Can We Be Held Responsible for Contractor Wage Issues? Seeking Advice on Employer Duties

Dear All, Seeking advice from the seniors. We are a manufacturing company with many contractors under the Contractors’ Labour Act, 1970. Recently, we have been facing numerous problems related to this. Some contractor workers have filed a complaint against us, stating that they did not receive their salary, and a Conciliation Officer has sent a letter regarding the same. My query is that the said worker does not have a direct relationship with us, and they are ultimately under the control of the contractors. At this point, can we be held responsible, knowing that as the principal, it is our responsibility to ensure the distribution of contractor workers' wages as per their status? However, the letter should be directed towards the contractors.

Furthermore, it is important to mention that we have complied with all formalities such as (RC, License, agreement, etc.). Therefore, I request clarification on why the Labor Conciliation Officer did not send the letter to the contractors. I seek your valuable suggestions on this matter.

Note: I am not denying our responsibility as the principal employer.

Very true, in respect of contract labor, the contractor is the employer, and any disputes relating to their employment should be addressed by him. The Labor Officer should also discuss the issue with the contractor only. However, since the workers are working for you, the principal employer cannot escape from his liabilities or obligations to ensure timely payment of wages, etc., and you can also be called for conciliation. It is also true that the principal employer forming part of any dispute shall make the contract sham, which may lead to further complications. But it may also be understood that you are not called as a party to the dispute but as a witness. The principal employer should have knowledge about the non-payment or even late payment of wages. If they are not paid in time, obviously, their contributions towards ESI/PF should not have been deposited by the contractor. It will also become your liability tomorrow. Therefore, please check that also.

If the workers have filed a complaint against you, the possibility of some elements making the contract a sham cannot be ruled out. If your officers have direct control and supervision over the contractors' workers by way of approving leaves, granting overtime, sanctioning advances, addressing their grievances, etc., then it will prove against you.

What Mr. Madhu TK has explained is absolutely right. Please keep in mind that you cannot escape your responsibility after engaging contract labor and then closing your eyes. You must monitor every aspect on a day-to-day basis, including payment and statutory compliance (PF, ESI, Bonus, Gratuity, etc.).

Importance of a Contract Labor Cell

It is essential to have a contract labor cell in your organization that rigorously monitors all these aspects to avoid any future complications. Organizations like Tata Group and other big industries are implementing this practice to prevent problems when engaging a significant number of contractors or contract laborers.

Regards, S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions [Phone Number Removed For Privacy-Reasons] [Email Removed For Privacy Reasons] www.usdhrs.in

Thank you for your prompt reply. Let me clarify that we do not have direct control over the workers of the contractors. We are monitoring compliance with various acts on a day-to-day basis. We have also hired an external audit team for this purpose.

However, the main issue is that the conciliation officer has sent a letter requesting our appearance and asking for clarification regarding the complaint from the contractor's workers. It is important to mention that we are not trying to avoid our responsibility, but my concern is that the conciliation officer has not consistently sent letters to us regarding the complaints from the contractor's workers.

No, it all depends on how the workers present the complaint. If the workers have indicated that you were aware of the non-payment of wages, then shouldn't the conciliation officer call you? Certainly, he should call you, and that is why I have mentioned that it may not be as a party to the dispute but as a witness to the incident of non-payment of wages.

If you had no control over the workers of the contractor, then why should you worry? You can very well appear. However, it is just impossible that an organization legally compliant and even engaged an auditor to monitor the compliance could not find out whether their contract workers have been paid wages or not.

Dear Mr. Gaurav,

Please review the following:

FORM V [See Rule XYZ]

Form of Certificate by the Principal Employer:

Certified that I have engaged the applicant as a contractor in my establishment. I undertake to be bound by all the provisions of the Contract Labour (Regulation and Abolition) Act, 1970, and the Contract Labour (Regulation and Abolition) XYZ State Rules 197, insofar as provisions are applicable to me with respect to the employment of contract labour by the applicant in my establishment. (I hope you understand the reason for my authority in calling upon you.)

Responsibilities of the Principal Employer:

The duty of the principal employer is to ensure that all the workmen under the contractor receive their salary within the wage period. The rules stipulate that all payments to workmen by the contractor are to be monitored by the HR representative of the Principal Employer.

Now, if the contractor does not pay the wages, you must pay on their behalf and recover the amount from the contractor's bill, along with a penalty if specified in the work order. You cannot evade responsibility without making the payment. Pay and submit the wage sheet; there is no need to attend the proceeding.

Furthermore, do not pay the agency for their poor monitoring of the assigned job, which led to this situation.

Prabhat [Phone Number Removed For Privacy-Reasons]