Is CGIT the Right Forum for Contractor Bonus Dispute with Principal Employers?

Dear Patrons,

As everyone is aware, the Payment of Bonus Act was amended in 2015, with retrospective effect from 1.4.2014. Principal Employers (PE) are required to include in their tender estimates the bonus element at the rate of Rs. 11.21 per day for each worker, which is equivalent to 8.33% of Rs. 3500 per annum as per the pre-amended bonus act.

One of the PSUs acting as the PE refused to compensate the contractors for the difference in bonus amounts between 8.33% on Rs. 3500 and 8.33% on the Minimum Wage as per the Amended Act, for work orders starting from 2013 and also for work orders issued before the publication of the Amended Bonus Act.

In response, the contractors approached the offices of the Dy. Labour Commissioner, and conciliation proceedings were held with the ALC(C). Following the PE's refusal, the conciliation proceedings ended in failure, and the matter was referred to the Ministry of Labour, Government of India.

The Ministry of Labour referred the matter to the Central Government Industrial Tribunal (CGIT) to determine "whether the PE's refusal to compensate the contractors is justified."

Key Question at Hand

The key question at hand is whether CGIT is the appropriate forum to address this issue, given that it concerns a dispute between the PE and its contractors. My understanding is that CGIT typically intervenes in matters related to "Workmen" exclusively. Alternatively, the contractors may need to pursue a Civil Suit (although this is time-consuming). Furthermore, should the contractors opt for Arbitration Proceedings (as stipulated in the work order conditions), this would apply to each work order individually rather than collectively. However, the decision on this matter is of a policy nature and should be applied uniformly to all similar work orders.

Attached are copies of the referrals for your reference. Your insights on this matter would be greatly appreciated.

Regards,
PL Kanthan

Mr. P. L. KANTHAN,

Kindly go through the definition of the term "industrial dispute" under section 2(k) of the Industrial Disputes Act, 1947. There can be an industrial dispute between employers as well, in so far as it relates to the conditions of labor of any person. Is the payment of bonus not a condition of service?

Therefore, the Central Government Industrial Tribunal (CGIT) is certainly competent to adjudicate the dispute between a principal employer and the contractor engaged by him regarding the conditions of service of the contract labor.

Thank you very much for your advice/input in a nutshell.

Another issue:

Can PE, being PSU (NPCIL), include a condition in their NIT that PE will not compensate the contractor for National Public Holidays, such as Republic Day, Independence Day, and Gandhi Jayanti, in all its tenders, including tenders calling for M/Power deputation of 8 hr/day work converted or termed as "1 Task" for the purpose of billing?

Similarly, can they back out from compensating the contractors for Election Day, which is declared a Paid Holiday, for their work orders, including for M/P requirement? This condition is not mentioned in the tender and is not predicted by either party at any time. It can be a regular election or by-election.

Can contractors file a claim in CGIT directly against PE for these too?

Kindly advise.

Regards,
PL Kanthan

Dear Kanthan,

Whenever a contract for service is entered into between two parties, each will naturally try to maximize their gains. Every prospective contractor may have their own estimation of the manpower required to accomplish a particular task within a specific timeframe with the expected standards of execution. They arrive at the tentative minimum cost of the work and, based on such parameters, only fix the maximum tender value.

Every prospective contractor participating in the tender would have their own estimation based on the possibility of economy of operation to attain the expected standard of accomplishment at the end and arrive at the value of their minimum bid. Insofar as the engagement of contract labor in such a contract for service is concerned, if the prospective principal employer explicitly refuses to include certain legal costs of labor, like extra wages for working on holidays or wages for compulsory holidays declared by the operation of any special law, it would not be ethical to do so.

However, the prospective contractor cannot sue for this or initiate any legal action since no contractual relationship has emerged between them at this stage. At most, what they can do is to raise their bid amount or back out from the tender—that's all.

Dear Sir, thank you for your reply on Paid Holidays & Election Day.

There exist contractual relations between the so-called PSU and contractors on all the work orders issued since the end of 2018, in which the following issues have cropped up:

1. Unlike for the three National Public Holidays (26 Jan, 15 Aug, & 2nd Oct), compensation for Election Day (declared by the Election Commission of India as a paid holiday) is not mentioned in the NIT by the PSU. However, within a period of one year, two such elections have taken place, and another two are looming. For these, contractors also had to pay the workers engaged by the PSU through a contract. The contracts are not works contracts but pure manpower contracts termed differently.

Query

Can the PSU willfully defy the Fundamental Rights by not compensating for such National Holidays and declared Paid Holidays (as and when they occur), and whether CGIT can entertain this matter?

Thank you.

Regards, PL Kanthan