Understanding Form IV Requirements: When Must Contractors Apply for Labor Licenses?

Contract Labor and Form IV Requirements

I work in a company where we employ contract labor from two contractors:

- Contractor A: 12 laborers
- Contractor B: 11 laborers

Contractor A has a total of 45 contract laborers (including those working for our company). However, Contractor A has not obtained Form IV. When we ask for it, they claim that since they are providing less than 20 laborers to our company, they are not obligated to apply for Form IV under the act.

Clarification Needed on Form IV Application

Is Contractor A correct in their opinion? Can you also clarify when a contractor must apply and the limit regarding the number of laborers for applying for Form IV?

Is it necessary for the contractor to file Form IV separately for each establishment they are providing labor to? What happens if the number of laborers supplied falls below 20 for each company?

Please reply back promptly.

Awaiting your response.

Contractor Licensing and Registration Under CLRA Act

In the present case, none of your contractors needs to take a license. At the same time, you are bound to take registration under the CLRA Act. Registration under the CLRA Act is required for the principal employer if they engage 20 or more laborers through contractors. Since you have engaged 33 laborers through two contractors, you need registration.

A license under the Contract Labour (Regulation and Abolition) Act is required for a contractor who places at least 20 employees in one establishment. Since Contractor A has engaged only 12 and Contractor B has engaged only 11 persons, neither is under any statutory obligation to apply for a license.

The license is principal employer-specific and is obtained only if applied in Form IV along with a certificate from the principal employer in Form V, which states that they have been appointed as a contractor for engaging contract workers. Therefore, a contractor has to take separate licenses for separate principal employers.

Regards,
Madhu.T.K

I am really glad for your reply. This is the answer provided by a senior person on another website. Both your views and his views are divergent in this respect. So, can you please go through the answer given by him and provide your guidance in this regard?

Contract Labour (Regulation and Abolition) Act 1970

According to section 1(4)(b) of the Contract Labour (Regulation and Abolition) Act 1970, this Act is applicable to every contractor who employs or who employed on any day of the preceding twelve months twenty or more workmen.

License Requirement Under Section 12

According to section 12 of the Contract Labour (Regulation and Abolition) Act, every contractor to whom the Act applies can undertake or execute any work through a contract except under and in accordance with a license issued in that behalf by the licensing officer.

If the above two sections are read together, it would be seen that these two sections do not refer to the "Principal Employer". Further, if the contractor employs 20 or more workers, he has to take out a license. The Act does not say that only if the same contractor undertakes to supply 20 or more contract workers to a single principal employer, the contractor has to take out a license. The grammatical interpretation of section 1(4)(b) read with section 12 is that if the contractor supplies less than 20 contract workers to individual principal employers but on the whole, he is supplying 20 or more contract workers to more than one principal employer, then he should take out a license under the Contract Labour (Regulation and Abolition) Act.

I would prefer to take you to the same sections along with the relevant Rules framed in which it is said that the application for a license (the license is for the contractor whereas the Principal employer is expected to take Registration and not a license) is issued subject to the Principal employer issuing Form V to the contractor. Form V is an undertaking by the Principal employer declaring that so-and-so person (contractor) has been appointed by him.

A contractor, like any other person, can employ any number of persons, and unless any of these is engaged for another employer (Principal employer), the question of CLRA does not arise. Now, when his employees work for another, only the issue of contract labor arises, and it is from this act of letting his employees for that other person (Principal employer) that he becomes an intermediate employer. Section 1(4)(a) states that the CLRA Act applies to establishments which engage 20 or more contract workers, and section 1(4)(b) states that it applies to every "CONTRACTOR" who employs 20 or more... Now see the definition of a contractor as given in section 2 (c), which says among others one who supplies labor for the establishment.

If a contractor is one who supplies manpower, the engagement of manpower at the principal employer's place is the main factor that decides the contract, and in this exercise, the number of employees employed by him for working for him and not for another person is immaterial. This is the interpretation I could draw from the Act.

Regards, Madhu.T.K

Thank you for your valuable interpretation and speedy reply. Can you please draw a conclusion for this case? Is Contractor A bound to apply for Form IV? Is there any limit for the number of laborers under which he has to apply? I mean, as he has provided 12 laborers, is he required to apply for Form IV?

I have already stated that the contractor is under no obligation to take a license, but you have to register since you engage 20 or more people from all the contractors taken together.

Regards,
Madhu.T.K

Labor License Requirements Under the Contract Labour Act

The conditions for obtaining a Labour License under the Contract Labour (Regulation and Abolition) Act, 1970, and the State Rules vary from state to state. In Gujarat, a Labor License is required for engaging 10 or more contract laborers. Additionally, a Labor License may be obtained by the respective contractor even if they engage fewer than the prescribed limit, provided the Principal Employer is registered under the said Act.

Regards,
RKB