Navigating Dual Licensing for Contract Labor: How to Handle Separate District Requirements?

Dear Seniors,

We are a construction company operating all over India. I have a typical query as mentioned below.

Contract Labour License Issue in Chennai and Thiruvallur

In Chennai, we are executing a contract for CMRL. As the main contractor, we have obtained a license under the Contract Labour Act, 1970 for this project. Our main site office is established in Chennai city. Fortunately or unfortunately, we have established our casting yard in Thiruvallur district due to the non-availability of land in Chennai. More than 20 contract laborers are working on these premises, but this is not a separate establishment as it is supplementary to our core construction work in Chennai (structural items are being cast here and will be used at the Chennai site). All the workers in this establishment are covered under the contract labor license, which is taken for 500 workers. All of them have been included in the payroll of the Chennai office. Their other registers under the Contract Labour Act are also being maintained at the Chennai office. Notice boards and other compliance measures are also being upheld at the Chennai office and in the said casting yard.

The core issue is that the licensing authority of both districts (Chennai & Thiruvallur) is separate. The ALC in Thiruvallur is insisting that we obtain a separate labor license for the casting yard.

I seek your remarks on this based on any of the SC/HC judgments.

Regards

Dear Seniors, We are a construction company operating all over India. I have a typical query as mentioned below.

Contract Labour Licensing Issue in Chennai and Thiruvallur

In Chennai, we are executing a contract for CMRL. As the main contractor, we have obtained a license under the Contract Labour Act, 1970, for this project. Our main site office is established in Chennai city.

Fortunately or unfortunately, we have established our casting yard in Thiruvallur district due to the non-availability of land in Chennai. More than 20 contract laborers are working on these premises, but this is not a separate establishment as it is supplementary to our core construction work in Chennai (structural items are being cast here and will be used in Chennai). All the workers in this establishment are covered under the contract labor license, which is taken for 500 workers. All of them have been included in the payroll of the Chennai office. Their other registers under the Contract Labour Act are also being maintained at the Chennai office. Notice boards and other compliance measures are also being maintained at the Chennai office and in the said casting yard.

The core issue is that the licensing authority of both districts (Chennai & Thiruvallur) is separate. The ALC, Thiruvallur, is insisting that we take a separate labor license for the casting yard.

I seek your remarks on this based on any of the SC/HC judgments.

Regards

Separate Labor License for Different Sites

If you are employing 20 or more contract laborers on two different sites (not in the same premises), check the labor license format which mentions the address where the contract laborers are employed. You have to obtain a separate labor license for each site if they are operating in two distinct premises, even if the principal employer is the same. Just carefully review the license copy, and you will find your answer.

Regards,
Prashant Mhatre

As I understand, you have a labor license as a contractor for the Chennai site of CMRL. In addition, you have a casting yard in Thiruvallur District. It is not clear whether you have deployed your own staff or are using a subcontractor's men. Assuming they are your employees, it is evident that they are not your contract employees but your regular employees; hence, the Contract Labor Act is not applicable. However, if the employees are from a subcontractor, then you are the principal employer and need to register yourself as such. In any case, no separate license is required.

Clarification on Licensing Requirements

By way of clarification, if a contractor works at different places under different licensing authorities, they are required to have different licenses. According to Section 12 of the Act, a contractor can undertake or execute any work with contract labor only if they possess a valid labor license. The territorial jurisdiction of the licensing authorities is clearly defined by Gazette Notification, and unless the sites fall within the jurisdiction of the same licensing authority, a license issued by one authority serves no purpose elsewhere.

Understanding the Act and Jurisdiction

Indeed, as per Rule 25(1) of the Act and Form VI, the license must indicate the nature of work, the establishment, and the place of work. Since the Chennai site and Thiruvallur works constitute separate establishments, the labor license in Chennai obviously cannot cover the Thiruvallur works. This is a plain interpretation of the words in the Act; I could not find any judgment of the High Court or Supreme Court directly addressing this point.

Regards,
KK

Thank you for the reply. As mentioned earlier, you are correct in stating that CMRL (Chennai Metro) is the principal employer, and the construction companies are contractors. However, the construction work in Chennai and the casting yard in Thiruvellur are complementary and supplementary to each other. We have clearly informed the licensing and inspecting authorities that the principal employer who awarded us the project is CMRL. For the entire territory of the project, CMRL is the owner/caretaker. Hence, the balance sheet and P&L account will be managed in Chennai for the entire project cost.

The principal employer issued only one Form V for this project.

As mentioned previously, all relevant compliances under the Contract Labour Act are also being maintained at the Chennai office and casting yard concerning the Chennai labor license.

In the half-yearly returns that we have to submit, we need to provide details on manpower, total wages, total deductions, etc. In case a separate license is obtained, we would need to bifurcate all the details. However, we reiterate that we are maintaining a single balance sheet and P&L account as this is a single project based on the tender.

We would appreciate any further valuable inputs from you.

Thank you.

Registration and Licensing for Contract Work

The registration of the principal employer and the contractors is done with respect to an establishment. In your case, the license pertains to and is limited to the CMRL project area mentioned in the license.

Thiruvallur casting yard was started after getting the license and is obviously a premise where a manufacturing process is carried out, hence it comes under the Factories Act. Therefore, you need to obtain a license for the contract work being carried out in the Thiruvallur establishment.

Regards,
Sanu Soman
Manager-HR

I am still not clear as to whether it is your own employees or employees of your subcontractor who are working at the Thiruvellur site. Since the casting yard is not owned by CMRL, there is no question of CMRL becoming the principal employer. If there are subcontractor's men involved, then you become the principal employer, and you need to register yourself. The fact that you maintain P&L accounts for the two units together is no grounds for non-registration of your Thiruvellur site.

Regards,
KK Nair