Is CLRA Registration Necessary for IT Giants Like TCS/Infosys in Software Contracts?

Hi, Would the Contract Labour Regulation and Abolition Act (CLRA) be applicable to a company as the principal employer if IT giant companies such as TCS/Infosys are engaged under contract for software development, ongoing maintenance of such software, and other IT support from the premises of the said company? There seems to be varied market practice where some companies include these IT giants as contractors under CLRA registration, while others do not, arguing that the software engineers of TCS/Infosys are not considered workers. Can someone provide guidance on the correct legal position for such IT contracts?

Thanks and Regards,
Pankaj Srivastava

Principal Employer and the CLRA Act

In this context, who is the principal employer? What or who is the (IT) giant from the labor law point of view? If companies like TCS have to perform software development work and associated tasks by deploying their employees to other companies, the CLRA Act will apply. They must obtain licenses under the CLRA Act after obtaining Form VI from the company for which they are working, i.e., the principal employer.

TCS and Food Vendor Compliance

TCS requires their vendors supplying food to their employees to possess a CLRA license. The HR team at TCS conducts audits to ensure that the restaurants or food suppliers pay their workers minimum wages, bonuses, etc. What is the rationale behind this? Food vendors are not obligated to adhere to the CLRA Act as the relationship between the restaurants and TCS resembles that of a seller and buyer of a product or service, and the restaurant workers are not contract laborers. It is acceptable if the restaurant staff work at TCS to prepare food for TCS employees using TCS-provided materials and infrastructure. However, this is unnecessary when the relationship is simply that of a buyer and seller.

Understanding CLRA Licensing Requirements for IT Companies

The primary question here is where the work is taking place. If TCS, Infosys, or another software company undertakes to develop a program or other service at their work premises for another principal, then there is no need for taking a CLRA license by such contractors. However, if the required number of laborers is deployed at the works of the principal, then the license is required.

I recollect an exception to the above principle in an Orissa High Court judgment, which states that if the contractor is a well-established entity having its well-defined HR compliances, then there is no need for such contractors to take a license.

Definition of "well-established entity"

What should be the definition of a "well-established entity"? If we apply it to large establishments as the principal employer, then for a small principal employer, can't we have small contractors working without a license? That is why I have asked, who is a giant? Can there be a law that defines its scope?