Can Laborers Claim Backdated Wage Increases from Contractors or Companies? Seeking Legal Insights

We have engaged a contractor for a one-year period with an escalation clause for payment in case of an increase in minimum wages. We are also paying the contractor, in addition to minimum wages, leave with wages, notice pay, retrenchment compensation, and notice pay. The contractor settled all the above benefits to labor, and the company also paid his final bill after verifying the payments.

Later, the government increased the minimum wages with retrospective effect. You are kindly requested to clarify whether laborers can claim the above benefits from the contractor or the company. Please provide your reply with reference to the relevant statute.

Legal Relationship with Contractors

Your legal relationship with the contractor ends as soon as the contract is terminated. Then why should the principal employer be concerned about arrears of wages payable by the contractor? It is understandable if the contract is in force and the minimum wage is revised with a retrospective date. In such cases, the principal employer must ensure that the workers engaged by the contractor are paid the difference in wages, but only from the date on which they were engaged at the principal employer's plant or the date of the revision, whichever is later.

In case you agree that the contractor's additional bill will be approved, can you ensure that the contractor is making the payment to the workers who were present at your plant? No, you cannot, because once they are out of your premises, you have no control.

Notice Pay in Contracts

Your inclusion of notice pay in the contract is also unusual, which I have not seen elsewhere. What does it mean? If the contractor's workers are to be terminated, should the principal employer bear the cost of termination or notice pay? Is it not the responsibility of the contractor alone?

Regards,
Madhu.T.K

We have engaged a contractor for a one-year period with an escalation clause for payment of escalation in case of an increase in minimum wages. We are also paying the contractor, apart from minimum wages, leave with wages, notice pay, retrenchment compensation, and notice pay. The contractor settled all the above benefits to labor, and the company also paid his final bill after verifying the above payments. Later, the government increased minimum wages with retrospective effect. You are kindly requested to clarify whether laborers can claim the above benefits from the contractor or the company. Please provide your reply with reference to the relevant statute.

Contractual Obligations and Retrospective Wage Increase

Depends upon the language of your agreement with the contractor. If your agreement is silent about payment or non-payment of enhanced wages from retrospective effect after termination/expiry of the contract, you would be liable to pay the back wages also. However, the worker cannot claim directly from the company but through the contractor.