Contractor Ends Work for 15 Employees: Is the "Last Come, First Go" Rule Being Violated?

A contractor has employed 30 persons for two separate activities in an establishment against two work orders having a common license. Fifteen workmen are engaged by the contractor in each activity. The management has discontinued one activity, leading to the termination of the contract of the contractor for this specific activity. The contractor has ended the services of all the 15 workmen engaged in that activity. However, the other 15 workmen are continuing.

Please suggest:

1.0) Whether there is a violation of the last come, first go principle.

2.0) What formalities is the contractor supposed to do at the time of termination of services of the 15 workmen?

Regards

No Violation of the Last-Come, First-Go Principle

1. There is no violation of the last-come, first-go principle of the ID Act because the activity itself is stopped. If you consider the entire activity as a 'division,' the entire division is closed, and hence the workers in that division are retrenched.

Termination Formalities Under the ID Act

2. The contractor has to terminate the employees by complying with the provisions of the ID Act (Section 25F, etc.). Accordingly, he should give notice one month prior to the termination and also provide compensation at the rate of 15 days' wages for every completed year of service.

Alternatively, the contractor can deploy these 15 workers to other plants. Since there exists a master-servant relationship only with the contractor and the workers, he can deploy his workers anywhere he deems fit.

The contractor has issued two work orders but has only obtained a single license. The contractor should have acquired two licenses instead of one. In the current situation, the contractor must lay off all the workers involved in the work order that was canceled by the Principal Employer (PE). If there were two licenses, the retrenchment would not be necessary. However, the contractor now needs to terminate all 15 workers involved in that activity and provide retrenchment compensation.

Violation of the "last come, first go" principle

1.0) The violation of the "last come, first go" principle applies when the skill category is the same.

Retrenchment compensation requirements

2.0) The contractor is required to pay retrenchment compensation for all 15 workers since they are covered under one license. There is no need for payment if the work under the work order for which the license was obtained is ongoing, and a fresh license is obtained for the new work order.

I appreciate the observations of Prabhat, but is there any connection between work orders and a license? I understand that a principal employer can issue one Form V in favor of one contractor, allowing them to take one license that will cover two kinds of work if the premises are the same. When there is a termination of one work order, the contractor can terminate (or redeploy) the workers engaged in that work by paying compensation as prescribed. Since there is no closure of the contractor's establishment but a complete closure of a particular division, should the last come, first go principle be applicable?

Again, the workers may be employed by the contractor for a particular project, and naturally, it could be on a fixed-term contract. If so, when the project is completed, the workers should leave even without receiving any retrenchment compensation because the termination of employment upon completion of a project is not considered retrenchment, provided their contract of employment is for a specific project or period. This has to be verified with the terms and conditions of employment offered by the contractor.

Thank you, Mr. Madhu.

The role of a work order

The role of a work order is crucial because the license is issued based on it. The terms and conditions of the job, along with the value and time period, are specified therein. The connection between work orders and licenses remains essential. The contractor can obtain several licenses from the authority using a single Form V, but there should be separate work orders.

Protection under the Industrial Disputes Act

The contractor can seek protection under Section 2(oo)(bb) of the Industrial Disputes Act, 1947. It states that the expiry of the fixed term of employment of an employee or the employer's refusal of service does not constitute illegal termination if there is a separate work order or upon license expiry.