How Are Emerging Trends in Contract Labour Laws Impacting Employers and Workers?

CLRA Emerging Trends

The Summary Record of Discussion of the 44th Session of the Standing Labour Committee, held on 17th October 2011 at New Delhi under the Chairmanship of Shri Mallikarjun Kharge, Union Minister of Labour and Employment, Government of India, records the CLRA emerging trends. The national-level tripartite meeting was attended by senior-level functionaries of Central Trade Union Organizations, Employers’ Organizations, State Governments, and Central Ministries and Departments.

Shri Mallikarjun Kharge, Union Minister of Labour and Employment, addressed the demand of Trade Unions to amend the Contract Labour Act, 1970, to provide for automatic absorption of contract labour in the event of prohibition of employment of contract labour. In response to opposition by the employers’ organizations, Shri Kharge stated that the ministry has been making efforts to protect the interests of all stakeholders and is trying to extend the same benefits to contract workers that are otherwise available to permanent workers.

Views from the Employers' Side

In the meeting, Shri R. Venkatanarayanan from the Confederation of Indian Industry invited the delegates' attention to the global financial downturn. He stressed the necessity to invest more to generate more employment opportunities. He mentioned that the issue of contract labour requires further discussion and that the law should be strictly followed. He stated that regular employees and contract labourers cannot be paid the same due to many considerations such as training and experience, and a "flexibility premium" is the way out. He emphasized that the rationalization of labour laws should be done, and as far as possible, third-party verification and self-certification by the employers should be applicable. He further stated that employment generation and skill development are linked to each other and that CII is working towards setting up several skill centers for the skill development of disadvantaged rural youth. However, he believed that much more needs to be done to enhance the employment situation in the country. Therefore, skill training should be imparted to both rural and urban youth, covering both employment and self-employment.

Shri Michael Dias from the Federation of Indian Chambers of Commerce and Industry suggested the rationalization of labour laws in the context of the unorganized sector. In his view, the issues pertaining to contract labour need to be addressed in-depth, possibly after receiving the report from the V.V. Giri National Labour Institute. In this regard, he fully supported and endorsed that complete data on contract labour be made available and urged the need for a white paper to be brought out by the Ministry of Labour and Employment at the earliest. He considered the issues of enhancing employability and employment as critical ones that needed serious attention from all stakeholders and should be part of the agenda at the next ILC.

Opposing Views

Shri S. K. Rathore, All India Secretary of Bhartiya Mazdoor Sangh, stressed the need for the amendment of contract labour laws and emphasized that the explicit purpose of engaging contract labour is to provide lower wages and poor service conditions, leading to sheer exploitation. He expressed his concern over permanent jobs being converted into contractual jobs even in PSUs and Government Departments. Therefore, there is a need for immediate amendment of the Contract Labour (Regulation and Abolition) Act to prevent all types of exploitation. He also focused on issues pertaining to women working in Anganwadi, ASHA, and mid-day meal workers, etc., who are facing gender discrimination and working under exploitative conditions. He also highlighted the issue of wide variation in minimum wages from state to state and sector to sector, which has resulted in large-scale migration. He expressed the need to fix a National Minimum Wage to combat uneven income disparity.

Shri Srinageshwar from the Council of Indian Employers reflected on the similarity in the condition of workers engaged in various sectors and on the issue of contract labour. He reiterated that the western models for improving the conditions of contract labour could not be transmitted to India; rather, there should be a focus on the direct impact of employment generation. While pointing out the content of the Impact Study Report, he considered it important to engage in a discussion in a tripartite forum and come out with a concrete decision. He also focused on the competitiveness of the industry with simultaneous flexibility that cannot be underestimated either by the government or trade unions. He further stated that employers train a huge number of trainees in their premises who become a source of a huge pool of trained manpower for the industry either locally or outside. This should be recognized, and the employer should be incentivized by the government for undertaking these initiatives.

Shri Janardhan Singh Sigriwal, Labour Minister, Govt. of Bihar, expressed his concern over the poor working conditions of contract laborers. The increasing tendency towards outsourcing of contract labour has led to the hiring of more contract labour in comparison to regular workers. Moreover, globalization has led to the migration of workers outside India who are subjected to all kinds of exploitation by placement agencies. He quoted examples of migrant workers from Bihar who recently returned from Libya and were devoid of any social security. Therefore, he stressed the need for a law to protect the interests of international migrant workers. He also emphasized the need for skill development as skill and knowledge are considered motivating powers for economic and social development. He stressed the need for the establishment of more industrial training institutes to boost the supply of skilled manpower to meet the projected demand of 50 crore skilled manpower by 2022, as per estimates of the National Kaushal Vikas Mission.

..To be continued>>>

With Regards,

V. Sounder Rajan

Advocates & Notaries & Legal Consultants

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In continuation of the Summary Record of Discussion of the 44th Session of the Standing Labour Committee held on 17th October 2011 at New Delhi under the Chairmanship of Shri Mallikarjun Kharge, Union Minister of Labour and Employment, Government of India, the national level tripartite meeting was attended by senior-level functionaries of Central Trade Union Organizations, Employers' Organizations, State Governments, and Central Ministries and Departments. This part addresses many important issues relevant to CLRA which were discussed.

Shri Sudarshan Sareen, Vice President of All India Manufacturers' Organization, raised an important question regarding the permanency of workers in seasonal industries and pointed out the difficulty of making such workers permanent due to the seasonal nature of their occupation. Another issue he addressed was the equal pay for regular and contract workers. In this context, he opined that an increase in the quality of production would ultimately lead to an increase in wages for some regular workers, potentially creating a wage discrepancy between regular and contract laborers.

Shri Chandrashekhar Sahu, Labour Minister of the Government of Chhattisgarh, highlighted the efforts of the State Government to improve the conditions of contract labor. He informed the house that the state government has begun paying wages to contract laborers through banking institutions. Approximately 60 percent of contract laborers in the industry are now receiving their wages through banks, and the government plans to link the remaining 40 percent of workers to the banking system in the near future. He also mentioned that the Chhattisgarh government is working on registering contract labor by issuing them with identity cards detailing their nature of work and working hours.

Points Emphasized by Shri B. N. Bachegowda, Labour Minister of Karnataka

(i) Issuance of a circular to all Officers and Senior Labour Inspectors to implement the Contract Labour (Regulation & Abolition) Act, 1970, and (Karnataka) Rules, 1974 diligently.

(ii) Notification specifying wage rates, holidays, hours of work, and other conditions of service for workmen employed by a contractor performing the same or similar work as those directly employed by the principal employer.

(iii) The constitution and functioning of the Karnataka State Contract Labour Advisory Board since 1991.

(iv) The need for an amendment to the Act/Rules to facilitate payments to contract workers through banks.

To be continued...

With Regards,

V. Sounder Rajan

Advocates, Notaries & Legal Consultants

"Patriotism is your conviction that this country is superior to all others because you were born in it." - George Bernard Shaw

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CLRA Emerging Trends-IV

In continuation of the Summary Record of Discussion of the 44th Session of the Standing Labour Committee held on 17th October, 2011, at New Delhi under the Chairmanship of Shri Mallikarjun Kharge, Union Minister of Labour and Employment, Government of India, the national-level tripartite meeting was attended by senior-level functionaries of Central Trade Union Organizations, Employers’ Organizations, State Governments, and Central Ministries and Departments. This part also covers many important issues relevant to CLRA which were discussed. The need for amendment to the Contract Labour Act was raised by Shri S.P. Tiwari, General Secretary, Trade Union Coordination Centre.

Shri S.P. Tiwari, General Secretary, Trade Union Coordination Centre, while reflecting on the job losses and employment situation, reiterated that during the global downturn, job loss was 22 lakh and there was a need to provide jobs to 38 lakh people affected by the downturn, including the newly entered people in the labour market. Some important suggestions given by him included the monitoring of the RSBY scheme, amendment of the Contract Labour Act, initiatives for irrigation, seed supply, crop insurance, food grains storage, etc. He also suggested at least a 3% allocation of the budget for the welfare of unorganized workers, uniform social security programmes, and involvement of central trade unions in skill development initiatives.

Shri Sharad S. Patil, Council of Indian Employers, stated the following among other points raised by him:

• Referring to a study conducted by OECD providing that flexibility in labour laws results in more employment generation, he suggested that the central government should undertake a similar study to explore the rigidities of laws.

Ms. Manali Shah, Self Employed Women’s Association, stated that outsourced workers are not included in the Contract Labour Act, and therefore she demanded their inclusion in the Act.

Shri Swapan Mukherji, General Secretary, All India Central Council of Trade Unions, referring to his other suggestions, included immediate action for amendments to the Contract Labour (AR) Act and also equal remuneration for equal work.

Shri Madhu Sudhan Baidya, Labour Commissioner, Govt. of Andaman & Nicobar Islands, raised the following points:

• The Contract Labour (Regulation & Abolition) Act, 1970, and Rules made thereunder are effectively enforced in letter and spirit with available inspectorate staff.

• The Andaman & Nicobar Contract Labour Advisory Board is to be revived shortly.

• Making payments to contract workers through banks is an issue that needs amendment.

..To be continued>>>

With Regards,

V.Sounder Rajan

Advocates & Notaries & Legal Consultants

“Give the world the best that you have, and the best will come back to you.” — Madeline Bridges

CLRA Changing Trends

In continuation of the Summary Record of Discussion of the 44th Session of the Standing Labour Committee held on 17th October, 2011, at New Delhi under the Chairmanship of Shri Mallikarjun Kharge, Union Minister of Labour and Employment, Government of India, the national-level tripartite meeting was attended by senior-level functionaries of Central Trade Union Organizations, Employers’ Organizations, State Governments, and Central Ministries and Departments. This part also covers many important issues relevant to CLRA that were discussed.

The thrust for changes to the Contract Labour Act was discussed in the context of equal pay and other benefits to contract labour as given to direct regular employees. If implemented, it will have a cascading effect on the staffing industry. The Principal Employers may choose not to entrust work to Contractors.

Dr. Kavita Gupta, Principal Secretary, Govt. of Maharashtra, stated that the State Government had taken necessary action regarding the payment of wages to contract labourers through cheques. She also pointed out that the state has introduced the Labour Management System.

Shri Mihir R. Chandra, United Trades Union Congress, while reflecting on the needs of the informal sector, suggested steps to reduce the gap between training capacities and training needs, setting up vocational training at the school level, and reemployment for retrenched employees. He mentioned that since the term “Rationalization of Labour Laws” is very vague, the focus should be on the implementation of labour laws. Some of the other suggestions he gave included equal pay and other benefits to contract labour as given to direct regular employees.

Shri Govind Rao Adik, General Secretary, National Front of Indian Trade Unions (DHN), stated that globalization has brought about many challenges for the labour force, and outsourcing has also adversely impacted stable employment situations. He expressed his concern over the non-implementation of policy decisions taken in the 42nd and 43rd national conferences. Moreover, the global downturn had resulted in job losses, and he urged that subsequent steps should be taken by the government to provide job opportunities to people who have lost their jobs in the downturn. Despite innumerable laws made in the country, he reported, some laws are still not implemented. Therefore, he called for the urgent implementation of laws and policies pertaining to the benefit of workers.

...To be continued>>>

With Regards,

V.Sounder Rajan

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Summary Record of Discussion of the 44th Session of the Standing Labour Committee

We are concluding the Summary Record of Discussion of the 44th Session of the Standing Labour Committee held on 17th October 2011 at New Delhi under the Chairmanship of Shri Mallikarjun Kharge, Union Minister of Labour and Employment, Government of India, and its relevance to CLRA.

As already indicated, the Summary Record of Discussion of the 44th Session of the Standing Labour Committee held on 17th October 2011 at New Delhi, the major stress has been on the need to overhaul the CLRA.

Shri Indranil Sengupta, Additional Secretary, Govt. of West Bengal, emphasized the following points:

• The evils of retrenchment, lock-out, wage-cut, evasion of statutory contributions, and dues continue to affect industrial relations. There is no universal coverage of social security in a fruitful and effective manner. Minimum wages and other essential terms of employment are violated more often than not.

• There is no single document declaring a Labour Policy of the Government of India. A labour policy at the national level may set the right direction for bringing parity in approaches of the States as well as different stakeholders like Government, employers, and the workers.

• There is a need for legal support for the workers.

• National floor level Minimum wages should also be made enforceable as the bottom line throughout the country.

In his concluding remarks, Dr. Mrutyunjay Sarangi, Secretary, Ministry of Labour and Employment, congratulated the participants for their constructive suggestions in the area of skill development, employment generation, contract labour, minimum wages, and other issues related to the world of work. He highlighted that the work of the Ministry of Labour and Employment is vast in nature, which not only deals with the development aspects but also the regulatory aspects of the labour force. Finally, he stated that the success of various schemes of the Ministry depends heavily on the active participation of not only the social partners but also all the State Governments.

Shri Mallikarjun Kharge, Union Minister of Labour and Employment, in his concluding remarks, congratulated all the delegates for their active participation and valuable suggestions. He mentioned that the views of the stakeholders play a very important role in the decision-making of the Ministry and the inputs received from the speakers would definitely play a crucial role. He further stated that every year a sizeable number of workers get added to the labour force and if the Government does not take the challenge of imparting relevant skills to them, then the country might face a very difficult situation. Therefore, he reiterated that the involvement of trade unions and public-private partnership models will play a very crucial role. He also welcomed State Governments' participation for the effective implementation of various schemes. He further highlighted the sustainability of enterprises for achieving inclusive growth.

Shri Kharge informed the house that based on the general consensus, the three agenda items selected for discussion in the forthcoming 44th ILC are:

• Minimum Wages,
• Social Security, and
• Employability and Employment.

On account of the positive indications given by the 44th Session of the Standing Labour Committee, let all of us optimistically await the changes to the CLRA in 2012.

With Regards,

V. Sounder Rajan

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Revised Draft Labour Policy 2011 by Government of Maharashtra

We are highlighting that the Government of Maharashtra has issued a Revised Draft Labour Policy 2011.

Salient Features:

• Seamless Implementation of Labour Laws in Organized and Unorganized Sector: The Labour Management System (LMS) 'Mahashramm' is creating a facilitating environment for both labour and employers. The Labour Department, through its LMS 'Mahashramm,' would ensure seamless implementation of labour laws by:
- Mandating employers to file online returns, thereby enabling concurrent online monitoring of labour law compliances and reducing the need for inspections, creating a win-win situation for both employers and workers.
- The labour office, through the Labour Management System, shall monitor the implementation of labour laws in various shops-cum-establishments/factories.
- Automatic alerts will inform labour machinery on non-compliance of labour laws, and visits of labour machinery would be focused only on such non-complying units after they are given a reasonable opportunity to rectify.
- Providing facilities to employers to submit applications for licenses, renewal of licenses, registrations, renewal of registrations, exemptions, etc., online, thereby creating a favorable environment for industries and businesses.
- All software to monitor compliances and deliver services have been tested and standardized. The 'mahashramm.gov.in' website has been launched, providing services and monitoring dashboards. The Thane pilot of LMS has been completed successfully, and the LMS shall be rolled out to the entire state.

Financial Inclusion to All Workers:

To provide financial inclusion to all workers in organized and unorganized sectors (except domestic workers and agricultural workers):
- The Labour Department, through amendments in the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965, Maharashtra Gratuity Rules, 1972, the Maharashtra Workmen's Minimum House Rent Allowance Act, 1983, has mandated various payments to labour through cheque/bank account only. This shall be enforced effectively in both organized and unorganized sectors by registering all employers and workers under the Labour Management System, 'Mahashramm' Project.
- No-frill zero balance bank accounts for all labourers in organized and unorganized sectors will be opened to provide them financial inclusion through the 'Mahashramm' project.
- A network of 24,000 business correspondents will be created under the 'Mahashramm' project to enable easy withdrawal facilities for the labourers within a radius of 2 km from their workplace.

Strategy to Create a Win-Win Environment for Industry and Labour and Enable Economic Growth:

In each policy element discussed below, the Labour Department has carefully ensured that a win-win environment for the industry and labour is created:
- Service delivery levels have been defined in the citizen's charters, which have been worked out after mapping 400 processes and sub-processes and doing business process re-engineering to improve efficiency, cut short delivery timelines, and minimize errors.
- Services and their delivery levels are linked with the citizen's charter in the Mahashramm portal to generate automatic alerts in case of failures to meet the defined delivery levels.
- Employers, through the 'Mahashramm' project and 'Mahashramm' portal www.mahashramm.gov.in, will be able to submit online license applications, renewal of license applications, registration applications, renewal of registration applications, exemption applications, and any other applications required to be submitted online.
- Trade unions, through 'Mahashramm,' will be given the facility of online registration.
- Other services would be available online, including registration of certifying surgeons, submission of labour NOC applications, etc.
- Mathadi Act Amendment and an enforceable code of conduct for the trade unions have been proposed to facilitate industries without compromising on labour protection and welfare.

>>>to be continued

Regards,
V. Sounder Rajan
Advocate - Labour & HR & Consumer Law Consultant - Chennai

"The credit belongs to the man who is actually in the arena, who strives valiantly; who knows the great enthusiasms, the great devotions, and spends himself in a worthy cause; who, at best, knows the triumph of high achievement; and who, at worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who know neither victory nor defeat."
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Changes in Section 1(6) of the Payment of Wages Act

Recently, the Government of India issued Notification S.O. No.2260(E) dated 20th September 2012, amending Section 1(6) of the Payment of Wages Act. The monthly ceiling on wages is now Rs.18,000/- per month.

Effect of the Amendment

With this change, the provisions of the Payment of Wages Act do not apply to those drawing Rs.18,000/- per month and above. Only those below the ceiling will benefit from the provisions of the Payment of Wages Act.

Similar to the current increase by the Central Government, the Andhra High Court in the case of The Singareni Collieries vs. The Singareni Collieries Company, decided on 7th July 2011, HON'BLE SRI JUSTICE K.C. BHANU held:

“Therefore, when the Central Government issued a Gazette notification extending all the provisions of the Act to all classes of persons, it can be made applicable to all persons working in the first respondent company irrespective of their wages. While substituting the present provision under Section 1(6) of the Act, the statement of objects and reasons of the Amendment Act 1947 of 2003 is very clear that the then existing ceiling of Rs.1,000/- per month was last revised to Rs.1,600/- per month in 1982. Since then, a large number of persons have gone out of the purview of the Act due to successive rises in wage levels resulting from the rise in the cost of living. With a view to covering more employed persons, it is proposed to enhance the wage ceiling from Rs.1,600/- per month to Rs.6,500/- per month. So, the legislature thought it fit to regulate the payment of wages to certain classes of persons as indicated in this Act to benefit certain classes of employed persons.”

Further, His Lordship Mr. Justice K. Chandru of the Madras High Court in a recent judgment on 28.02.2011 in the case of P. Palani vs. The District Manager observed:

“Under Section 1(6) of the Payment of Wages Act, the Act has been made applicable to persons who are drawing wages not exceeding Rs.10,000/- per month, which limit can be increased periodically at intervals of every five years. The said notification was issued on 8.8.2007 by the Central Government's notification in S.O.1380 (E).”

Regards,

V. Sounder Rajan

Advocate - Labour & HR & Consumer Law Consultant - Chennai

Legal Consultant for Indian Staffing & Recruiting Industry

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Overview of Indian Contract Staffing (Labour) Law – Part IV

In continuation of our fourth part, it is noticed that somehow, the deployment of contract labour in India has been looked upon with an eye of distrust, suspicion, and as a tool for exploitation of labour. Therefore, the abolition of the contract labour system had been under the consideration of the Government of India prior to 1970. In the second Five Year Plan, the Planning Commission made certain recommendations to address the problems of contract labour with progressive abolition of the system and, wherever abolition was not possible, improvement of the service conditions of such contract labour. It must be borne in mind that the concept of a "Welfare State" was the edifice of the economic system until 1992 when the focus shifted to slow and steady globalization. Under the concept of a Welfare State, as enunciated in the Directive Principles of State Policy in the Constitution of India, it is the duty of the State to ensure a living wage and proper working conditions for the workers with full enjoyment of leisure, social, and cultural activities. Also, it became the duty of the State to take steps to promote the participation of labour in the management of industrial undertakings.

To trace the history prior to the enactment of the Contract Labour (Abolition and Regulation) Act 1970, the following developments are noteworthy:

- The 20th session of the Indian Labour Conference (1962) recommended legislative action to abolish the contract labour system.
- The Contract Labour (Regulations) Bill, 1964, was drafted and considered by the 22nd and 23rd sessions of the Standing Labour Committee (1964 and 1965).
- Keeping in view the opinions expressed by the interests concerned, the bill was suitably modified and was approved by the Cabinet on 22 June 1966.
- The Bill was passed by Parliament on 19 August 1970 and received the assent of the President on 5th September 1970.

The preamble of the Act states that it was passed as an Act to regulate the employment of contract labour in certain establishments and to provide for its abolition in certain circumstances and for matters connected therewith.

From the preamble of the Act, it can be gathered that the object of the Act is twofold. One is to regulate the employment of contract labour in certain establishments, and the second is to provide for its abolition under special circumstances. In short, the Act permitted the deployment of contract labour for casual, temporary, and intermittent jobs and, at the same time, regulated it and also empowered the Government to abolish such contract labour in a specified industry wherever it deems necessary by issuing a notification. Therefore, the Act by itself is permissive, regulatory, and prohibitory, all put in one piece of legislation. It is self-balancing in nature and a remarkable piece of legislation which has worked well for nearly 43 years since. In our next part, we will go through the salutary features of the Contract Labour (Abolition and Regulation) Act 1970.

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In the previous part, we highlighted the surrounding reasons and the chronology of the events that led to the passing of the Contract Labour (Abolition and Regulation) Act, 1970. Post-1968, the legal scenario changed. When, in 1970, the Contract Labour (Abolition & Regulation) Act was passed by Parliament, all outsourcing activities could be brought within the realm of the Act. For example, the definition of:

(i) "workman" means any person employed in or in connection with the work of any establishment to do any skilled, semi-skilled, or unskilled manual, supervisory, technical, or clerical work for hire or reward, whether the terms of employment be express or implied, but does not include any such person – (A) who is employed mainly in a managerial or administrative capacity.

The definition is so broad that it includes any contract employee or temp employed in connection with the work of any establishment to do any skilled, semi-skilled, or unskilled manual, supervisory, technical, or clerical work for hire or reward.

Additionally, the following explanatory definition is also included:

(b) A workman shall be deemed to be employed as "contract labour" in or in connection with the work of an establishment when he is hired in or in connection with such work by or through a contractor, with or without the knowledge of the principal employer.

This is where the catch is. In case a temp is employed as "contract labour" in or in connection with the work of an establishment and when he is hired in or in connection with such work by or through a contractor, with or without the knowledge of the principal employer, even if it is termed as a Service Level Agreement where the PE will feign ignorance of the temp, the temp will be reckoned as a contract worker.

The other definitions are also broad:

(c) "contractor," in relation to an establishment, means a person who undertakes to produce a given result for the establishment, other than a mere supply of goods or articles of manufacture to such establishment, through contract labour or who supplies contract labour for any work of the establishment and includes a sub-contractor.

Again, here too, the definition is broad. Whatever name you may call the Agreement, the term "Contractor" in relation to an establishment means a person who undertakes to produce a given result for the establishment, other than a mere supply of goods or articles of manufacture to such establishment, through contract labour or who supplies contract labour for any work of the establishment.

Similarly, the definition of Principal Employer is also broad and linked to the head of that office or department:

(g) "principal employer" means – (i) in relation to any office or department of the Government or a local authority, the head of that office or department or such other officer as the Government or the local authority, as the case may be, may specify in this behalf,

(ii) in a factory, the owner or occupier of the factory and where a person has been named as the manager of the factory under the Factories Act, 1948 (63 of 1948), the person so named,

(iii) in a mine, the owner or agent of the mine and where a person has been named as the manager of the mine, the person so named,

(iv) in any other establishment, any person responsible for the supervision and control of the establishment.

Since the PE is linked to the term "establishment," one needs to see its definition:

(e) "establishment" means – (i) any office or department of the Government or a local authority, or

(ii) any place where any industry, trade, business, manufacture, or occupation is carried on.

Strikingly, the definition of "establishment" is also all-inclusive and means any place where any industry, trade, business, manufacture, or occupation is carried on.

In our next part, we shall explain the most important provision of the Act, being Section 10, which is the prohibition of Contract Labour.

With Regards,

V. Sounder Rajan

Advocate - Labour & HR & Consumer Law Consultant - Chennai

Legal Consultant for Indian Staffing & Recruiting Industry

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Dear Staffing Industry Friends,

The Need to Record "Contract Staff Misconduct"

Being part of the Temp Staffing Industry since December 2005 and serving as a specialized pioneer for Legal Consultation to the Contract Staffing and Recruiting Industry players, we have observed that many clients in the Staffing Industry want to terminate Contract Staff due to disciplinary and performance-related issues.

For the Contract Staffing Company, the relationship is based on the Fixed-Term Contract. Many Staffing Professionals have initiated a debate on this issue, and we have faced many difficult questions from each of them. We believe that some innovation for this controversial topic is required as we acknowledge the legitimacy of the questions raised by Staffing Professionals pan India.

Understanding Temporary Employment

The concept of Temporary Employment needs to be understood by Contract Staffing Professionals. With a Fixed-Term Contract that includes provisions for Notice and Notice Pay, the Staffing Professional must understand that situations of Misconduct or Performance-related issues with the Contract Staff can be managed easily. In such cases, the following actions can be taken without referring to Misconduct:

• Issue a Notice of termination by providing the Notice Period;
• Issue a Termination letter by providing Notice Pay without any hesitation.

However, in all cases of misconduct or performance-related issues, the Clients, i.e., the Principal Employer, may not agree to either the Notice Period or Notice Pay. They may simply instruct: "Fire this guy!"

When the Client considers terminating the Contract Staff due to misconduct/performance-related issues, the matter should be examined from two standpoints:

(i) As per the conditions of the Appointment letter;
(ii) From the standpoint of the Shops and Establishments Act.

Termination, as per the Appointment letter, is only possible under the relevant clause provided in the Appointment letter. Such termination, known as Termination simpliciter, does not attribute any performance or discipline-related issues to the Contract Staff. This ensures a smooth exit for the Contract Staff, as discussing the Contract Staff's conduct or discipline may lead to stigma and harm their chances of future employment. Additionally, the risk of litigation or retaliation may become significant for the Agency.

To be continued.

Regards,
V. Sounder Rajan
Advocate - Labour & HR & Consumer Law Consultant - Chennai
Legal Consultant for Indian Contract Staffing & Recruiting Industry

Hi, may I know the governing laws in India for contractual employees who are working in the government sector? As these days, the government is hiring on a contract basis, please let me know the laws applicable in this situation in the case of the government sector. These employees are experts in different domains like finance, materials management, procurement, HR, etc.

Thanks.

Hi, may I know the governing laws in India for contractual employees who are working with the government sector? As these days, the government is hiring on a contract basis, please let me know the laws applicable in this situation in the case of the government sector. These employees are experts in different domains like finance, materials management, procurement, HR, etc. Thanks.

Here, what you are talking about is the Fixed-Term Employment on a contract; in such cases, the Contract Labour (Regulation and Abolition) Act (CLRA) is not applicable. The employment shall be governed by the terms and conditions of the employment agreement with the individual. Though in terms of benefits, the employee shall be entitled to all social security benefits like ESI, PF, Gratuity, etc. However, it's difficult to claim permanency in such cases, as after the expiry of the contract period, employment automatically comes to an end or if there is a stipulation in the appointment letter to this effect, "Like on hiring permanent employees, the position became redundant."

Regards.

[QUOTE=essykkr;2146991]Here, what you are talking about is the Fixed-Term Employment on a contract. In such cases, CLRA is not applicable. The employment shall be governed by the terms and conditions of the employment agreement with the individual. Though in terms of benefits, the employee shall be entitled to all social security benefits like ESI, PF, Gratuity, etc. However, it's difficult to claim permanency in such cases, as after the expiry of the contract period, employment automatically comes to an end, or if there is a stipulation in the appointment letter to this effect, "Like on hiring a permanent employee, the position became redundant."

Thanks.

Possibility of ESI and PF in Fixed-Term Contracts

What kind of possibility for ESI and PF is there if employment is under a fixed-term contract like one year, and after the expiry of the year, the same contract is renewed without any break, like ending on 30-09-14 and getting renewed on 01-10-14 in the government sector? Please clarify this.

Regards, KK

Contract Staff Misconduct – Part II

Being part of the Contract Staffing Industry since December 2005 and a specialized pioneer in Legal Consultation for the Contract Staffing and Recruiting Industry, we have noticed that many clients wish to terminate contract staff due to disciplinary and performance-related issues.

This is a continuation of the write-up (Part I) on the need to record "Contract Staff Misconduct." In our earlier part, we pointed out situations when clients in the Contract Staffing Industry wish to terminate contract staff on disciplinary and performance-related issues. For the client, they will simply inform the SPOC of the Contract Staffing Industry Professional that this contract staff needs to be fired immediately.

Now, for the Contract Staffing Industry Professional, he or she has to see it from the legal perspective:

For illustrative purposes, under the Shops and Establishments Act, specifically Section 30 of the Delhi Shops and Establishments Act, there are only two types of termination. The first type is termination with a notice of 30 days, and the other is termination for misconduct, wherein an opportunity is given to the temp to explain their conduct.

What Do Courts Say on This?

Courts of law have interpreted that "Termination for Misconduct on Performance-related Issues" can be done only after conducting a Domestic Enquiry. During the period of the enquiry, the Contract Staffing Industry entity has to pay the contract staff 50% to 75% of their salary and continue their employment during the enquiry as a via-media. For the Contract Staffing Industry Professional, all this may seem complicated.

How Does the Contract Staffing Industry Professional Handle This?

The branches of the Contract Staffing Entities must adhere to proper maintenance of contract staff files as they will serve as the basic record to compare performance and productivity of the contract staff well ahead and take steps such as collecting resignation letters or issuing termination letters with the correct notice period.

Open a Tracker?

Yes, for every contract staff, open a tracker on their conduct. Documenting contract staff misconduct and their discipline in a "Tracker" is paramount. Documenting these issues should not be considered an unpleasant experience for most supervisors and managers in the Contract Staffing Industry.

Over time, this documentation will definitely help the Contract Staffing Industry Professional clearly communicate to the contract staff that a certain type of performance or behavior is not acceptable. This interaction can help contract staff improve their performance or conduct to avoid termination.

...To be continued...

With Regards,

V.Sounder Rajan

Advocate - Labour & HR & Consumer Law Consultant - Chennai

First dedicated Legal Consultant for Indian Contract Staffing & Recruiting Industry

"An expert is someone who has succeeded in making decisions and judgments simpler through knowing what to pay attention to and what to ignore." - Edward de Bono

https://www.citehr.com/285737-legal-...-industry.html

Contract Staff Misconduct – Part II

Being part of the Contract Staffing Industry since December 2005 and a specialized pioneer in Legal Consultation for the Contract Staffing and Recruiting Industry, we have noticed that many clients in this sector want to terminate contract staff due to disciplinary and performance-related issues.

This is a continuation of the write-up (Part I) on the need to record "Contract Staff Misconduct."

In our earlier part, we pointed out situations when Contract Staffing Industry clients wish to terminate contract staff on disciplinary and performance-related issues. For the client, they will simply inform the SPOC of the Contract Staffing Industry Professional that this contract staff member needs to be fired immediately.

Legal Perspective for Contract Staffing Industry Professionals

Now, for the Contract Staffing Industry Professional, he or she must view it from a legal perspective:

For illustrative purposes, under the Shops and Establishments Act, specifically Section 30 of the Delhi Shops and Establishments Act, there are only two types of termination. The first type is termination with a 30-day notice, and the other is termination for misconduct, where an opportunity must be given to the temp to explain his conduct.

Court Interpretations

What do Courts say on this?

Courts of Law have interpreted that "Termination for Misconduct on Performance-related issues" can only be done after conducting a Domestic Enquiry. During the period of the enquiry, the Contract Staffing Industry entity must pay the contract staff salary, ranging from 50% to 75%, and continue the contract staff's employment during the enquiry as a via-media. For the Contract Staffing Industry Professional, all this may seem complicated.

Documentation and Record-Keeping

How does the Contract Staffing Industry Professional handle this?

The branches of the Contract Staffing Entities must adhere to proper maintenance of contract staff files as they will serve as the basic record to compare performance and productivity of the contract staff well ahead and take steps such as collecting resignation letters or issuing termination letters with the correct notice period.

Open a Tracker

Yes, for every contract staff member, open a tracker on his/her conduct.

Therefore, the need to document contract staff misconduct and their discipline in a "Tracker" is paramount. Documenting these issues should not be considered an unpleasant experience for most supervisors and managers in the Contract Staffing Industry.

Over time, this documentation will definitely help the Contract Staffing Industry Professional clearly communicate to the contract staff that certain types of performance or behavior are not acceptable. This interaction can help contract staff improve their performance or conduct to avoid termination.

..To be continued....

With Regards,

V. Sounder Rajan

Advocate - Labour & HR & Consumer Law Consultant - Chennai

IMPORTANT EPF CIRCULAR

EMPLOYEES PROVIDENT FUND ORGANISATION

MINISTRY OF LABOUR AND EMPLOYMENT, GOVERNMENT OF INDIA, DELHI

Ref. No. LC(637)2009/Vol.I/203- Dated: 27.05.2014

Subject: Filing of Review Petition against Judgement of Hon’ble Supreme Court of India in SIP No. 1205/2009 in the Matter of Marathwada Gramin Bank Employees Union Vs. Management of Marathwada Gramin Bank – Regarding.

Reference: This office letter No. LC-2(637)2009/MH/12780 dated 08.10.2013

Please refer to the above-cited letter wherein views on the issue of filing a Review Petition/implementation of the order dated 09.09.2011 of the Hon’ble Supreme Court of India in SLP No. 1205/2009 in the matter of Marathwada Gramin Bank Karamchari Sangathan & Ors. Vs. Management of Marathwada Gramin Bank, were called for.

The views expressed by the Zonal Addl. Central Provident Fund Commissioners as to whether a review petition needs to be filed or not have been examined at Head Office. After analyzing the pros and cons of the issue, the Competent Authority felt that there is no point in going for a review against the said judgement of the Hon’ble Supreme Court of India.

All the Regional Provident Fund Commissioners-In-charge of Regional/Sub-Regional Offices are, therefore, directed not to force employers to contribute over and above the statutory wage ceiling in respect of their employees. However, the option is available for the employees to contribute beyond the statutory wage ceiling if they so desire, subject to the conditions enumerated under para 26(6) of the Employees’ Provident Funds Scheme, 1952.

By implementing this Circular now, EPFO cannot force the contractors to contribute over and above the statutory wage ceiling in respect of their contract employees.

Regards,
(P.K. UDGATA)
Addl. Central Provident Fund Commissioner (Compliance)
Tel.: 011-26172672