Introduction

In India, Contract labourers are protected by the contract labour Regulation and Abolition Act, 1970. A Contract Labour is Defined in Act as one who is hired in connection with the work of an establishment by the principal employer through a contractor. While a contract is the supplier of contract labour for the organisation, a principal employer is a person responsible for the control of the establishment. 

The act extends the whole territory of India.

The Contract Labour (Regulation and Abolition) Act, 1970 is read with Contract Labour (Regulation and Abolition) Central Rules, 1971.

Principal Employer: A principal Employer would mean and include the head of any government or local authority; the ‘Owner’ or ‘Occupier’ or ‘Manager’ of a factory (under the Factories Act); Owner, agent or manager of mine; or any person responsible for the supervision and control in the establishment.

Contractor: A contractor would mean by any person, who supplies contract labour for any work of an establishment and include a sub- contractor. Any contractor to whom act applies has to take a licence under the act.

What are the categories of Establishment to which the act is Applicable? 

  • Establishment: Applies to every establishment in which 20 or more workmen are employed or were employed on any given day of the preceding 12 months as contract labour; 
  •  Contractor: Who Employs or who employed on any day of the preceding 12 months 20 or more work men.

What are the categories of Establishment to which the act is not Applicable? 

The act is not applicable to the establishments which perform work of casual or intermittent nature. Intermittent nature of work means:

  • If the work and seasonal and is not performed for more than 60 days
  • Other cases, if it was performed for less than 120 days in the preceding 12 months

What is compliance Requirement under the for Principal Employer and Contractor?

Principal Employer
Registration of Establishments employing Contract Labors under Act

  • The principal employer of the establishment shall apply for Registration of the establishment to the Registering Officer for employing contract labour
  • The application for Registration should be made in FORM XIII in Triplicate which is annexed to the Rationalisation of Forms and Reports under certain Labour law Rules, 2017
  • Demand Draft for the payment of fees should be attached with application
  • FORM I in which certificate of Registration is to be granted 
  • Duplicate Certificate of Registration is issued if the original is lost, defaced, or accidentally destroyed

Register and Records

  • Form XII – Register of Contractors

Employer’s liability on non-compliance of contractor

  • If the contractor fails to provide Rest Rooms, Canteens, First Aid, Latrines, Urinals, or washing facilities, then the principal employer should provide the same on behalf of the contractor.
  • It the Responsibility of the principal employer to ensure that the Contractor is complying with the requirements various applicable labour laws
  • All the expenses incurred on providing them must be recovered by the principal employer either by deduction or by way of debt

Returns

  • Unified Annual Return in FORM XIV is filled online by principal employer and contractor on Shram Suvidha Portal under Ministry of Labour and Employment on or before 1st Feb.

Contractor
Licensing

  • Any contractor who executes any work through Contract Labour, should apply for License before the Licensing Officer.
  • The application should be made in FORM II and in triplicate
  • Every application must be annexed with certificate from Principal Employer in FORM III stating that the applicant has been appointed by principal employer as contractor for his establishment
  • Demand Draft should be attached to every application of license showing: Security amount + Payment of fees
  • Copy of license must be kept at premises where work is carried on.

Register and Records

  • Form A: Register for contract labour (specified in the Schedule to the Ease of Compliance to Maintain Registers under various Labour Laws Rules, 2017)
  • Form B: Wage Register
  • Form C: Loan/Recoveries/Damages Register
  • Form D: Attendance/Muster Roll Register
  • Form XII: Contractor should issue employment card to the contract labours within 3 days of their employment 
  • Form VIII: The contractor issues service certificate 7 on Termination of any contract labor 
  • Register of overtime in FORM B should be maintained by the contractor
  • Form XIX: Wage slips is issued if wage period is 1 week or more by the contractor at least a day before disbursement of wages
  • Contractor should take thumb impression or sign of the workers in the register against their entries
  • Such register should be maintained in Hindi, English or in language spoken by majority of the people in the establishment

Returns

  • Unified Annual Return in FORM XIV is filled online by principal employer and contractor on Shram Suvidha Portal under Ministry of Labour and Employment on or before 1st Feb.

What is the Responsibility of contractors regarding Payment of Wages?

  • The contractor is responsible for payment of wage to the contract labour within a period of 1 month
  • If there are less than 1000 contract labour in any establishment, the wages should be paid to them before the expiry of 7th day, after the last day of the wage period
  • In any other case, before the expiry of 10th day, after the last day of wage period
  • In case of termination of contract labour, the wages should be paid by the contractor before the expiry of 2nd day, from the day of termination
  • Wages should be paid directly, and payment should be made either in cash, cheque or in the wage account, and it should be paid without any deductions except those provided under the Payment of Wages Act.
  • Wages should be paid on the working days, at work premises, at working time, on the date notified in advance
  • A notice which displays wage period, time and place of disbursement of wages should be displayed at the place of work and a copy of it should be sent to the Principal employer
  • A notice which shows rates of wages, hours of work, name and address of inspector, date of payment of unpaid wage, should be displayed in English, Hindi or language spoken by the majority at a conspicuous place of the premises
  • The Contractor should display abstract of acts and rules in English, Hindi or in language spoken by the majority and a copy of such notice must be sent to the inspector
  • The Principal employer is required to ensure that a representative be present while the contractor is disbursing wages to the contract labour.

What are the Offences and Penalties provided by the Act?

  • A person obstructs an inspector in performing his duty – Punishment of Imprisonment up to 3 months; or fine up to Rs 500; or both
  • A person who refuses to produce any Register, records, documents demanded by an inspector; or; attempts or prevents any person from appearing before inspector - Punishment of Imprisonment up to 3 months; or fine up to Rs 500; or both
  • Person who contravenes any provision of the Act, Rules made relating to prohibiting, regulating or restricting the employment of contract labour; or; person who contravenes any conditions of license- Imprisonment up to 3 months; or fine up to Rs 1,000; or both; NOTE: In case the contravention continues after 1st contravention then an additional fine of Rs 100 per day is imposed
  • The person who contravenes any provisions of the act, and for which no penalty is provided anywhere – Punishment with Imprisonment up to 3 months; or fine up to Rs 1,000; or both
  • If the offence is committed by the company, then all persons responsible for the conduct of the company shall be held guilty and punished accordingly
  • If it is proved that the offence by the company is committed with the consent or due to neglect by the MD, Managing Agent, Director, then such person shall be held guilty and punished

What are the benefits to Contract Labours in relation to their welfare and health?

Canteens

  • It should be properly maintained by the contractor or principal employer 
  • It should have a dining hall, kitchen, store-room, pantry and washing places separately for workers and for utensils
  • Properly lighted
  • The floor shall be made of smooth and impervious material, inside walls shall be lime-washed or colour-washed at least once in each year
  • Walls should be maintained in clean and sanitary condition
  • Wastewater should be carried in suitable drains
  • Arrangements for disposal of garbage

Rest Rooms

  • Establishments where workers halt at night for work should be provided with restrooms
  • Separate rooms for women employees
  • Adequate ventilation and circulation of fresh air should be maintained
  • Must provide adequate protection against heat, wind, rain and shall have a smooth, hard and impervious floor surface
  • Should have a proper supply of drinking water

Latrines and Urinals

  • At least 1 latrine for every 25 females and 1 for every 25 male
  • Should be covered and partitioned to provide privacy
  • Display outside the urinals, stating “for men only”, “for female only”
  • 1 urinal for male worker up to 50 and 1 urinals for 50 female workers

Washing facilities

  • Separate and adequate screening facilities
  • Should be accessible and must be kept in a clean and hygienic conditions

First Aid Facilities

  • Readily available first aid boxes should be available
  • At least 1 box for every 150-contract labour

Brief Summary - State Rules (Maharashtra)

By virtue of Section 35 of the Contract Labour Act, the State Government have the power to make rules for effective implementation of the Act. Therefore, there are certain states having specific state rules, and such rules are to be read together with the Contract Labour Act and along with the Central rules.

There is Maharashtra Contract labour (Regulation and Abolition) Act, 1971; where the government of Maharashtra makes certain rules for implementation of the Contract labour Act. The Rules provide for constitution of State Advisory Board, specifies the Terms of Office of the members. 

According to Maharashtra Amendment Act, 2016; the act is applicable to establishments having more than 50 workers.

Requirement as per Maharashtra:

  • FORM I: shall be filled in triplicate for Registration of Establishment by Principal Employer.
  • FORM II: In which certificate of registration should be granted

FREQUENTLY ASKED QUESTIONS (FAQs)

Who is a Principal Employer and a Contractor?

Principal Employer means: Office, Government Department, Local Authority: The Head of Department or Local Authority Factory: Owner or Occupier of the Factory Mine: Owner or Agent of Mine Other Establishment: Person responsible for Supervision and Control of the establishment.

Contractor means: Person who undertakes to produce the result for establishment; but does not includes, a supply of goods or articles of manufacture; and achieves such result by providing contract labour to the establishment.

To which establishments the Contract Labour Act is not applicable?

The act is not applicable to those industries involved in doing work of intermittent or casual nature.

What does the intermittent nature of work stand for?

Intermittent nature of work means:

  • If the work and seasonal and is not performed for more than 60 days
  • Other cases, if it was performed for less than 120 days in the preceding 12 months

What are the reasons for which the appropriate government may prohibit any establishment from employing any contract labour?

The central or state govt. may prohibit any establishment from employing contract labour by issuing notification, but before that, it considers the following factors:

  • Conditions of work and benefits provided for contract labour are satisfactory or not
  • Work is incidental or necessary for the business of the establishment
  • Whether it is done through ordinary workmen
  • Whether it is sufficient to employ a considerable number of whole-time workmen

What is the most essential obligation of the Principal Employer and Contractor?

Principal Employer: To get the establishment registered for employing contract labour Contractor: To obtain a license for undertaking or executing work through contract labour

What are the conditions when the Registration of Establishment is revoked?

If the Registering Officer is satisfied that:

  • Registration has been obtained due to Suppression or Misrepresentation of any fact
  • Registration became ineffective or useless for any other reason

When can a license be revoked or suspended?

The licensing officer can revoke or suspend the license on fulfilment of the following conditions:

  • If a license has been obtained by Misrepresentation or Suppression of fact
  • If the license holder has failed to comply with the specified conditions
  • If the license holder has contravened any provision of the Act or Rules made

What is the validity of the license granted under the Act?

Every license granted remains valid until 12 months from the date it was granted or renewed.

When can a license be amended? And what are the conditions for it?

If the contractor wants the license to be amended, the contractor is required to submit an application. However, if the licensing officer refuses the application for amendment, the officer shall record its reasons for doing so.

When can the duplicate certificate of Registration or License is issued?

In case the certificate of Registration or License is destroyed, defaced, or lost, then a duplicate certificate is issued.

What are the services or amenities provided with regard to the welfare and health of contract labour?

Contractor should provide and maintain for contract labours: Canteens, restrooms, first aid facilities, drinking water, latrines, and urinals, washing facilities etc

Who will be liable where the contractor fails to provide for services for welfare and health of contract labour?

In case the contractor fails to provide for such services or amenities, the principal employer will be liable to provide for such.

In case the contractor fails to provide wages or pays less to the employees?

It is the duty of the principal employer to ensure payment of wages to contract labour, however, in case the contractor fails to provide wages or pays less, then the principal employer will be liable.

Can an appeal lie against the order of registering or licensing officer?

Yes. An Appeal can lie against their order and such appeal should be filled within 30 days from the day of communication of such order.

If the contractor does not hold a valid license then the workmen employed by him under the Contract Labour Act could they be considered as workmen of the principal employer?

Madras high court stated that, if the contractor does not hold a valid license, then in such cases workmen employed by him are considered as workmen of principal employer. However, the Delhi High Court has a dissenting opinion.

Which act/order will prevail if they are inconsistent with contract labour act?

If any law, agreement or standing order are less favourable then contract labour act will be applicable, and if the provisions of such law/ agreement/ order are more favourable, then they will be applicable over contract labour act.