Understanding Labor Law: Who's Accountable When Wages and Contributions Are Delayed?

I want to know who is responsible under labor law if:

1. The Principal Employer does not release the salary bill of the contractor, resulting in contract labor not receiving wages.
2. The Principal Employer releases all dues of the contractor, but the contractor does not disburse wages.
3. The Principal Employer does not release ESIC and EPF contributions of their own share (employer), while the contractor has already deposited the employee's share.

Regards,
Nagendra

Responsibility for Payment of Wages

(1) A contractor shall be responsible for the payment of wages to each worker employed by him as contract labor, and such wages shall be paid before the expiry of the period as may be prescribed.

(2) Every principal employer shall nominate a representative duly authorized by him to be present at the time of disbursement of wages by the contractor. It shall be the duty of such a representative to certify the amounts paid as wages in the prescribed manner.

(3) It shall be the duty of the contractor to ensure the disbursement of wages in the presence of the authorized representative of the principal employer.

(4) In case the contractor fails to make payment of wages within the prescribed period or makes a short payment, then the principal employer shall be liable to make the payment of wages in full or the unpaid balance due, as the case may be, to the contract labor employed by the contractor. The principal employer can recover the amount so paid from the contractor either by deduction from any amount payable to the contractor under any contract or as a debt payable by the contractor.

For whatever reason, if the contractor does not pay the contribution, the ultimate responsibility to pay it squarely rests with the principal employer.

Regards,
B. Saikumar
HR & Labour Advisor
Mumbai

Case of Dispute in Construction Project

A Private Limited Company is presently constructing a commercial building for a hotel. The company had appointed a contractor for the same. The contractor has given work under his contract to a subcontractor. The work was going on smoothly at the site.

The Director of the Company underwent open-heart surgery. As the director was the only one with the knowledge of what needed to be made and where, and he was responsible for overseeing the day-to-day work of construction, the family members of the director stopped the work on-site and settled the account with the contractor.

In the meantime, there was a dispute between the contractor and the subcontractor. The contractor removed the subcontractor without finalizing his account with him. The subcontractor, through his employees, filed a case in the labor court in the name of the employees, pleading that they were not paid wages from November 2012 to March 2013. Now, the labor court has issued summons to the director of the company and the contractor. The name of the subcontractor does not appear anywhere in the application filed by the workers.

Please advise on how to handle the case.

Thanks,

Jawaharlal

Responsibility for Payment of Wages

1. A contractor shall be responsible for the payment of wages to each worker employed by him as contract labour, and such wages shall be paid before the expiry of the prescribed period.

2. Every principal employer shall nominate a representative duly authorized by him to be present at the time of wage disbursement by the contractor. It shall be the duty of this representative to certify the amounts paid as wages in the prescribed manner.

3. The contractor must ensure that wages are disbursed in the presence of the principal employer's authorized representative.

4. If the contractor fails to pay wages within the specified period or makes an incomplete payment, the principal employer shall be liable to pay the full wages or the outstanding balance to the contract labour employed by the contractor. The principal employer can then recover the amount paid from the contractor, either by deducting it from any amount due to the contractor under the contract or as a debt payable by the contractor.

Regarding point no. 2, it is indeed mandatory for the representative to certify the amounts paid as wages. The relevant section or paragraph of the Payment of Wages Act should confirm this requirement.