How Should We Handle a Contract Employee's Theft of Diesel and Vehicle? Seeking Legal Guidance and Responsibilities

Dear Experts, Recently, one of our contract employees stole 750 liters of diesel and a vehicle and absconded. Our client insists that we take action against the contract employee, as he was appointed by us. My questions are:

1. What is the extent of responsibility of the contractor in theft/loss cases by contract employees on-site?
2. Does CLAR have any provisions for taking legal action against contract employees in such cases?
3. Who should report to the police station, the contractor who supplied manpower or the principal employer whose materials/goods have been stolen/damaged?
4. What is the role of a contractor in such cases?
5. Can a principal employer stop payments to the contractor due to such incidents or recover the losses from the contractor?

Please also mention the applicable acts in this situation. Experts, I need your valuable answers. Please reply ASAP.

Regards,
M S V R K S

Disciplinary Actions Against Contract Employees

The principal employer should not initiate any disciplinary action against an employee engaged through a contractor. If he does so, it will act against him only when a situation arises to decide whether the contract is genuine or a sham. A principal employer taking action against contract labor shall be taken as one of the evidences of a sham contract.

In case contract labor is involved in theft, inform the contractor of the matter, remove him from the workplace, and recover the theft amount from the contractor. Let the contractor decide what action should be taken against the employee. Normally, in the contract deed, such a provision will be included.

Informing the police or lodging an FIR will not, however, affect the relationship. Therefore, if the principal employer has incurred a loss by way of theft by contract labor, he can inform the police, the investigation of which will be entirely different from a domestic inquiry.

Regards,
Madhu.T.K

Once again, thank you very much, Madhu ji. If you can mention the applicable acts and how we can proceed further (we are contractors, we supplied manpower to the client).

There is no need for any specific act to take action. Since the employee involved in theft is your own employee, you can initiate disciplinary action after placing him under suspension. Talk to the principal employer also in this regard and assure him that the amount misappropriated or the cost of material stolen by your employee would be reimbursed once the inquiry is over.

Regards,
Madhu.T.K

Dear Mr. Ravikanth, please check Form 20 in the Contract Labour (R&A) Rules, 1971. You can recover the same from the workmen through the contractor. You can deduct the cost of diesel and other materials he has stolen from you from the contractor's bill, along with a percentage of overhead charges. Going to the police could create problems for you, your contractor, and the workman. Moreover, the material recovered from the workmen through the police may not be in usable condition.

If a contract workman has absconded after taking 750 liters of diesel from the workspot, it is unlikely that this theft was carried out by a single person. What happened to your security measures? Was there no security deployed in the Diesel Stores or at the main gate? How was the vehicle allowed to leave without proper checks? It is implausible that four barrels of diesel could have been taken away simply by pouring the diesel into the vehicle's tank and removing it outside the gate.

How did the workman manage to load the diesel barrels onto a vehicle without any assistance from manpower or a hydra crane?

What is the stance of the Stores personnel regarding this theft case? You have the option to blacklist the individual or contractor to prevent their engagement in your other site offices across the country.

Thank you.

We are yet to go through a detailed investigation. As you mentioned, alone, that employee may not have done this. There must be some inside people who are helping him.

The place is very remote, and there is a local-non-local conflict as well. Any action taken against the local people (including the culprit employee) from the management side could worsen the situation. We are also receiving several threats from them (a local group, including the employee himself). They cut our site pipeline (of electrical & water) at night, call, and abuse our staff and engineers on-site. We believe the involvement of the police is necessary here. This is not just a theft case; it's beyond that. People are worried about working there, let alone getting back the money.

We do have security, but with limited strength, and even they are non-local. We have lodged a complaint with the local police station and are waiting for the investigation to start.

Regards,
M S V R K S

In that case, the matter will become very sensitive. Therefore, do not get directly involved. It is a fact that the person involved is a contract laborer, and you, as the principal employer, have no legal relationship with that employee. However, in the eyes of local people, he will be considered an employee of your company. Therefore, any action taken, even by the contractor, will reflect on you, and it may escalate into a law and order issue. It would be advisable to seek the assistance of the police based on the threats you have received.

Regards,
Madhu.T.K