Navigating Labor Licenses: Who's Responsible When Contractors and Subcontractors Are Involved?

Responsibility for Obtaining a Labor License

If an organization appoints a contractor to execute a job, and the contractor further appoints subcontractors to carry out the prescribed job, who is responsible for obtaining the labor license?

Acceptability of Subcontractors' Labor License

If the labor license of the subcontractors appointed by the contractor is acceptable, what steps should be taken?

Compliance with Labor Act and Communication

The appointed General Contractor states that he has several contractors, and if the labor strength exceeds 20, they will obtain the labor license. Is this arrangement compliant with the relevant act? In such a scenario, how should the organization communicate with the contractor?

Q1. Responsibility for Obtaining the Labor License

If any organization appoints a contractor to execute a job, and the contractor further appoints subcontractors to carry out the prescribed job, who is responsible for obtaining the labor license?

Ans-1: The contractor to whom the principal employer issued the work order to execute the job.

Q2. Acceptability of Subcontractor's Labor License

If the contractor's appointed subcontractor's labor license is acceptable.

Ans-2: The contractor cannot engage a subcontractor without the subletting clause in the work order. The contractor has to obtain a license for the total manpower, including the subcontractors' manpower.

Q3. Labor License Requirement Based on Labor Strength

The appointed General Contractor is stating that if the labor strength is more than 20, they will obtain the labor license.

Ans-3: The contractor's statement holds no weight because they are the contractor for the principal employer, having been awarded the work order to execute the job. The contractor must obtain the labor license if they employ more than 20 or 50 workers (inclusive of subcontractors' workers) as per the state regulations.

[Phone Number Removed For Privacy-Reasons]

Dear Member,

I agree with Point No. 2 of Mr. Prabhat regarding contractors not being able to engage a sub-contractor without the subletting clause in the work order.

For others, I would like to clarify the following points:

1. In Maharashtra, the labor license is applicable for 50 or more contractual employees.

2. The sub-contractor can also obtain a labor license, but in such cases, the Principal Employer (PE) has to issue Form V in favor of the sub-contractor. The PE will mention M/s XXXXXXX (sub-contractor) engaged for XXXX job through M/s XXXXXX (Main-Contractor). Based on Form V, the sub-contractor can apply for a labor license.

3. If permitted in the contract, the main contractor can award various sub-contracts. However, there must be some basic (technical or other) justification. If it is proven at any point that the job was sub-let merely to avoid labor license and legal obligations, both the PE and main contractor can be penalized.

Senior members are welcome to provide further insights.

Thank you.

Thank you, Mr. Prabhat and Mr. Pan Singh. I have another question on a similar line, but it's about Workmen's Compensation. Legally, this must be obtained from the Principal Contractor appointed by the Client. However, some of the principal contractors are submitting the WCP obtained from sub-contractors, and the Principal Contractor is submitting the WCP only for their staff.

What should be the correct process to be followed as per legal requirements?