Is a Contract Labour License Needed for Main Contractors Using Subcontractors? Seeking Advice

Respected Seniors,

Query on Contract Labour License for Main Contractor and Subcontractors

My query is on obtaining a Contract Labour license by the main contractor and subcontractors. The query details are as follows. Our company has given a project to Contractor A (main contractor). Contractor A is carrying out the said work through subcontractors X, Y, and Z. We insist that the main contractor and subcontractors obtain the labor license. However, the main contractor is refusing to obtain the license, stating that he engages only 4 or 5 employees to supervise the work, and the total work will be carried out through subcontractors only. The subcontractors will obtain the labor licenses, as he said.

Is it not necessary for the main contractor to obtain the license? I request respected seniors kindly advise on this issue.

Ramu

Dear Ramu,

As per the law, the minimum requirement of workers to obtain a Labour License (LL) is 50 or more. Your main contractor is engaged with 4 or 5 casuals, and the subcontractor has 50 or more workers. You need to establish a tripartite agreement between your company, the main contractor, and the subcontractor. As a result, the subcontractor will be included on your RC for the further LL process.

License Requirement for Main Contractor

It is necessary for the main contractor to obtain the license because the principal employer awarded the jobs to A (main contractor). Furthermore, the contractor can't sublet the work to others (subcontractors) without the consent of the principal employer.

If you are the principal employer, ask the contractor to obtain the license, and also request other contractors to do the same.

Dear Ramu,

As far as compliance under the Contract Labour Act is concerned, all the contractors (Contractor A, X, Y & Z) are in the same boat. Hence, you will be treated as the Principal Employer for all these contractors.

Since Contractor A is introducing the other contractors, please take an indemnity bond from Contractor A to protect yourself from any future liability, if any, due to non-compliance with any of these contractors.

Regards,

Hi Ramu,

In many jurisdictions, both the main contractor and subcontractors may be required to obtain a contract labor license depending on the specific laws and regulations governing labor and contracting in your region. While it's common for subcontractors to obtain their own licenses, this doesn't necessarily absolve the main contractor of their responsibilities, especially if they are directly overseeing the project.

Here are some key points to consider:

Legal Requirements:

It's crucial to review the labor laws and regulations in your area to determine the exact requirements for obtaining a contract labor license. These laws may vary depending on the industry, location, and size of the project.

Responsibility of Main Contractor:

In many cases, the main contractor is responsible for ensuring that all labor employed on the project, including subcontractors' workers, complies with labor regulations. This often includes obtaining the necessary licenses and ensuring that all workers are legally permitted to work on the project.

Subcontractors' Responsibility:

While subcontractors may obtain their own licenses, this does not necessarily alleviate the main contractor of their obligations. Both parties may be held accountable for ensuring compliance with labor laws.

Risk Management:

Failing to obtain the required licenses can lead to legal consequences, including fines, project delays, and even legal disputes. It's in the best interest of all parties involved to adhere to legal requirements and obtain the necessary licenses.

Contractual Agreements:

Review the contracts between the main contractor and subcontractors to determine if there are specific provisions regarding the responsibility for obtaining labor licenses. Contracts should clearly outline each party's obligations to avoid misunderstandings and disputes.

Ultimately, it's advisable to consult with legal experts or regulatory authorities in your area to clarify the specific requirements and obligations for obtaining a contract labor license. Additionally, open communication between the main contractor and subcontractors is essential to ensure compliance with all legal and contractual obligations.

Thanks

It is the responsibility of the Principal Employer to ensure that every provision of the law is adhered to. Unless there is a specific clause in the contract document, no subcontractor is permissible. A will have no right to engage subcontractors X, Y, Z, etc., in such cases. In any case, without registration and licenses, no contract labor shall be allowed. It is advisable to examine this aspect.

Contractor Certification

Next, every contractor shall be issued a certificate in Form-V under CLRA. Furthermore, the CLRA Act is applicable to a contractor where 20 workers are employed, including those of subcontractors (as per AP Act 21 of 2015, Section 2).