Does the CL (R&A) Act Apply to School Renovation Projects Outside Company Premises? Seeking Legal Insights

Please advise if a civil job contract for the repair and renovation of a school building, awarded to a civil contractor under the company's CSR project with a work order given by my company, would attract the provisions of the CL (R&A) Act. Please note that the entire work has been carried out in a school, a location outside my company's premises.

Please suggest if any other laws are applicable.

Regards,
DG

Dear DG,
The subject title of your thread is "Applicability of labour laws in a job done outside the company's premises."

Let me tell you first that the labour laws are applicable to you even if you carry out any work in your house or even on the road footpath, engaging even a single person. However, certain labour laws are applicable to you when you engage a specific number of persons as stated in that particular labour law.

Main Query Clarification

To my understanding, you are doing repairs and renovations at a school. You mentioned that this school is not within your company's premises. In this case, you want to know if the CLRA Act and any other labour laws are applicable to you.

The answer to your query is - YES. Not only the CLRA Act but all other labour laws that are applicable to the school are also applicable to you, including the BOCW Act, subject to conditions.

I request other members to continue this discussion. What are the labour laws applicable to DG, the query-er, and when? What are the obligations, duties, and responsibilities of him, etc.?

Regards

Basically, it is like the company has taken on a contract, and whether it is for charity or not, labor safety regulations must be followed. Therefore, all the laws that would typically apply to contract labor on-site are also applicable to off-site scenarios.

I agree with the comments on this. Is the purpose of doing CSR activities to take advantage and benefit by violating the laws? Just because some activities of a company fall under CSR activities, this is not a reason to violate the labor laws.

Warm regards.

If your company is supervising the work going on in the school, each and every labor law is applicable. Supervision and the source of payment are very important criteria to decide the Employer-Employee relationship.

Since you are supervising the work being carried out in the school and you are also paying the workers there, all workers/employees working there will be treated as your employees and are entitled to all statutory benefits, including ESIC, EPF, gratuity, etc. The CLRA Act will also be enforceable between your organization and the school management.

Regards,
Kamal

I think we are misreading the situation and the intent. The school where the repair work is being done is not an establishment under the Contract Labour Act. Even if it were, the principal employer would not be this company but the school management.

How the contractor is selected and supervised (by the school or company) needs to be checked before deciding who is responsible. How the payment is made is another consideration. If the contractor is being paid by the company, it may as well verify compliance with all labor laws. If the money is paid to the school and they are paying the contractor, then it is not the responsibility of the company to ensure compliance.

How many workers are employed? If it is less than 20, then the Contract Labour Act will not apply anyway (remember, it is location-wise).

Though the Contract Labour Act does not apply, the Building and Other Construction Workers Act (BOCW) applies. It is better to ensure that the contractor is registered and is paying the cess.

Intent Clarification

I think what DG wanted to ask is whether it is the responsibility of his company to monitor compliance and to follow the same level of rigorous enforcement that he does for contractors working for his factory. I do not think that the same level of compliance enforcement is required.

Dear Saswat and friends, Please note what has been submitted, especially the following: "under co's CSR project and work order given by my company."

Understanding CSR Projects

Hope you are aware that companies take up several kinds of projects under their CSR (Corporate Social Responsibility) activities, such as:

- Building public roads (with or without tie-up with PWD or other Govt dept)
- Building culverts; small bridges
- Putting up tube-wells
- Repairing or constructing school buildings; health centers; training schools/institutes
- Taking up several employment generation programs and training
- Building bus, rest shelters
- Small irrigation projects
- Adopting several villages

The list is almost endless. These are undertaken in rural areas where these companies are situated, which are generally in manufacturing, power projects, mining, and metals, etc.

An HR professional who has worked only in metros or in sectors such as hospitality, real estate, education, IT, etc., and in companies governed by the Shops & Establishment Act may not have even heard of these things or activities undertaken by companies. Here, everything is the company's responsibility, and there is no role of the school or the beneficiaries in the administration of the scheme and paying its expenses. They are simply the beneficiaries. Perhaps, this may sound bizarre to the uninitiated!

Medical and Community Health Drives

Going further on this, companies also undertake Medical and Community Health drives regularly, in and around several villages, such as:

- Weekly medical camps for diagnosis, treatment, and distribution of medicines
- Special annual camps for cataract surgery
- Periodic vaccination and immunization programs
- Ambulance services for emergencies, including childbirth
- Malaria and mosquito eradication

Going by the above logic - that legal compliance is not required for CSR work outside the company - a company for its medical and health activities can employ UNQUALIFIED DOCTORS for such activities?

Let us not make such ASSUMPTIONS, which not only border on absurdity but are potentially illegal. It may kindly be noted that every company is bound to ACT LEGALLY and cannot commit any illegal act. (Although it is another thing that any entity can break the law and commit illegal and immoral acts.)

Warm regards.

Dear DG,

The applicability of any enactment to a job or work depends on several factors, such as:

1. **Nature of Employment:** Permanent or Contractual
2. **Number of Persons Employed:** 20 or more (CLRA applicable), 10 or more (BOCWA applicable), 5 or more interstate workmen (Interstate Migrant Workmen Act applicable)
3. Apart from License or Registration, there are certain acts that are always applicable to all jobs or works, such as the Minimum Wages Act, Payment of Wages Act, etc.
4. **Period of Work:** Bonus Act
5. **Type of Workmen Engaged (Male/Female):** Maternity Benefit Act, Equal Remuneration Act, etc.
6. **Social Security:** EC Act, ESI Act, EPF Act, etc.

You are requested to analyze the above first to check the applicability of any enactment on your said job or work.

Regards,
DG

We should try to provide correct answers for the queries rather than attempt guesswork and confuse the person who seeks guidance and more information. HR is a vast field, and a person cannot possibly have experience in all sectors and industries, their specialties, or peculiarities. This is the reason that these days HR has become a very niche career; for example, companies in IT or Medicine will prefer people having experience in that sector only.

What has been stated earlier by me is something which any person who is exposed to CSR activities of any good and big company (as CSR activities worth the name are undertaken only by such companies) will be able to understand and appreciate. I have only tried to present the correct picture to those who would like to know what actually happens during CSR work and how companies implement it.

Relevant Information to Note

The Work Order has been taken out by the Company and given (i.e., awarded) to the Company's contractor. It stands to reason that any contractor of a company must be registered under the C L (R&A) Act unless, of course, we are talking about a small proprietary outfit sort of company, in which case it is difficult to imagine them doing such CSR work. In any case, whether it is CSR work or otherwise, the provisions of the Act are applicable, and simply saying it is CSR work or discussing the STATUS OF THE BENEFICIARY - whether a school or a village and villagers - is not acceptable and relevant.

Clarification on CSR Activities

In any CSR activities, the entire responsibility, from financing, implementation, supervision, handing over, etc., vests with the company. It does not matter what is the NATURE OF THE SCHOOL. The School has no relevance or any role to play in the administration of activities. The school is only the BENEFICIARY and has no effective say in this matter except refusal to be a part of the company's CSR work. As a matter of fact, in several primary schools in the tribal and backward regions of the country, the poor headmaster or teachers of the school do not even know how things are being done for their school. These are the practical realities that one experiences while undertaking such works.

Moreover, the SDM/DM of the subdivision/District and the Labour Department keep a hawk eye on such activities, so it is all the more necessary to abide by all the legal provisions. In case there are still some doubts on this, the matter may be clarified with the CSR department of any renowned company. (I have had the experience of working in three states with three different blue-chip companies).

Further, I invite more comments on this from CSR professionals who have worked on CSR projects of their companies. I apologize if it hurts the feelings of anyone. My attempts are only to give proper direction and firm factual footing to this discussion, which shall help in enhancing the knowledge of our members.

Warm regards.

I appreciate the posting by Raj Kumar ji, our senior member and super moderator, elaborating on CSR projects and value addition in the discussion. However, I have to differ with one of the senior members, Saswata ji, with due respect to him.

Definition of "Establishment" under CLRA

"Establishment" under CLRA 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. On what basis can we say the school where the repair work is being done is not an establishment?

Definition of "Principal Employer" under CLRA

"Principal employer" under CLRA 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. Even the company can be a PE. It depends on how you take it. The company can assume its establishment on the premises of the school for repair work since it has issued the work order and is responsible for the supervision and control of the establishment, i.e., repair work.

Compliance Enforcement

Under what provisions is such relaxation allowed? This submission aims to have more clarity on the subject and nothing else.

I put in another post after that where I specified why I think this will not come under the Contract Labour Act. Please see that and let me know if you agree. (It's mostly about the definition of establishment and the concept of intermittent work).

Assuming that I am right about it, there is the question of why the level of compliance verification can be relaxed. Note: I am not saying that compliance is not required. Compliance with all labor laws is required by the contractor. What I was referring to is the legal responsibility of the company to ensure compliance.

In the case of work done in the factory, the company as the principal employer is responsible for ensuring ALL the labor laws are complied with in full. The wording of the acts and the stand taken by the courts are such that the principal employer is liable for everything.

In the case of this particular CSR activity, it is being done in a place other than the factory. It is not an establishment under the Contract Labour Act; therefore, the principal employer is not supervising the activity or monitoring it closely (can't) since they do not have an active setup of managers, security, safety officers, grievance mechanism, etc.

Some basic and important things need to be monitored in any case (referring to my earlier post) like minimum wages, PF, ESIC, proper attendance. Since this is a large company (otherwise they would not be doing CSR) and a responsible citizen, they will try to ensure that workers are not exploited (again not strictly specified in the act). So they will send the safety officer from time to time to check if safety measures specified are followed, that work shifts are not more than 9 hours a day (or as allowed in the BOCW Act), that rest interval is provided. For this, they will check that systems and general practices are followed.

Let me take an example. Use of PPE - safety lines, hard hat, gloves, safety shoes. In a factory, they would be checking and ensuring that contract workers are wearing them all the time. If not, that person may be removed from work until they get their PPE. This they do not do because the act says it, but because in case of an accident, they will be held responsible and will have to pay worker compensation. By enforcing the use of PPE, they are minimizing the risks.

If the same thing happens at the school where repair is going on, and there is an accident where (say) someone is hurt because something fell on their toe and they were not wearing safety shoes. Will the company be held responsible? No, they would not. They will have to ensure compensation is paid, mostly from ESIC. But they are not directly responsible because the place is not under their supervision.

Take another case, let's say there are cases of workers being denied a weekly off, but the attendance register shows they are not working on Sunday. If this were in a factory, the company is directly responsible and will be answerable as to why they allowed it to happen, why they didn't prevent it. But if it happens at the school, the contractor will still be liable and answerable, but the company will be able to defend itself by showing adequate checks were put in place. However, since they are not present at the school, they could not discover that the attendance records were fraudulent.

I hope my point is clear. Please let me know your views, especially if your experience shows that my assumptions are wrong.

Applicability of Labor Laws in CSR Projects

Coming back to your original query, below is a brief of the suggestions on the applicability of labor laws in your case:

- The venue where the work is done, such as inside the factory premises or in any open areas or any other areas (for example, loading and unloading material from and to the nearest rail-head—which may not lie within the premises of the company), does not make any difference to the liability of the laws.

- In other words, the Principal Employer (having awarded the work to a contractor) cannot escape his liability under the Act, either on the pretext of:
- The work is not being done inside his premises (if this is the case, every company will take their work outside their premises or hire others' premises), or
- He has no information on how the work is being carried out. Ignorance of the law or simply saying "One is not aware" cannot be an excuse under the law and does not allow anyone to escape one's liabilities.

Thus, the relationship and obligations of the Principal Employer continue irrespective of where the work is being carried out, whether it is out of the premises, in an existing school, or an open ground, etc.

Hope this helps in clarifying your doubts and avoiding non-compliances of any such laws.

(Although several CSR works in recent times by some companies are more of a scam conducted for embezzlement of funds or publicity, with the collusion of several agencies involved, rather than genuine philanthropy work. Any violation of law cannot be suggested or recommended.)

Warm regards.

Dear Mr. Banerjee,

I would like to put forth my submissions in this matter, which are as follows:

1) Whether it is a factory, establishment, or site, the Principal Employer (PE) is always responsible for enforcing compliance. While issuing Form V, the PE undertakes to follow the provisions of the CL(RA) Act. (Please refer to the contents of Form V.) The PE has to ensure that the contractor is complying with applicable laws.

2) Enforcing/ensuring a safe working environment through the contractor is also the responsibility of the PE.

3) It is correct that legal/criminal responsibility for any violation with respect to safety & compliance will go to the contractor instead of the PE, and only financial liability may come to the PE.

4) The PE has to ensure that workmen are paid as per applicable rates within a stipulated timeline.

5) Ensuring social security for workmen via ESI, Employees' Compensation, and EPF is also the responsibility of the PE.

6) Taking due care, ensuring maintenance of relevant records, ensuring submission & deposition are also part of the PE's responsibility.

Please note that authorities may approach the PE for ensuring compliance at the site in case subcontractors are not complying with applicable labor laws.

The PE can't escape by stating that it's not a factory/establishment, etc., as "Ignorance of the law has no excuse."

It is better to be safe than sorry.

Regards

Understanding the Contract Labour Act and Its Implications

There is a specific clause in the Contract Labour Act (definition of contractor worker) which clearly excludes the workers who are working outside the said premises from the coverage of the Contract Labour Act. The wording used is "out worker."

That is why most companies use vendors to do part of manufacturing and sub-assemblies because they do not come under contract labour. If the work is done outside the premises under the control of the principal employer, it does not come under the Contract Labour Act, and the compliances required are not applicable. There are a number of judgments in support of this.

Dear Mr. Banerjee, you are clubbing two issues here. We are referring to the engagement of contract workmen for CSR & related issues, while you are unnecessarily adding manufacturing and sub-assemblies by vendors, which they normally do on their premises. Such activities are supposed to be considered as mere supplying of goods, nothing else.

I sincerely request you to please interpret the definition of a contractor in the right perspective and also note that the definition of a contractor includes subcontractors. You are also requested to share case laws.

Regards.

I agree with the comments of Mr. Kapil Dev Singh and Mr. Koragaonkar. Supplying goods and services, as in outsourcing services, is different from the work undertaken by the company and assigned to its contractors under a Work Order. In the latter case, even from the view of Civil and Criminal Laws (apart from the specific Acts of Labour Laws), the Principal Employer cannot escape its "VICARIOUS LIABILITIES."

Bhopal Gas Tragedy Example

This is the reason (or logic) that in the Bhopal Gas Tragedy, Warren Andersen, the Chairman and CEO of Union Carbide Corporation (UCC) in the USA, could not escape their vicarious liabilities and were pursued under the law, as it was under their control that the Indian subsidiary Union Carbide of India Ltd (UCIL) functioned.

Ethical Company Practices

If a company is ethical and respects the laws in spirit, then it should not even attempt to think of ways or loopholes to avoid legal liabilities; otherwise, there are violations galore that one comes across in the news every day.

Warm regards.

I agree with you and appreciate your discerning objectivity in distinguishing and pointing out the two situations. In the case of out-workers under Sec. 2 (1)(c) of the CL(R&A) Act 1970, a person to whom any articles and materials are given out by or on behalf of the principal employer to be made up, cleaned, washed, altered, ornamented, finished, repaired, adapted, or otherwise processed for sale for the purposes of the trade or business of the principal employer, and the process is to be carried out either in the home of the out-worker or in some other premises, not being premises under the control and management of the principal employer, they are not covered.

It may be noted that these are the work or processes related to or "for the purposes of the trade or business of the principal employer" and can be carried out either in the home of the out-worker or in some other premises, not being premises under the control and management of the principal employer.

Just the fact that "some other premises" is mentioned should not lead us to jump to a fixed conclusion.

The nature of the above work related to "out-worker" is entirely different. The purpose or the nature of work being performed also has to be seen together with the "premises."

By no stretch of imagination can a CIVIL CONSTRUCTION WORK, assigned to a Civil Contractor of the company through a Work Order, escape the scope of the CLAR Act just because it is being CARRIED OUT IN PREMISES OUTSIDE THE COMPANY.

If this be the logic, then ALL INFRASTRUCTURE COMPANIES carrying out the construction of Roads and Highways, Bridges, Townships, Real Estate, Hospitals, etc., will escape from being covered under the CL(A&R) Act because they are working either through their contractors/sub-contractors in PREMISES OUTSIDE THEIR COMPANY OR CONTROL! We all know this argument prima facie appears ridiculous.

Thus, it stands to reason that a Company intending to do a job of Civil nature, namely construction of a School building, through a Work Order in favor of a Contractor, irrespective of the purpose of work—whether for CSR, Employee Welfare, or for Profit—shall be covered under the provisions of the said Act.

Warm regards.

Can you please provide a reference to a court judgment which states that "If the work is done outside the premises under the control of the principal employer, it does not fall under the Contract Labour Act, and the required compliances are not applicable."

Regards,
Kamal

Give me a day; I will get a copy for you. I need to ask someone in the office to search it out.

Dear seniors, the thread has really gathered good inputs. From all posts, it seems that there is no difference of opinion about the obligation of the company (principal employer) to comply with CLRA and all other relevant acts where the company has directly issued a work order to the contractor.

Practical Necessity

But... the unrevealed query really is, PRACTICALLY, IS IT NECESSARY? There are different routes adapted by the company for CSR like directly undertaking welfare/developmental work, through an NGO sponsored by the company, or just giving financial aids to the body/institute to whom they want to extend help.

For time-bound CIVIL work, if you see practically... there is a huge labor turnover, laborers are migrants, and keep changing the contractors. The company that spends a huge amount towards CSR might definitely have no intention to make any malpractice by not complying with the law.

Who Benefits?

But effectively, who will gain in such typical types of labor and contracts (the money PE deposits to the government)? Better ensure payment of fair wages and good and safe working conditions for such laborers BY NOT ISSUING WORK ORDER ON BEHALF OF THE COMPANY BUT GETTING IT DONE THROUGH AN NGO OR ANOTHER BODY OF LOCAL SELF-GOVERNMENT KIND... AND AVOID AVOIDABLE OBLIGATIONS... WHEN YOUR INTENTIONS ARE NOT MALICIOUS AND YOU ARE NOT STEALING FROM THE PORTION OF THE LABORS. MAY ENSURE THEY ARE INSURED AND THEIR PORTION OF PF IS ALSO COMPENSATED SOME OR ANOTHER WAY BY THE CONTRACTOR. (since the contractor is finally going to claim from the company).

Regards,
Shailesh Parikh
Vadodara, Gujarat
[Phone Number Removed For Privacy Reasons]

Dear friends actively contributing to this discussion,

I am afraid that the thread started by D.G is turning into a hotchpotch because of the protracted arguments and counterarguments. The questions posed by D.G are very simple ones in totality—when a business enterprise undertakes a project totally unrelated to its normal business activity in terms of the project's nature and place of execution under its scheme of CSR, is it bound to observe the Labor Laws if any, applicable? To me, the answer is 'YES'. Simply donating the money to the beneficiary to carry out the task himself is a different thing. But, as a benefactor, obviously to ensure proper utilization of the funds donated and effective and timely execution of the work, when the benefactor/business enterprise directly executes the project by engaging a contractor depending upon its scale or size, it automatically assumes the legal responsibility to comply with the provisions of Labor Laws, if any applicable. But to what extent depends upon the deed of the contract to be made in this regard I suppose. Maybe it is a tripartite contract involving the benefactor, beneficiary, and the contractor. Since the beneficiary being an educational institution, it is an industry and as such whether the B.O.C.W Act or C.L.R.A Act or the E.C Act, whatever it is, the project is bound by the applicable labor legislation—that's my humble submission.