CONTRACTLABOURININDIA

CONTRACTLABOURININDIA

BACKGROUND

1.ContractLabourisasignificantandgrowingformofemployment.Itisprevalentinalmost
allindustries,inagricultureandalliedoperationsandinservicesector.Itgenerallyrefersto
workersengagedthroughanintermediaryandisbasedonatriangularrelationshipbetweenthe
userenterprises,thecontractor(includingthesubcontractor)andtheworkers.Theseworkersare
millionsinnumberandgenerallybelongtotheunorganisedsector.Theyhaveverylittle
bargainingpower,havelittleornosocialsecurityandareoftenengagedinhazardousoccupations
endangeringtheirhealthandsafety.Theyareoftendeniedminimumwagesandhavelittleorno
securityofemployment.Ontheotherhand,reasonslikesporadicnatureofwork,difficultyin
ensuringclosersupervisionbytheemployerorcosteffectiveness,flexibilityinmanpower
deployment,concentrationincorecompetenciesetc.justifythesystemofcontractlabour.

2.Recognisingtheneedforprotectingtheinterestofcontractlabour,theContractLabour
(Regulation and Abolition) Act, 1970 was brought on the Statute Book to regulate the
employmentofContractLabourincertainestablishmentsandtoprovideforitsabolitionincertain
circumstancesandformattersconnectedtherewith.

3.TheContractLabour(RegulationandAbolition)Act,1970ActandtheContractLabour
(RegulationandAbolition)CentralRules,1971cameintoforceon10.2.71.TheConstitutional
validityoftheActandtheCentralRuleswaschallengedbeforetheSupremeCourtinGammon
IndiaLimitedVs.UnionofIndia1974ILLJ480.TheSupremeCourtupheldtheconstitutional
validityoftheAct&Rulesandheldthatthereisnounreasonablenessinthemeasure.TheAct&
Ruleswereenforcedw.e.f.21.03.1974.

PROVISIONSOFTHEACT&THEPRESENTSTATUS

4. The Act applies to every establishment/contractor in which 20 or more workmen are

employed or were employed on any day in the preceding 12 months as contract labour and to
every contractor who employs or who employed on any day of the preceding 12 months, 20 or
moreworkmen.Itdoesnotapplytoestablishmentswheretheworkperformedisofintermittentor

seasonal nature. An establishment wherein work is of intermittent and seasonal nature will be
covered by the Act if the work performed is more than 120 days and 60 days in a year
respectively. The Act also applies to establishments of the Government and local authorities as
well.

AppropriateGovernment

5.ThejurisdictionoftheCentralandStateGovernmenthasbeenlaiddownbythe
definitionoftheAppropriateGovernmentinSection2(1)(a)oftheAct,asamendedin
1986.TheAppropriateGovernment,inrespectofanestablishmentundertheContractLabour
(RegulationandAbolition)Act,1970isthesameasthatintheIndustrialDisputesAct,1947.

TheCentralandStateAdvisoryBoards

6.TheCentralGovernmentandStateGovernmentsarerequiredtosetupCentraland
StateAdvisoryContractLabourBoardstoadvisetherespectiveGovernmentsonmattersarising
outoftheadministrationoftheActasarereferredtothem.TheBoardsareauthorisedtoconstitute
Committeesasdeemedproper.

7.TheCentralAdvisoryBoardatripartiteBodywasreconstitutedon24thJune2002and
the nonofficial members hold office for a term of three years. The Chairman of the Board was
appointedon10th June 2005 for a period of three years. Seventythree meetings of the Central
AdvisoryContractLabourBoard(CACLB)havebeenheldsofar.Thelastmeetingwasheldon
2nd June,2008.ThereconstitutionoftheCACLBaswellasthenominationoftheChairmanis
underprocess.

8.TheexistingCentralAdvisoryContractLabourBoardhasheldfourmeetingsduring
20072008 under report and considered various issues relating to abolition of contract labour
systemincertainestablishments.TheworkingoftheActwasalsoreviewedinthismeeting.

Registration

9.TheestablishmentscoveredundertheActarerequiredtoberegisteredasprincipal
employerswiththeappropriateauthorities.Everycontractorisrequiredtoobtainalicenceandnot
toundertakeorexecuteanyworkthroughcontractlabour,exceptunderandinaccordancewith
thelicenceissuedinthatbehalfbythelicensingofficer.Thelicencegrantedissubjectto
conditionsrelatingtohoursofwork,fixationofwagesandotheressentialamenitiesinrespectof
contractasprescribedintherules.

FacilitiesforContractLabour

10.TheActhaslaiddowncertainamenitiestobeprovidedbythecontractortothecontract
labourforestablishmentofCanteensandrestroomsarrangementsforsufficientsupplyof
wholesomedrinkingwater,latrinesandurinals,washingfacilitiesandfirstaidfacilitieshavebeen
madeobligatory.Incaseoffailureonthepartofthecontractortoprovidethesefacilities,the
PrincipalEmployerisliabletoprovidethesame.

PaymentofWages

11.Thecontractorisrequiredtopaywagesandadutyiscastonhimtoensuredisbursement
ofwagesinthepresenceoftheauthorisedrepresentativeofthePrincipalEmployer.Incaseof
failureonthepartofthecontractortopaywageseitherinpartorinfull,thePrincipalEmployeris
liabletopaythesame.Thecontractlabourwhoperformssameorsimilarkindofworkasregular
workmen,willbeentitledtothesamewagesandserviceconditionsasregularworkmenasperthe
ContractLabour(RegulationandAbolition)CentralRules,1971.

PenalProvisions

12.ForcontraventionoftheprovisionsoftheActoranyrulesmadethereunder,the
punishmentisimprisonmentforamaximumtermupto3monthsandafineuptoamaximumof
Rs.1000/.

OtherProvisions

13.TheActmakesprovisionsfortheappointmentofInspectingstaff,formaintenanceof
registersandrecordsandmakingofRulesforcarryingoutthepurposeoftheAct.Inthecentral
sphere,officersoftheCentralIndustrialRelationMachinery(CIRM)havebeenappointedas
Inspectors.

Prohibition

14.ApartfromtheregulatorymeasuresprovidedundertheActforthebenefitofcontract
labour,the'appropriategovernment'undersection10(1)oftheActisauthorised,afterconsultation
withtheCentralBoardorStateBoard,asthecasemaybe,toprohibit,bynotificationinthe
officialgazette,employmentofcontractlabourinanyestablishmentinanyprocess,operationor
otherwork.

Subsection(2)ofSection10laysdownsufficientguidelinesfordecidinguponthe
abolitionofcontractlabourinanyprocess,operationorotherworkinanyestablishment.

Theguidelinesaremandatoryinnatureandare:

Conditionsofworkandbenefitsprovidedtothecontractlabour.
Whethertheworkisofaperennialnature.
Whether the work is incidental or necessary for the work of an
establishment.
Whethertheworkissufficienttoemployaconsiderablenumberofwhole
timeworkmen.

Whethertheworkisbeingdoneordinarilythroughregularworkmaninthat
establishmentorasimilarestablishment.

15.TheCentralGovernmentontherecommendationsoftheCentralAdvisoryContract
LabourBoard,haveprohibitedemploymentofcontractlabourinvariousoperations/categoryof
jobsinvariousestablishments.Sofar76notificationshavebeenissuedsinceinceptionoftheAct.

Exemption

16.The'appropriategovernment'isempoweredtograntexemptiontoanyestablishment
orclassofestablishmentoranyclassofcontractorsfromapplicabilityoftheprovisionsoftheAct
or the rules made thereunder on such conditions and restrictions as may be prescribed. Fifteen
notificationsgrantingexemptiontoestablishments
inexerciseofthispowerintheCentralspherehavebeenissued.

Enforcement

17.IntheCentralsphere,theCentralIndustrialRelationsMachinery(CIRM)has
beenentrustedwiththeresponsibilityofenforcingtheprovisionsoftheActandtherulesmade
thereunder,throughInspectors,LicensingOfficers,RegisteringOfficersandAppellateAuthorities
appointedundertheAct.

18.RegularinspectionsarebeingconductedbytheFieldOfficersoftheCIRMand
prosecutionsarelaunchedagainsttheestablishments,wheneverviolationsofthe
Act/Rules/notificationsprohibitingemploymentofcontractlabouraredetected.Inordertoensure
compliancewiththelabourlawsfromtimetotime,instructions/directionshavebeenissuedtothe
fieldofficersofCIRMandStateGovernmentforproperimplementationoftheAct.

19.AnumberofcomplaintsallegingviolationofcontractlabourActespeciallythe
notificationsprohibitingtheemploymentofcontractlabourarebeingreceived.Thesecomplaints
arebeinginvestigatedandremedialactiontakeninaccordancewiththeprovisionsofthelawby

launchingprosecutionsifconsiderednecessary.Referencesarereceivedforregularisationofthe
contractlabourorabolitionofthecontractlaboursystemonthegroundofperennialnatureof
work/ordinarilydonethroughregularworkmenetc.WritPetitionsarealsobeingfiledby
Union/Workersseekingabsorptionwherethecontractlaboursystemhasbeenabolishedor
pleadingthatthecontractissham.Therequestsforabolitionofcontractlaboursystemare
examinedinconsultationwiththeCentralAdvisoryContractLabourBoardandnotifications
abolishingcontractlaboursysteminvariousestablishmentsindifferentjobshavebeenissued.So
farastheregularisationoftheworkersisconcerned,nosuchprovision,eitherexpressorimplied,
existsintheAct.ThishasalsobeenaffirmedbytheConstitutionBenchoftheSupremeCourtin
thematterofSteelAuthorityofIndiaLimitedVersusWaterFrontWorkersUnionon30th
August,2001.

20.Astatementindicatingthenumberofinspectionscarriedout,prosecutions
launched,licencesissued,establishmentsregistered,andnumberofcasesreceivedduringthelast
threeyearsunderrules25(2)(v)(a)&(b)oftheContractLabour(R&A)CentralRules,1971
relatingtopaymentofwagesisannexed(AnnexureI).

EMERGINGISSUES/PROBLEMS

21.Inthecontextofglobalisation,privatisationandliberalisation,inMarch2000a
GOMwasconstitutedtoexaminetheproposaloftheMinistrytosuitablyamendtheprovisionsof
theActwithaviewtofacilitatingoutsourcingofactivitiestospecializedfirmshavingprofessional
experienceandexpertiseintherelevantareaandatthesametimetoprovideforasafetynetto
contractlabourinsuchoutsourcedactivities.Suchameasure,itwasfelt,wouldgenerate
employmentgrowth.TheGOMheldaseriesofmeetingsintheyears2000,2001and2003.After
indepthdeliberationsontheissuesinvolveditwasagreedthatcertainactivitieswhichform
supportservicesofanestablishmentbeexcludedfromtheapplicationofSection10oftheexisting
Act,whichprovidesforprohibitionofemploymentofcontractlabourincertain
circumstances.However,thesamecouldnotbefinalized.

22.WhilethetradeunionshavedemandedthattheActshouldbeamendedtoprovidefor
automaticabsorptionofcontractlabourintheeventofprohibitionofemploymentofcontractlabour,
theemployersorganizationsarevehementlyopposedtoit.Accordingtothemsuchastepwouldlead
tocapitalintensivemeasureslikemechanization,automization,etc.andfallinemployment.Their
viewisthattheemployersshouldbegivenflexibilitytodeterminethecompositionoftheworkforce
fortheindustrytosurviveinthecompetitiveenvironment.Further,accordingtothem,contractlabour
shouldnotbeabolishedinnoncoreactivitiesofanestablishmentandshouldbeallowedtobe
parcelledouttospecializedagencies,whichhavegrownrapidly,forbettertimemanagement,better
operationalefficiencyandhighpercentageofconsumersatisfaction.

23.SomeoftheStateGovernments,intunewiththechangingtimes,haveproposed
measurestoliberalisetheActtospurthegrowthofindustry,asforexample,grantofexemptionto
SpecialEconomicZonesandExportOrientedUnitsfromtheapplicabilityoftheActtoboost
exports.TheGovernmentofAndhraPradeshhaveamendedtheContractLabourActwithaviewto
prohibitingemploymentofcontractlabourinthecoreactivitiesofanestablishmentandtoallow
engagementofcontractlabourinnonecoreactivitiesofanestablishmentsuchaswatchandward,
sanitation,cleaningworks,etc.TheGovernmentofGoahasintroducedabillinthelegislatureto
abolishcontractlabourincoreactivitiesofanestablishment.

ISSUEFORCONSIDERATION

24.Inviewofthediametricallyoppositeviewsheldbythetradeunionsandthe
employersorganizations,ontheissueofabsorption,andthepresentthinkingofsomeState
Governments,aviewneedstobetakenonamendingtheActtofacilitateoutsourcingorprohibit
employmentofcontractlabourincoreactivitiesandtomandateautomaticabsorptionofexisting
contractlabour.

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