What Can Happen if Employers or Contractors Skip Proper Registration Under CLRA?

Question 1: Actions by the Labour Commissioner on a Principal Employer Without a Registration Certificate

What are the possible actions by the Labour Commissioner on a principal employer who has not obtained a Registration Certificate under Section 7 of the Contract Labour Act?

Question 2: Actions by the Labour Commissioner on a Contractor Without a License

What are the possible actions by the Labour Commissioner on a contractor for not obtaining a license under Section 12 of the CLRA but deploying more than 20 contract labours?

Question 3: Actions by the Labour Commissioner on a Principal Employer Exceeding Registration Limits

What are the possible actions by the Labour Commissioner on a principal employer for obtaining a Registration Certificate for 200 CL but engaging 400 CL on a regular basis?

Liability of the Principal Employer for Non-Compliance

The Principal Employer is 100% liable for penalties and penal actions in respect of non-compliance by any contractor engaged by the Principal Employer under the CL (R&A) Act, besides the contractor for blatant breach of legal provisions.

Kritarth Consulting Pvt Ltd, Bengaluru Office, 26.7.20

The effect of non-compliance by the principal employer

The effect of non-compliance with the provisions of registration by the principal employer is twofold. First, the principal employer can be prosecuted under Section 24 of the CLRA Act, 1970, by the enforcement officers under the labor commissionerate. This may include imprisonment, a levy of penalty, or both. The second and most important consequence is that the entire contract labor would be deemed as the direct employees of the establishment concerning all employment benefits and all other statutory purposes.

The reader can refer to Section 23 of the Act regarding the punishment for the violation of any license conditions by the contractor, which is similar to that under Section 24.

Legal Position on Engagement of Contract Labour Without License

The earlier legal position on the engagement of contract labour (CL) without a license or registration was that such engagement was considered a sham, and the contract labour should be regularized. However, now only penalties are imposed. It is still advised that the principal employer (PE) obtain registration and engage contract labour only through contractors with a license.

Regards, Varghese Mathew

[Phone Number Removed For Privacy-Reasons]