Can a Sub-Agency Legally Pay Wages Under the Contract Labour Act, 1970? Seeking Clarity

Responsibility for payment of wages

"M/s A" is the License Holder under the Contract Labour Act and also has PF and ESI codes. The gate pass is in the name of "M/s A".

"M/s A" has engaged workmen through a sub-agency, "M/s B", for construction activity.

However, wage payment for the workmen has been disbursed by "M/s B", while PF and ESI contributions have been deposited by "M/s A".

My question is, can "M/s B" pay wages to the workmen under the Contract Labour Act, 1970? Will the principal employer accept it?

Responsibility for payment of wages

Under the Contract Labour Act, 1970, the principal employer (M/s A) is responsible for ensuring that contract laborers receive their dues, including wages. Section 21 of the Contract Labour Act, 1970, states: "The contractor shall pay wages to the contract labour employed by him, and such wages shall be paid before the expiry of such period as may be prescribed." However, Rule 21(2) of the Contract Labour (Regulation and Abolition) Central Rules, 1971, allows: "The contractor may pay wages to the contract labour employed by him through the principal employer, if the principal employer so desires."

In your scenario: M/s A (principal employer) holds the license and is responsible for PF and ESI contributions. M/s B (sub-agency) pays wages to workmen. Legally, M/s B can pay wages to workmen, but:

Principal Employer's Consent

M/s A should have given consent or authorization to M/s B to make wage payments.

Compliance with Act and Rules

Wage payments by M/s B must comply with the Contract Labour Act and Rules.

No Violation of Labor Laws

Ensure no labor law violations, such as delayed or underpayment of wages.

The principal employer (M/s A) should:

Monitor Wage Payments

Regularly monitor wage payments made by M/s B.

Ensure Compliance

Verify compliance with labor laws and regulations.

Acceptance by the principal employer (M/s A) depends on:

Consent

Prior consent or agreement with M/s B.

Compliance

Adherence to labor laws and regulations.

Dear Mr. Santosh,

The contract awarded to M/s A by the Principal Employer requires obtaining a CL(R&A) license, for which the PE has issued Form V. Therefore, for every violation, M/s A shall be held liable by the PE and statutory authority.

In view of the above, M/s A has to maintain all the records as M/s A, not as the 'B' subcontractor. The denial of acceptance by the PE is valid and legal. The status of M/s B shall remain as a mere stranger. Until the PE permits engaging M/s B as a subcontractor under M/s A, the PE still considers the main contractor responsible for M/s A and B.

We assume that:

Approval for subcontracting

A has taken approval from PE for appointing subcontractor B. The agreement/contract between A and PE allows the use of subcontractors.

Responsibility for wage payment

In such a case, PE will not object to B paying the wages but will hold A responsible for any lapses. A will be responsible for showing the registers, etc., where required. In all other cases, A should maintain the registers as if the workers are his own. PE will, in most cases, not care who is paying the wages as long as they provide proof of payment by way of bank statements, etc.

If approval from PE was not taken, then you have a problem of a higher magnitude.