Navigating Supplier Accidents: Who's Responsible and What Steps Should We Take?

I have suppliers in an outside company. We have a written agreement for material supply. In this regard, suppliers' employees have ESI & EPF compliance fully in place. However, if an employee comes to supply under my premises and there is an accident, who will be responsible? What procedure should we follow, and who should notify the government officials?

We have an umbrella contract in the company, and we are pushing suppliers to operate under this umbrella contract. The umbrella contract checks ESI & EPF compliance thoroughly, but it's only for verification. In the event of an accident, what further processes should be followed? Can someone experienced in this field explain?

Dear Sapthagiri,

According to the Contract Labour Act, the ultimate responsibility falls on the principal employer if the same is not provided and fulfilled by the immediate employer. This includes providing shelter, restrooms, canteen facilities, first aid, ensuring safety, timely wage payments, compensation, and compliance with statutory regulations.

Thank you for your attention to this matter.

Best regards

Dear Sapthagiri, if you go through the definition of the term "contractor" under Section 2(1)(c) of the CLRA Act, 1970 a little more carefully, I think you can find the answer yourself. The definition encompasses only those contractors who commit to producing a specific result for the establishment through contract labor or who provide contract labor for any work of the establishment, including subcontractors. Furthermore, the definition explicitly excludes individuals with any contractual obligation to supply goods or manufactured articles.

The supply of materials can be facilitated either through third parties like courier services or by direct personal door delivery, depending on the terms of the material supply contract between the establishment and the supplier. In both scenarios, the employment of human labor is inevitable. Consequently, neither the contractee/establishment becomes a "principal employer" nor the contractor/material supplier becomes a "contractor" under the CLRA Act, 1970.

The employment accident risks faced by the material supplier's employees must naturally be borne by the material supplier alone.

Query itself is incomplete, though after repeated reading it is still hard to understand that the person who got injured in goods handling belongs to:

a) supplier
b) recipient
c) logistic channel partner

And to whomever it would belong, the principal employer has to ensure that they maintain the labor law formalities; otherwise, accept the responsibility for the same.

In simple terms, if it is to be explained, in the case of a failure of the contractor to fulfill his legal responsibilities stipulated under the Contract Labour Act, the principal employer is held accountable. I hope my learned colleague will agree.

R. R. Kapoor
Vadodara

Dear friends,

The liability imposed upon a Principal Employer under the CLRA Act, 1970, for the omissions and commissions of a Contractor affecting contract labor is in the nature of vicarious liability only. However, such vicarious liability arises only when there exists a relationship of Principal Employer and Contractor between the parties. As the contract to supply materials mentioned in the post is not a contract contemplated by the Act, there is no possibility of charging the Company, which is just a contractee, with accountability for any accidents likely to happen to the supplier's employees during the course of their employment.

If the contractor has insured his employees under ESI, then the PE need not worry. The contractor has to report accidents. PE should incorporate necessary conditions in the contract.