit rate adjustable/recoverable from salary or with similar arrangements, then it will become very easy for the ESI authorities to establish that the canteens/malls are run by the employer or set up for the benefit of employees as part of their welfare schemes (which would directly or indirectly affect the CTC agreed). If so, the employees of that canteen/malls will be treated as labor of the employer.

Regards,
Madhu.T.K

Sorry, I did not attach the document. Please find the attachment.

Regards,
Madhu.T.K

Dear Mr. Manish Gadre, please read my post again, specifically the last sentence. The last sentence in my previous post reads as: "Therefore, my view is that both work contract and labor contract are covered by the provisions of the Contract Labour (Regulation and Abolition) Act, subject, of course, to the other conditions of the CLRA Act."

Moreover, the CLRA Act does not refer to "work contract" or "labor contract." The issue at hand is whether a "work contract" and a "work contractor" can fall within the purview of the CLRA Act. In such a discussion, the fundamental premise is that the other conditions specified under the CLRA Act have been met or need to be met. Therefore, when I made my last post, I was fully aware of the requirements for the applicability of the CLRA Act.

Incidentally, the first sentence in your post reads as: "I feel that this Act applies to every establishment where 20 or more than 20 workmen are employed." This statement of yours is at variance with the provisions of the CLRA Act.

With regards,