THE CONTRACT LABOUR

(REGULATION AND ABOLITION)

ACT, 1970
 OBJECT OF THE ACT

To do away with the abuses of

the system of employment of
contract labour
 An Act to regulate the
employment of contract
labour in certain
establishments and to
provide for its abolition in
certain circumstances and
for matters connected
therewith.
Inferior labour status, casual nature of
employment, lack of job security and poor
economic conditions are the major
characteristics of contract labour.

While economic factors like cost effectiveness

may justify system of contract labour,
considerations of social justice call for its
abolition or regulation.

The concern for providing legislative protection

to this category of workers, whose conditions
have been found to be abysmal, resulted in the
enactment of the Contract Labour (Regulation
and Abolition) Act, 1970.

4
 The Contract Labour
(Regulation and Abolition)
Act, 1970 Act and the
Contract Labour (Regulation
and Abolition) Central
Rules, 1971 came into force
on 10.2.71.

10/09/20
5
Short Title, Extent, Commencement
And Application.
Section 1
APPLICABILITY OF THE ACT (Sec. 1)

2. It extends to the whole of India

4. It applies:-

(a) To every establishment in which 20 or

more workmen are employed or were
employed on any day of the preceding
12 months as contract labour

(b)To every contractor who employees or

who employed on any day of the
preceding twelve months 20 or more
workmen
5. Act does not apply to
establishments where the work
performed is of:-

a) Intermittent or Casual nature

b) Seasonal nature
 What is Intermittent
nature of Job?

 
• If the work is performed for
more than 220 days in the
last 12 months or

• If the work is of seasonal

nature & it is performed more
than 60 days in a year

then it shall not be deemed to

be intermittent nature.
9
The Supreme Court of India in the case of
Standard Vacuum Refinery Company Vs.
their workmen (1960-II-ILJ page 233)
observed that contract labour should not
be employed where: —
(a) The work is perennial and must go on
from day to day;
(b) The work is incidental to and necessary
for the work of the factory;
(c) The work is sufficient to employ
considerable number of whole time
workmen; and
(d) The work is being done in most concerns
through regular workmen.
10
Definition
Section 2
 PRINCIPAL EMPLOYER

• In relation to any Govt. Office or Dept. or a

Local Authority, head of that Office/Dept.
or such other Officer as the Govt. or the
Local Authority may specify in this behalf.
• In case of factory, the owner or occupier of
the factory, & manager of the factory, if any
so named under the Factories Act, 1948.
• In case of mine, owner or agent of mine &
the manager of the mine, if any so named.
• In any other estt., any person responsible
for the supervision & control of the estt.
Sec 2 (c) CONTRACTOR

"contractor", in relation to an
establishment, means a person
who undertakes to produce a
given result for the
establishment, other than a mere
supply of goods or articles of
manufacture to such
establishment, through contract
labour or who supplies contract
labour for any work of the
establishment and includes a
sub-contractor.
 Sec 2 (i) WORKMEN

"workman" means any person

employed in or in connection
with the work of any
establishment to do any skilled,
semi-skilled or un-skilled
manual, supervisory, technical
or clerical work for hire or
reward, whether the terms of
employment be express or
implied, but does not include
any such person.
(A) Who is employed mainly in a managerial
or administrative capacity; or

(B) Who, being employed in a supervisory

capacity draws wages exceeding five
hundred rupees per mensem or exercises,
either by the nature of the duties attached
to the office or by reason of the powers
vested in him, functions mainly of a
managerial nature; or

(C) Who is an out-worker, that is to say, a

person to whom any articles or materials
are given out for certain process to return
them back.
 CONTRACT WORKER

Any worker will be a contract

labour when he is hired for
work of establishment through a
contractor, with or without the
knowledge of the principal
employer
Authorities
The appropriate govts. are required to set up
Central and State Advisory Contract
Labour Boards to advise the respective
Governments on matters arising out of the
administration of the Act as are referred to
them.

The Boards are authorised to constitute

Committees as deemed proper.

On the recommendation of the Board, have

prohibited employment of contract labour in
various operations/ category of jobs in
various establishments. 17
 CHAPTER III
Registration of Establishments
Employing Contract Labour
SECTION 6-10
 APPOINTMENT OF
REGISTERING
OFFICERS (ASST.
COMMISSIONER OF
LABOUR OR LABOUR
OFFICER)
SECTION 6
 SECTION 7 :
1. Every principal employer of an REGISTRATION OF
establishment to which this Act
applies shall, make an CERTAIN
application to the registering ESTABLISHMENTS
officer in the prescribed
manner (FORM I) for
registration of the
establishment

2. If the application for

registration is complete in all
respects, the registering officer
shall register the establishment
and issue to the principal
employer of the establishment a
certificate of registration
containing such particulars as
may be prescribed.
 SECTION 8:
If the Registering REVOCATION OF
Officer is satisfied REGISTRATION
that, the registration
of any establishment
has been obtained by
misrepresentation or
suppression of any
material fact, or that
for any other reason
the registration has
become useless or
ineffective
 SECTION 9:
EFFECT OF
In case an NON-
establishment required
to be registered under
REGISTRATION
Section 7 is not been
registered within the
time fixed for the
purpose under that
section, then
punishment will be
given as per section 36.
 Contd.
If -
• the establishment has not been registered under the Act
within the stipulated time ; or

• the registration certificate has been revoked,

the principal employer of the establishment to

which this Act applies, shall not employ
contract labour after expiry of period or
after the revocation of RC.
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23
 SECTION 10:
1. The appropriate PROHIBITION OF
Government may, after EMPLOYMENT OF
consultation with the CONTRACT LABOUR.
Central Board or, as the
case may be, a State Board,
prohibit, by notification in
the Official Gazette,
employment of contract
labour in any process,
operation or other work in
any establishment.
 Before issuing any notification as aforesaid,
the appropriate Government shall have
regard to the conditions of work and
benefits provided for the contract labour in
that establishment and other relevant
factors, such as –

a) Whether the process, operation or other

work is incidental to, or necessary for
the industry, trade, business, manufacture
or occupation that is carried on in the
establishment

b) Whether it is of perennial nature, that is

to say, it is of sufficient duration having
regard to the nature of industry, trade,
business, manufacture or occupation that is
carried on in that establishment
c) Whether it is done ordinarily
through regular workmen in that
establishment or an establishment
similar there off

d) Whether it is sufficient to employ

considerable number of whole-
time workmen.
 CHAPTER IV
LICENSING OF CONTRACTORS
Section 11- 15
 SECTION 11:
Appoint such APPOINTMENT
persons define the OF LICENSING
limits, within OFFICERS
which a licensing
officer shall
exercise the
powers conferred
on licensing
officers by or
under this Act.
 SECTION 12:
1. With effect from such LICENSING OF
date as the appropriate CONTRACTORS
government , no
contractor shall
undertake or execute
any work through
contract labour except
under and in accordance
with a licence issued in
that behalf by the
licensing officer.
2. A Licence shall contain -
Such conditions including, in
particular,

• Hours of work

• Fixation of wages

• Other essential amenities

in respect of contract labour.

Every contractor is required to obtain a licence
and not to undertake or execute any work
through contract labour except under and in
accordance with the licence issued in that
behalf by the licensing officer.

The Contractor has to obtain License if

employing more than 20 workers & deposit
the required fees on FORM No. 4 along with
the Principal Employer Certificate on FORM
No. 5.
 

31
 SECTION 13:
1. Every application for the
grant of a licence under sub- GRANT OF
section(1) of section 12 shall LICENCES
be made in the prescribed
form and shall contain the
particulars

2. The licensing officer may

make investigation

3. A licence granted shall be

valid for the period specified
therein and may be renewed
from time to time
1. If the licensing officer is SECTION 14:
satisfied, either on a reference REVOCATION,
made to him in this behalf or
otherwise, that- SUSPENSION AND
AMENDMENT OF
a) Obtained by
misrepresentation or LICENCES.
suppression of any material
fact

b) Failed to comply with the

conditions subject to which
the licence has been granted

2. The licensing officer may

vary or amend a licence
granted under Section 12.
Terms and Conditions of License
• License is non transferable
• Contract labour should not
exceed, on any day, maximum
specified in the license.
• Wages, hours of work and other
conditions of service.
• Notify any change in no. of
workmen or conditions of service.

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34
Validity & Renewal

The License will be valid for one year

and can be renewed thereafter before
30 days of its expiry

Revocation, suspension & amendment

of license

If the license is obtained by

misrepresentation or suppression

Security Deposit

The Contractor has to deposit the

Security amount as prescribed by the
State Govt
Chapter 5 Welfare And Health
Sections 16-21
The Act has laid down certain amenities to be
provided by the contractor to the contract
labour for establishment of
• canteens
• rest rooms
• arrangements for sufficient supply of
wholesome drinking water
• latrines and urinals
• washing facilities and
• first aid facilities

In cases of failure on the part of the

contractor to provide these facilities, the
principal Employer is liable to provide the
same.
37
1. Appropriate Government
Section 16:
may make rules Canteen
(a) to which this Act applies,

(c) wherein contract labour

numbering 100 or more is
ordinarily employed by a
contractor, one or more
canteens shall be provided
and maintained by the
contractor
2. Without prejudice to the generality of the
foregoing power, such rules may provide
for:-

(a) The date by which the canteens shall be

provided;

(b) The number of canteens that shall be

provided, and the standards in respect of
construction, accommodation, furniture
and other equipment of the canteens;

(c) The foodstuffs which may be served

therein and the charges which may be
made thereof.
1. In every place wherein Section 17:
contract labour is required
to halt at night in Rest-rooms
connection with the work of
an establishment:-

(a) To which this Act applies,

and

(b) In which work requiring

employment of contract
labour is likely to continue
for such period as may be
prescribed,
2. The rest rooms or the alternative
accommodation to be provided

(1) shall be sufficiently lighted and

ventilated and shall be maintained
in a clean and comfortable
condition.
 It shall be the duty of every
contractor employing contract Section 18:
labour to provide and
maintain: Other facilities
a) A sufficient supply of
wholesome drinking water

b) A sufficient number of
latrines and urinals situated as
to be convenient and
accessible to the contract
labour and

c) Washing facilities
 Section 19:
There shall be provided First-aid
and maintained by the facilities
contractor so as to be
readily accessible during
all working hours a first-
aid box equipped with the
prescribed contents at
every place where contract
labour is employed by
him.
 Section 20:
1. If any amenity required Liability Of
to be provided for the Principal
benefit of the contract
labour employed in an Employer In
establishment is not Certain Cases
provided by the
contractor within the
time prescribed thereof,
such amenity shall be
provided by the principal
employer within such
time as may be
prescribed.
2. All expenses incurred by the
principal employer in providing
the amenity may be recovered by
the principal employer from the
contractor either by deduction
from any amount payable to the
contractor under any contract or
as a debt payable by the
contractor.
Welfare Provisions
Sr. No. Provision
1 Canteen
2 Rest rooms
3 Crèche
4 Drinking Water
5 Latrines & Urinals
6 Washing Facilities
7 First aid Facilities
Conditions
Where 100 or more contract labour employed &
employment of contract worker continue more than 6
months
If contract labour is required to halt at night &
employment of contract worker continue for 3 or more
months
Where 20 or more female contract labor are employed.
Sufficient supply at convenient place.
At least one latrine for every 25 male & female contract
labor separately
Separate for female & male contract labor
At least one First aid box for every 150 contract labor
46
1. A contractor shall be Section 21:
responsible for Responsibility for
Payment of
 Payment of wages to each
Wages
worker employed by him
 Shall be paid before the expiry
of such period as may be
prescribed
 In case of failure on the part of
the contractor to pay wages
either in part or in full, the
Principal Employer is liable to
pay the same.
 No wage period shall exceed one month
 Wages of terminated worker shall be paid
before the expiry of second working day from
the day on which his services were terminated
 Wages to every worker shall be paid directly or
to any person authorized by him.
 The wages paid to the contract workers shall be
authenticated by the representative of the
Principal employer at the end of the wage sheet
 Display of notice showing wage period
 Entries regarding payment of wages, etc. to be
made in Register
 Payment to be made on working day
 Wages to be paid without deduction (except
those permissible under Payment of Wages Act)
2. Duty of principle employer

 Shall nominate a representative to be

present at the time of disbursement of
wages

 Shall be the duty of such

representative to certify the amounts
paid as wages in such manner

3. It shall be the duty of the contractor to

ensure the disbursement of wages in
the presence of the authorized
representative of the principal
employer.
4. In case the contractor fails to make
payment of wages within the
prescribed period or makes short
payment,

 Then the principal employer shall be

liable to make payment of wages in
full or the unpaid balance due,

 Recover the amount so paid from the

contractor either by deduction from
any amount payable to the contractor
under any contract or as a debt
payable by the contractor.
Register & Records to be maintained:

Sr. No. Register to be maintained Form No.

1 Register of Contractor (by Principal Employer) 12

2 Register of Person employed 13
3 Employment card 14
4 Service Certificate 15
5 Muster Roll 16
6 Register of wages 17
7 Wages cum Muster roll register where is fortnightly or less 18

8 Register of Deductions 20
9 Register of Fines 21
10 Register of Advances 22
11 Register of Overtime 23
12 Wages slip where wage period is more than one week 29

51
• All the records & register shall be
preserved for a period of 3 years from the
date of last entry.

Annual Return
• Annual return in Form 25 (In duplicate)
Principal employer by 15th Feb.

Half Yearly Returns

• Half yearly return in Form 24 (In
duplicate) Contractor not later than 30
days from the close of half year.

52
Penalty
For obstructing the inspector or failing to
produce registers etc. - 3 months’
imprisonment or fine upto Rs.500, or both.
(Sec. 22)

For contravention of the provisions of the

Act or any rules made thereunder, the
punishment is imprisonment for a
maximum term upto 3 months and a fine
upto a maximum of Rs.1000/-.

On continuing contravention, additional

fine upto Rs.100 per day (Sec. 23)
53
Other Provisions
The Act makes provision for the
appointment of Inspecting staff, for
maintenance of registers and records
and forvmaking Rules for carrying
out the purpose of the Act.

In the central sphere, officers of the

Central Industrial Relation
Machinery (CIRM) have been
appointed as Inspectors.

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54
Prohibition of Employment of
Contract Labour
Apart from the regulatory measures
provided under the Act for the benefit
of the contract labour, the
‘appropriate government’ under
section 10 (1) of the Act is authorised,
after consultation with the Central
Board or State Board, as the case may
be, to prohibit, by notification in the
official gazette, employment of
contract labour in any Establishment in
any process, operation or other work

55
 Contd.
Sub-section (2) of Section 10 lays down
sufficient guidelines for deciding upon the
abolition of contract labour in any process,
operation or other work in any
establishment

The guidelines are mandatory in nature

and are:-Conditions of work and benefits
provided to the contract labour.

56
• Whether the work is of Perennial nature
(regular). Contd.
• Whether the work is incidental or
necessary for the work of an
establishment.

• Whether the work is sufficient to

employ a considerable number of
whole-time workmen.

• Whether the work is being done

ordinarily through regular workman in
that establishment or a similar
establishment
57
 Consequences of abolition
• Contractor gets eliminated and so does the contract.
• Contract Labour does not automatically become direct
employees of Principal Employer.
• Contract Labour gets preference for employment with
Principal Employer subject to their meeting the
employment requirements.
• The displaced Contract Labour can still raise an dispute
claiming that contract was sham and they were always
the direct employees of the Principal Employer.
• Contract Labour cannot be employed in such processes
thereafter.
58
Exemption
The ‘appropriate government’ is
empowered to grant exemption to any
establishment or class of
establishments or any class of
contractors from applicability of the
provisions of the Act or the rules made
hereunder on such conditions and
restrictions as may be prescribed.

59
2nd NCL 2002 Recommendation
• Contract labour shall not be engaged for core production / service
activities.
• However, for sporadic seasonal demand, the employer may engage
temporary labour for core production / service activity.
• Off-loading perennial non-core services like canteen, watch and
ward, cleaning, etc. to other employing agencies has to take care of
three aspects –
– (1) there have to be provisions that ensure that perennial core services are not
transferred to other agencies or establishments;
– (2) where such services are being performed by employees on the payrolls of
the enterprises, no transfer to other agencies should be done without consulting,
bargaining (negotiating) agents
–

60
 Contd.
• and (3) where the transfer of such services do
not involve any employee who is currently in
service of the enterprise, the management will
be free to entrust the service to outside agencies.
• The contract labour will, however, be
remunerated at the rate of a regular worker
engaged in the same organisation doing work of
a comparable nature or if such workers does not
exist in the organisation, at the lowest salary of
a worker in a comparable grade, i.e. unskilled,
semi-skilled or skilled.

10/09/20
61
Employment permitted by the State
Govt for employment of Contract
Labor

• Housekeeping
• Horticulture
• Loading & Unloading
• Material Movements
• Canteen Employment
• Security & Vigilance
• Opposite views held by the trade unions and the
employers’ organizations
• Some of the State Governments have proposed
measures to liberalise the Act to spur the growth of
industry, as for example, grant of exemption to
Special Economic Zones and Export Oriented Units
from the applicability of the Act to boost exports.
• Government of Andhra Pradesh have amended the
Contract Labour Act with a view to prohibiting
employment of contract labour in the core activities
of an establishment and to allow engagement of
contract labour in none-core activities of an
establishment such as watch and ward, sanitation,
cleaning works, etc.
• Government of Goa has introduced a bill in the
legislature to abolish contract labour in core
activities of an establishment.
 
63
 ENFORCEMENT OF CONTRACT LABOUR
( R & A) Act, 1970
Sl. No. Item 2003-04 2004-05 2005-06

1. No. of Registration Certificates issued to principal 720 590 675

employers.

2. No. of Licences issued to contractors*. 6788 7277 6973

3. No. of Inspections conducted. 4991 4540 5663

4. No. of Irregularities detected. 71632 59301 59298

5. No. of prosecutions launched. 3896 3356 2914

6. No. of convictions. 2072 2018 1000

7. No. of contract labourers covered by licences@. 853690 968792 971570

8. No. of Licences revoked/ cancelled. 4014 6601 7578

9. No. of registration certificates revoked. 52 08 211

64
Cases:
• Gujarat State Electricity Board Vs
Union of India 09.05.1995
Supreme Court recommended that the
Central Government should amend the
Act by incorporating a suitable
provision to refer to industrial
adjudicator the question of the direct
employment of the workers of the ex-
contractor in the principal
establishments, when the appropriate
Government abolishes the contract
labour.

65
Cases:
• Air India Statutory Corporation Ltd.
Vs United Labour Union & Others
06.12.1996

Though there exists no express provision in

the Act for absorption of employees in
establishments where contract labour system
is abolished, the Principal Employer is under
statutory obligation to absorb the CL the
linkage between the contractor and employee
stood snapped and direct relationship stood
restored between principal employer and
contract labour as its employees.
66
Cases:
• Steel Authority of India Ltd. & Others Vs
National Union of Waterfront Workers
30.08.2001
Principal Employer cannot be required to order
absorption of the contract labour working in the
concerned establishment.

The employer is not liable to absorb the contract

employees if the contract was genuine.
However, They can be given preference.

The judgement in Air India’s case was over-

ruled.
67
 MANAGING CONTRACT LABOUR
 Why there is need of engaging Contract Labour?
 What are the pros and cons of Contract Labour?
 What precautions should be taken while engaging Contract
Labour?
 Registration Certificate of Principal Employer
 License of the Contractor
 Selection of the Contractor
 Terms and conditions of the Agreement
 Appointment of Contract Labour & terms and conditions of their
employment
 Supervision & Control
 Disciplinary Matters
 Payment
 Statutory Compliance
68
FAQs

• In a situation where an organization ABC has

outsourced any services say transport of some senior
staff to a company EFG. EFG gain has outsourced it to
35 different vehicle owners cum drivers
– Now who is the principal employer and what are the
responsibilities of contractor?
– The contractor has not hired any manpower, they have
engaged vehicle with driver to deliver certain services,
similarly ABC has also hired company EFG for delivery of
services not man-power.
– In such situation what are obligations on part of company
ABC and contractor EFG?
69
FAQs

• What are the Advantages and Dis-Advantages of

appointment of Contract Labour?
– Minimum or no liability, Reduced Pay Roll burden,
Economic and financial feasibility, no fear of unionisation
– Permission from the appropriate authorities, ensure that
bonus, ESI contributions are remitted by the contractor , on
non-compliance by contractor PE has to pay, no chance to
judge CL’s competency
• Is there any minimum wage for Contract Labour?
– Under CL (R&A) Act & rules if the work done by the
contract workers are the same or similar that of employer's
workmen then in that case wage rates will be the same as
that of directly employed workers
70
FAQs

• Does one have to provide for PF, ESI, leave, Gratuity

for Contract Workers?
– PF, ESI, LEAVE yes.
– Gratuity No incase one has not completed 5 years of
continuous service

71