Understanding Contractor Obligations: Are Regular Workers Considered Contract Labor?

Please clarify if a contractor engaged by a PSU for performing a job/contract and the contractor is engaging his regular workmen. In this scenario:

(a) Is the contractor supposed to obtain a license under the Contract Labour (Regulation and Abolition) Act, 1970?
(b) Is the contractor bound by the Contract Labour (Regulation and Abolition) Act, 1970?
(c) What will be the liabilities of the principal employer in this case?

Thank you.
Regards

It does not make any difference whether the workmen are hired for that specific job or the contractor executes the job through his own employees. After all, the work has been done by workmen hired by the contractor, and the workmen hired by the contractor shall always be employees of the contractor itself, whether hired for your establishment or another one. Kindly go through the definition of Contract Labour & Contract provided under the CLRA Act.

Definition of Contract Labour & Contractor

(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.

(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.

It is clear from the above definition that the job contract is also covered by the Act "undertakes to produce certain/given results for the establishment." The contractor shall be covered by the Act, needs to obtain a license, and comply with other provisions of the Act. The principal employer also needs to get a registration certificate and comply with other requirements as per the Act.

Regards,

Thank you, sir, for the reply. Actually, here in a PSU, we are facing such an issue. Some contract workmen were working at the site for a long period and were performing the same nature of job. The contractors would change, but the contract workmen would remain the same. Recently, a new contractor was engaged for the said job, and he says that he will engage his own employees and will not be able to engage these contract laborers who were working previously at the site. Now, these contract laborers are fighting for the same job at the same site as a matter of their right.

Please guide on what can be done in this case as per CLRA.

Complexity in Contractor Engagement Under the Contract Labour Act

The issue raised by you is very complex and difficult. As you will see in The Contract Labour (R & A) Act, 1970, there is no provision on the issue of whom the contractor should engage as his labor/worker. There also appears to be no provision on whether the new contractor will engage workers of the previous contractor. In such a situation, as narrated by you, the question will arise later on about the regularization of the contract employees as direct employees of the principal employer.

Relevant Judgments

On the above issue, there are some judgments of the Honorable Supreme Court of India, some of which are mentioned as follows:

- Deena Nath vs. National Fertilizers Ltd, 1992 LLR 46 (SC).
- Steel Authority of India vs. Union of India, AIR 2006 SC 3229.
- Gujarat Electricity Board vs. Hind Mazdoor Sabha, 1995, LLR 552, SC.
- R.K. Panda vs. Steel Authority of India (1994), 69 FLR 256 (SC).
- Bhilwara Dugdh Utpadak Sahakaris Ltd. vs. Vinod Kumar Sharma Dead by LRS & ORS (01.09.2011).

If desired, you can study the above judgments.

Regards,

Harsh Kumar Mehta

Understanding Contractor and Contract Labour Regulations

Your Query: Some contract workmen were working at the site for a long period and were performing the same nature of the job. The contractors would change, but the contract labor/workmen would remain the same. Recently, a new contractor was engaged for the said job, and he mentioned that he would engage his own contract laborers and not those who were previously working at the site on the Muster Roll of the previous contractors. Now, those contract laborers are fighting for the same job at the same site as a matter of their right. Please guide.

Position on Contractor Employment

A contractor is free to employ, on his/her Muster Roll, an individual he/she finds most suitable to work in the required designation for the given work-on-contract after obtaining the mandatory Labor License based on Form V issued by the Principal Employer/Establishment.

No contract laborer has any legally maintainable claim that the succeeding contractor must employ him/her in the said work of the establishment (now to be carried on by the new contractor/contracting firm) because he/she had worked on the same work of the establishment on the Muster Rolls of another contractor or contractors for any stretch of time.

Common Misunderstandings About Contract Labor

There is often a misunderstanding that contract laborers can claim continuity in a work of the establishment carried-on-contract. It is not so. The object of the Act was to streamline through regulation & abolition, the work to be or not to be outsourced.

Contract laborers have been "regularized" by the judiciary only when it was found without a doubt that the work of the establishment for which a contractor was engaged, and through him/her the contract laborers were employed, was a 'subterfuge', a 'sham'.

Determining the Nature of Work

The moot point is to ascertain whether the work in question is of a permanent and perennial nature or not as defined in the Contract Labour (Regulation & Abolition) Act and the rules made thereunder. It's time for you/your PSU organization to honestly answer this question in all earnestness.

Regards,
Harsh Kumar Sharan
Kritarth Consulting Pvt. Ltd
16.11.13, 9:45 a.m.