Resolving Contractor Payment Discrepancies and Overtime Issues for Laborers

Dear All,

Our contractor has deducted overtime amounts from the salaries of laborers due to some discrepancy regarding the overtime amount; the company has not released the concerned sum. Now, we are facing a problem due to a shortage of manpower on a daily basis. How can we resolve this matter as it is creating an industrial relations issue?

Please advise on what actions to take. Can we compel the contractor to release the overtime payments to their laborers?

Thank you.

Please confirm if your company has any agreements with contractors related to wages and overtime.

Yes, as per Saroj Patel's reply, please refer to your agreement with regards to contractors' terms and conditions, if the agreement was made between the company and the contractor. According to the CLRA Act, the company had to release the OT payment. If any discrepancies are raised, they should be taken care of by the contractor and the company, but the laborers should not suffer.

I would like to know under which section of the act does it say that the company has to release payment to the contractor for overtime, despite discrepancies.

No, there is no agreement with the contractor related to wages and overtime. We are paying as per the minimum wages applicable in the state.

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If you have any more text that needs correction or further assistance, feel free to ask!

First, let's get your facts correct.

You have contract workers who are doing overtime, but they are not getting paid overtime because you have not released the overtime amount to the contractor. Now, contract workers are not willing to work in your factory.

First, I do not know why contract workers have to do overtime. You should instead ask the contractor to employ more persons for the additional work. Since there is no permanent liability for you, there is no problem in increasing the headcount. Further, overtime is at double the gross wages (doing double the basic plus DA is illegal) so it does not make sense.

If you do not pay the contractor, where is he going to pay the workers from? That is a normal business logic you need to understand. The legal aspect is secondary. He is not going to pay out of his pocket for your work.

Under the law, you as the principal employer are responsible to ensure that the workers get paid proper wages, leave, and statutory dues are deposited. So, you are liable for the unpaid wages. They can be recovered from you by the employees through the labor officer or court action. You can later recover that from the contractor by way of debts through a civil suit. However, that rarely materializes.

Actually, under the law, there is no provision directly to force the contractor to pay. Or more correctly, there is no provision for you to force him to pay. The workers can force him to pay by filing a complaint with the labor commissioner. However, as you are the principal employer and the client, you can definitely use other means of persuasion to get him in line.

You are definitely skating on thin ice. You should immediately enter into a formal agreement; your contract is putting all the relevant terms and conditions. In the current situation, you will have a problem enforcing any legal action against the contract. Therefore, you need to use your economic leverage against him. Even though it has been weeks since you have not bothered to pay him the overtime amounts. Please do not forget that anything you do that affects his ability to pay wages of the workers directly affects you, your work, reputation, and industrial relations.