Do All Contractors Need a Labor License if Only Two Have Over 20 Workers?

Contractual Obligations and Labor Licensing

ABC Company has given a contract to XYZ Company. XYZ Company has then subcontracted the same contract to 10 contractors. The total workforce of these 10 contractors is 110, with only two contractors employing more than 20 workers, while the remaining 8 have fewer than 20 employees. In response to XYZ Company's request, ABC Company has issued Form III to the 2 contractors whose workforce exceeds 20.

Questions on Labor Licensing

a) Does XYZ Company need to obtain a labor license?

b) If XYZ Company is hesitant to acquire a labor license, do all the remaining 10 subcontractors need to obtain one, or only the two contractors with more than 20 employees?

Please advise accordingly.

Liability for Labor License under CLRA Act

ABC Company is a Principal Employer (PE), and XYZ Company is a contractor under the CLRA Act. ABC Company is liable to issue Form V to the contractor, XYZ Company. Certainly, contractor XYZ Company is liable to take a license since 110 laborers are engaged through various subcontractors.

XYZ Company cannot legally claim that it will not take a license and that the subcontractors will take it. However, I have seen the practice of issuing labor licenses to subcontractors in some places. In my view, this is the wrong practice. In India, "SAB SE BADHA RUPAIYA."

Please let me know if you need any further information.

Thank you.

Principal Employer and Contractor Roles Under the CLRA Act

ABC Company, for whom the work is performed by contract labor through any contractor, is the principal employer under the CLRA Act, 1970. XYZ Company, being a contractor to ABC, is the contractor under the CLRA Act. Therefore, one cannot be a principal employer and contractor at the same time.

First of all, it is the discretion of the principal employer to permit subcontracting of certain works. If they do so, they are also liable for the omissions and commissions of the subcontractors under the Act. In such cases, only the principal employer has to issue Form V to the subcontractors and not the main contractor.

Definition and Licensing Requirements for Subcontractors

If you look at the definition of the term "contractor" under section 2(c) of the Act, it includes a subcontractor as well. Therefore, if any subcontractor employs 20 or more workers independently, they have to obtain a license and adhere to other formalities. However, when the main contractor obtains a license for the total number of contract labor employed, including the subcontractors' workers, the subcontractors do not need to obtain separate licenses.