Minimum Wage Dilemma: Should We Follow State or Central Government Notifications?

Please guide me on the following issue: We have obtained a CLRA license under the central act. The principal employer is requesting us to pay minimum wages according to state government notifications rather than central government notifications. We believe in adhering to the central government notifications.

Is our stance correct? Kindly advise.

The basis for determining the applicability of Central notified minimum wages is not clear. The nature of your services and the industry is also not mentioned, so we are unable to verify it. A labor license from the Central Government does not automatically lead to the application of its notified minimum wages.

Minimum Wages Act 1921

According to the Minimum Wages Act 1921, the appropriate government is the Central Government in relation to any scheduled employment carried on by or under the authority of the Central Government or a railway administration, or in relation to a mine, oilfield, or major port, or any corporation established by a Central Act. In relation to any other scheduled employment, it is the State Government. So unless the principal employer fulfills the above requirement, your contention will have no force.

Complications with State and Central Wage Notifications

This situation could lead to many complications as the principal employer follows the State Government notified rates, and the local Inspector may take action against you for non-compliance, as in most cases, State notified rates are higher than the central wages. My personal experience from a Navratna PSU is that for CLRA Act purposes, the appropriate government is the Central Government, but for Minimum Wages, it is the State Government. I hope this situation will come to an end with the new Labour Code.

Dear Mr. KK!HR,

I am of the view that there cannot be two appropriate governments for the same establishment, one for the purpose of registration of PE and licensing of contractors under the CLRA Act, 1970, and the other for the compliance and enforcement of minimum wages under the Minimum Wages Act, 1948.

Though both are Central legislations, the concurrent jurisdiction of both the Central & State governments automatically gets ousted because of the coverage of the PE's establishment under the Central government.

In the given circumstances of the thread, the question of the applicability of the statutory minimum wages, under which rate is a different question if there happens to be an absence of parity between the two statutory rates of minimum wages.

Automatically, the Central rates would be applicable if they are more. If less, paying at higher rates is not a violation. But, if subsequent revision of Central rates is more, automatically those rates have to be adopted.

Besides, once the Central government becomes the appropriate government, the State enforcement machinery has no jurisdiction over the establishment under both the laws.

Of course, if the union of contract workmen puts up such a demand in the event of the Central rates of minimum wages constantly remaining below the rates of the State for the same employment in the same geographical area, that's a different situation. Even then, compliance with the State rates would be a matter of expediency only and not of a statutory obligation.

Therefore, the poster's viewpoint in the matter as the contractor licensed by the Central enforcement machinery under the CLRA Act, 1970 seems appropriate to me. I would like to be corrected based on any case law in this connection.

A final note of reminder from myself is that the PE may be apprised of the above legal position by the contractor. If the PE still insists on his stand, no problem, let the contractor implement the same for the PE has vicarious liability in respect of wages under Section 21(4) of the CLRA Act, 1970 in case of any violation by the contractor.

This question had confounded us, particularly in the wake of the Supreme Court judgment in Air India Statutory Corporation vs. United Labour Union & Ors., decided by the Supreme Court on 06.11.1996. Suddenly, the jurisdiction, which until then remained with the State Government, changed hands to the Central Government. Thereafter, in the Steel Authority Of India Ltd. & Others vs. National Union Water Front, decided on 30 August 2001, the status quo ante was partly restored in the contract matter too. During this period, we had to get the matter legally examined many times. The jurisdiction remained a vexed enigma all along, and it changed every time. As the HR personnel handling the matter, it became incumbent to deal with the rival contentions and the whimsical officials who dealt with it.

Appropriate Government under CLRA and Minimum Wages Act

As per the CLRA Act 1970, the appropriate Government is the same as that of the ID Act 1947, so there is congruity between the two. But not so for minimum wages, and here it is a restrictive definition. Section 2(b) of the Minimum Wages Act 1948 defines the appropriate government to be: "appropriate Government" means, in relation to any scheduled employment carried on by or under the authority of the Central Government or a railway administration, or in relation to a mine, oilfield, or major port, or any corporation established by a Central Act, the Central Government, and in relation to any other scheduled employment, the State Government. So, the Appropriate Government is the Central Government only if the establishment falls within sub-section (i), and for all others, it is the State Government. Going by the Golden Rule of interpretation, the sub-section (i) cannot be given an umbrella-like scope; indeed, it is to the contrary. Central Government jurisdiction is essentially limited to department undertakings like Ordinance Factories, Press Note factories, etc. All PSUs cannot be stated to be establishments carried on by or under the Central Government; here the legal principle is that a company is different from its shareholder. (Reference Heavy Engineering Mazdoor Union vs. The State Of Bihar & Others on 12 March 1969) This ratio was upheld by the Constitution Bench in the SAIL matter. Thus, even if the company is a Government Company as defined in the Companies Act 2013, yet it may not have the Central Government as the Appropriate Government. It is in this background that it was mentioned that the jurisdiction as per the MW Act could be different from the CLRA Act.

Today From India, Mumbai

In addition to my earlier post, please note that our client is one of the reputed companies in the Oil and Gas industry. They released Form III to us for obtaining the labor license. We applied on the Shram Suvidha Portal for the labor license and also received it. We are of the opinion that following the minimum wages set by the central government is necessary, as they instructed us to obtain the labor license from the central government and not from the state government.

Thanks,

Legal Opinion on Minimum Wage Compliance

This issue requires a deep analysis of the legal position in both Acts. Therefore, it would be advisable to obtain a legal opinion from the Advocate General or Attorney General to create a binding effect on the officials concerned.

In my view, once a license is granted under the CLRA of Central Rules, the rates of minimum wages (MW) shall be as per the Central Rules. The Principal Employer (PE) is bound to follow Central Rules only. Though the labor item falls under the concurrent list, the principle followed is that only one jurisdiction, not two jurisdictions, will apply. We cannot pick and choose what is beneficial.

In this case, the PE obtained registration under the Central Rules; hence, the rates of MW apply to the Service Provider Employees (Contract workmen).

I stand for correction.

Dear Colleague,

Definition of Appropriate Government

The definition of "Appropriate Government" is a good term to analyze. As far as any scheduled establishment or the nature of the industry is covered, "Central" as the Appropriate Government means the appropriate government is Central only. Minimum wages as stipulated by the Central Government will be appropriate in your case of the oil sector. Moreover, the licenses for contractors and RC to the Principal Employer are obtained from Central Labour Authorities only.

Hence, from the perspective of Minimum Wages, Contract Labour Act, and Industrial Dispute Act, it is right to follow the Central Government's fixed minimum wages for the respective scheduled employment. Within that notification, you may follow different wages for different skill categories depending on the classification given in the notifications based on skill levels as stipulated in the notifications.

Definitions under Various Acts

A) The definition of Appropriate Government under the Minimum Wages Act 1948 is as follows:

2(b) "appropriate Government" means, (i) in relation to any scheduled employment carried on by or under the authority of the [Central Government or a railway administration], or in relation to a mine, oilfield, or major port, or any corporation established by [a Central Act], the Central Government, and (ii) in relation to any other scheduled employment, the State Government.

B) The definition of Appropriate Government under the Contract Labour Act is as follows:

2. Definitions.-(1) In this Act, unless the context otherwise requires,-(a) 'appropriate Government' means,-(i) in relation to an establishment in respect of which the appropriate Government under the Industrial Disputes Act, 1947 (14 of 1947), is the Central Government; (ii) in relation to any other establishment, the Government of the State in which that other establishment is situated.

C) The definition of Appropriate Government under the Industrial Disputes Act 1947 is as follows:

2. Definitions.- In this Act, unless there is anything repugnant in the subject or context,--(a) "appropriate Government" means-- (i) in relation to any industrial dispute concerning any industry carried on by or under the authority of the Central Government, ................ or the Oil and Natural Gas Commission established under section 3 of the Oil and Natural Gas Commission Act, 1959 (43 of 1959),...................................., the Central Government, and (ii) in relation to any other industrial dispute, the State Government.

Your understanding is very correct that your appropriate Government is Central, and you need to follow Central Government Notified Minimum Wages. In some notifications released by the Central Government, they mention that the minimum wages notified by the central or state, whichever is more, have to be followed. Here, you need to be a little careful and get clarity from the Labour Commissioner and then proceed, as it comes as a GO and has administrative powers to enforce but can be legally challenged. On this point, just have a discussion with your known Labour Commissioner and then proceed.

Dear friends,

I am unable to accept the view of our learned KK!HR that there can be two appropriate governments for the same principal employer's establishment, namely, one under the CLRA Act, 1970, and the other under the MW Act, 1948, based on the Air India Statutory Corporation judgment of the Supreme Court. Further clarification is required in this regard.

I would like to submit that the judgment of the Five-Judge Constitutional Bench of the honorable Supreme Court in Steel Authority of India Ltd and Others v. National Union Waterfront Workers and Others [2001(4) LLN 365] had already overruled the Air India Statutory Corporation judgment [1997 (1) LLN 75] with prospective effect, and it still holds the law on the subject matter. The implication is that since the overruling of the Air India Statutory Corporation judgment is explicitly declared to be prospective, any direction issued by any industrial adjudicator or court, including the High Court, for the absorption of contract labor pursuant to the overruled judgment would hold good. The same should not be set aside, altered, or modified in cases where such a direction had been given effect to and become final.

According to the Constitutional Bench, in the case of a Central Government Company or Undertaking, an instrumentality of the Government carrying on an industry, the criterion to determine whether the Central Government is the appropriate government within the CLRA Act is that the industry must be carried on by or under the authority of the Central Government and not that the Company or Undertaking is an instrumentality or agency of the Central Government for the purposes of Article 12 of the Constitution. Such an industry may be conferred either by a statute or by virtue of principal and agent or delegation of power, and this fact is to be ascertained based on the facts and circumstances of each case.

Hence, the implication of the above ratio decidendi is that once the particular government becomes the appropriate government under the CLRA Act, 1970, the same would be the appropriate government under the MW Act, 1948 too.

Therefore, no further clarification is required.