Facing Contractor Non-Compliance in Mumbai: What Penalties Could a Principal Employer Encounter?

Dear Colleagues and Seniors, I need your views on the following situation faced at present in Mumbai. We are employing 3 Contractors under the CLRA Act 1970. These three contractors have not submitted their Monthly Remittances records to us under the Payment of Wages Act, Minimum Wage Act, Employees' Provident Fund and Miscellaneous Provision Act, and ESIC Act.

Consequences for Principal Employer

Presuming that they have not complied with the said acts:

1) What are the consequences that a Principal Employer will face in such a case?

Types of Penalties

2) What are the types of penalties and the exact amount that will be imposed on the Principal Employer?

Please help me in understanding this scenario. I will appreciate it if anyone can quickly respond to this request as it's an urgent matter.

Thank you in advance,

Regards, KUNAL V.

Dear Mr. Kunal,

You will be liable for penalties for non-paid compliances to the Principal Employer.

Regards,
Narendra
Mumbai

Responsibility for payment of wages under Section 21(4) of the CLRA, 1970

In case the contractor fails to make payment of wages within the prescribed period or makes a short payment, the principal employer shall be liable to make payment of wages in full or the unpaid balance due, as the case may be, to the contract labor employed by the contractor. The principal employer can recover the amount so paid from the contractor either by deduction from any amount payable to the contractor under any contract or as a debt payable by the contractor.

The principal employer shall also be liable to make payment in the case of EPF and ESIC and recover the amount so paid from the contractor's bill.

Regards,
Amit

Your post is full of assumptions and presumptions. As the Principal Employer, you are not able to categorically state the Compliance/Non-Compliance status of your three contractors. Please follow the due procedure of verifying records and fulfilling your liabilities and obligations as the Principal Employer. Kindly revert with factual information.

You are liable to pay and maintain records if the contractor fails. You do not need to worry regarding this matter if you have not paid the contractor for the service provided by him. Pay all the statutory deductions with penalty and deduct it from the contractor's bill. If you have paid the contractor and you are under pressure, insist the contractor to do it ASAP so the penalty amount will be low.

The Madras High Court recently held that liability for depositing PF
Contribution in respect of employees of Independent Contractors, who were allotted and have been holding their own PF Code No. – Not of Principal Employer but of the contractor.

Dear Mr. Kunal,

In case the contractor fails to make payment of wages and minimum wages, the liability will fall upon the Principal Employer. It is a well-settled principle of law that if the contractors have an Independent Code both under ESI & PF, then the Principal Employer will not be held responsible for non-compliance by the contractors.

In the case of contractors who do not have an independent code, the liability will be on the Principal Employer for non-compliance by the contractors.

P S Lakshmanan