Can Contractual Employees Legally Work in Core Operations if the License Allows It?

Dear all seniors,

Under the Contract Act, no contractual employee shall be employed in the core activity (operations/production). However, if the contracting license states to employ the employees in operations, can the contractual employee be employed in the operation? Usually, loading and unloading are written in the contract license.

Contract Labour Deployment Restrictions

The Contract Labour cannot be deployed in trades prohibited by the State Government as per the CLRA Act 1970 (except in Andhra Pradesh, as I understand). The Act doesn't distinguish between core and non-core operations. Outsourcing core operations is not a good idea for strategic management.

Dear Gautam,

The CLRA Act, 1970 does not define 'core activity,' but Section 10 of the Act empowers the appropriate governments to declare certain activities/operations as prohibited ones after following the procedure laid down therein. That apart, by its very nature and multifaceted application, core activity becomes industry-specific rather than function-specific. Therefore, you can engage contract labor under the CLRA Act, 1970 in any activity/operation which is not prohibited under Section 10.

However, this interpretive difficulty is removed to some extent by the Occupational Safety, Health and Working Conditions Code, 2020 by defining the term 'Core activity of an establishment' under Section 2 (p) as "any activity for which the establishment is set up and includes any activity which is essential or necessary to such activity." At the same time, the first proviso of the definition clause excludes certain activities as not to be considered as essential or necessary activities if the establishment is not set up for such activity.

At the same time, it would not be out of place to mention that the prohibition of employment of contract labor in core activities of any establishment under Section 57(1) of the Code gets somewhat diluted by the sub-clauses (a), (b), and (c) of its following rider clause.

Review New Labor Laws

If you are making these decisions now, please review the new labor laws that state contract labor must be paid the same wages as regular employees of the factory.

You need to change your process, strategy, and management controls to ensure you do not run afoul of the regulations and end up paying high back wages.

Dear Gautam, it is not an issue but an issue as per some judgments (landmark) passed by the Apex Court in favor of workmen under the Contractor CL(R&A) Act. Similarly, in some cases, the Apex Court has favored the employer, though it may be the same.

Core Activity Employment

There should be no contractual employee employed in the core activity/perennial nature of (Operations/production) if there are existing workmen of a permanent nature.

Contracting License and Employment

The contracting license states to employ the employees in operations if that work has not been abolished by the state government (Loading unloading). Everything is fair enough if managed properly. Employers prefer engagement of contract workmen for exploitation because they count financial differences between Permanent & Contract.

The CLRA (AP Amendment) of 2003 introduced a broad classification of Core and Non-core activities. It provided a facilitating feature for engaging contract workers even in Core areas. This can be considered as a guideline to act upon. Please review the relevant provisions in the concerned state.

Thank you.