What Does 'Contractor' Mean Under the Contract Labour Act, 1970? Seeking Clarity on Licensing

Understanding Contractor under CLA, 1970

Can anyone explain what a contractor means under the Contract Labour Act, 1970?

If an MNC is assigning work to another MNC to accomplish certain tasks in office premises, does it need to obtain a labor license under the CLA, 1970?

Similarly, if an MNC is assigning work to another MNC to accomplish certain tasks in township premises, does it require a labor license under the CLA, 1970?

For example, if a company is awarded a project to construct a city road, does it need to obtain a labor license under the Contract Labour Act, 1970? If yes, why? If no, why?

Regards

In both cases, you need to apply for a Contractor License to engage contractors' laborers, and this is mandatory. Since you are not engaging them directly, the requirement is a must.

Regards,
B. Ravichandiran

A contractor means a person who undertakes to produce a given result for the establishment or the one who supplies contract labor to an establishment. Whether such a person or firm is a contractor or not depends upon the nature of the contract and the status in which both companies conduct themselves in the business relationship. Not in every case will a company that undertakes the work assigned to it by another company become a contractor. However, in the vague examples given by you, it is difficult to come to any conclusion.

Regards,
B. Saikumar
HR & Labor Law Advisor
Mumbai

Thank you, but if the power grid allots some work to L&T, which subsequently hires a few contractors to finish the work, will these contractors have any relation with the power grid? Shall the power grid have a duty to issue Form V to these subcontractors and check compliance by these subcontractors?

Understanding the Role of Principal Employer and Contractor under CLRA Act

If Power Grid allots some work to L&T and if such work is connected with its establishment (Power Grid's), then Power Grid is the principal employer, and L&T is the contractor. The definition of a contractor under the CLRA Act includes subcontractors. Form 5 is to be submitted in terms of Reg.26 under the ESI Act. Regulation 26 calls upon every 'employer' to submit the return concerning employees engaged through the principal employer and immediate employer (who is a contractor). Thus, the employer within the meaning of Reg.26 means Power Grid. Therefore, in my view, Form 5 may be issued by Power Grid for the contract labor employed by L&T even through subcontractors since the definition of a contractor includes subcontractors under the CLRA Act 1970.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai

If you go through the definition of Contractor, you can see that the definition of Subcontractor is the same as that of Contractor.

Mangesh Wakodkar

Yes, it is required to obtain the labor license in relation to how many employees are engaged for that particular work.

Regards,
Dhananjay Kawle

Power grid may be called the principal employer, and L&T are contractors for the power grid. The Powergrid has to apply with the labor department for the Registration of Certificates, otherwise called RC. Once it's registered, then only L&T can obtain their workers' license from the authorities. Here, the Powergrid RC is necessary. Whenever the labor inspector visits the site or the premises of the power grid, they may check the L&T details as well (ensuring they are paying PF/ESI and other compliances connected to labor laws under the CLRA Act). The contractors do not need to follow the Form V of the principal employer (Powergrid).

Regards,
G. KUMAR