Facing a Huge ESI Penalty for Construction Workers: How Can We Resolve This?

Actually, I belong to the Façade Industry, which has its own manufacturing setup. At the same time, we also perform various kinds of job work at construction sites through subcontractors. Our factory is covered under the ESI, and we pay contributions as per the law. However, since we also work at construction sites, we do not pay their ESI contributions as construction sites are not covered under ESI. We are also registered under the BOCW Act and have WC for all our laborers.

During the ESI inspection, they raised a penalty of Rs. 10 lacs due to the non-contribution of ESI for construction laborers deployed by us for various kinds of job work, like the installation of glass and other related work. I request your valuable suggestions in this regard; otherwise, we will have to bear a huge amount of penalty. In my personal hearing, I contested the same, but according to them, we fall under ESI. Looking forward to your support.

Thanks and Regards.

Please provide the following details of your unit for which a claim has been made by ESIC so that we can offer any comments:

1. Name of the city where the main office of your construction company is located. Is it situated in an implemented area?
2. Name of the city/area where the construction site is located. Is the construction site in an implemented area?
3. What type of work is being carried out at your construction site?
4. Have you informed ESIC authorities that the labor/workers at the construction sites are not covered under the ESI Act? If yes, what is their response/opinion based on which the claim is considered justified/legally valid?

Please provide the above information at your earliest convenience.

Thank you.

Please indicate the following particulars of your unit in respect of which a claim has been made by ESIC so that we are in a position to offer any comments:

1. Name of the City Where Main Office is Located
Is it located in an implemented area?
Ans: Our manufacturing unit is situated at Manesar, Distt Gurgaon, Haryana.

2. Name of the City/Area Where the Construction Site is Situated
Is the construction site located in an implemented area?
Ans: NCR, Kolkata, Mumbai: Yes, implemented area.

3. Type of Work Undertaken at the Construction Site
Ans: Installation of Glass, Façade, ACP works, Fabrication, etc.

4. Communication with ESIC Authorities
Have you informed ESIC authorities that construction site labor/workers are not covered under the ESI Act? If so, what is their reply/opinion on the basis of which such a claim is treated by them as justified/legally valid?
Ans: We have not informed ESI about this since we were not aware of it.

Attribution: https://www.citehr.com/509607-esi-ap...#ixzz3HKaRQCs3

Dear Dhirender Singh Ji,

Regarding the applicability of ESIS in construction worksites, there have been numerous discussions on this forum, including some of my own. I would like to request you to carefully read the Circular by ESIC New Delhi - Construction 4/99 dated 14.06.1999.

Upon reviewing this circular, if your argument is that ESI is not applicable to construction sites at all, then that is incorrect. It appears that many individuals, including employers involved in construction, consultants, as well as ESI officers, have misinterpreted this circular.

In your situation, the ESI inspector is correct in requesting contributions for laborers you have deployed at construction sites for various types of work, such as the installation of glass and related tasks, in my opinion.

Regards.

I agree with the views of Sh. Korgaonkarji, and it is clear that the contribution in respect of the claims made by ESIC is payable by the company. This is based on the reason that the firm/company from which the contribution has been claimed is not a construction company but a firm manufacturing glass, etc. Only the employees of construction establishments working at construction sites are not coverable. However, the company/firm can reduce its liability by making payment of contribution on an actual basis, if the claims are raised by ESIC on total amounts paid for "Installation of Glass, Façade, ACP works, Fabrication, etc." and that too within the period before the final order is passed by the competent authority.

Dear Dhirender Singh ji, please find a link below containing good material to help understand the applicability of ESI to construction activities. It is essential to read all the posts carefully before drawing any conclusions.

ESI Applicability to Construction Companies

Please review the information provided in the link. Thank you.

I appreciate the comments given by Sh. Keshav Korgaonkar Sir that you have to critically examine the implications of the circular issued by ESIC New Delhi vide their no. 4/99 dated 14.06.1999 (Copy attached) and decide to what extent the order is applicable in your case.

Regards,
BS Kalsi

Dear HR Professionals,

Our factory building is under construction, and we have awarded the contract to a construction company. Could anyone please clarify if ESI and PF are applicable to the construction workers who are involved in the construction activity?

Please refer to the stay order issued by the Apex Court regarding the applicability of ESI to construction site workers.