The Contract Labour (Regulation and Abolition ), Act 1970 | Labour and Industrial Law - CLAT PG PDF Download

Background

Contract labour systems can be misused, prompting ongoing government discussions about abolishing them. The Second Five-Year Plan recommended studying contract labour issues, abolishing the system, and improving service conditions where abolition wasn't feasible. 
The tripartite committee, including state government representatives, generally agreed on abolition where possible and regulation of working conditions where it couldn't be abolished.

The Object of the Act

• The act aims to abolish contract labour in specific categories as notified by the government, while also improving service conditions where abolition isn't possible.
• It establishes a tripartite advisory board to assist in administering the legislation and registering establishments and contractors.
• The act includes provisions for welfare measures, amenities for contract labour, and safeguards against wage payment delays.

Extension
The act extends to the entire territory of India.

Applicability

• Every establishment employing 20 or more workmen as contract labour on any day in the preceding 12 months.
• Every contractor employing 20 or more workmen on any day in the preceding 12 months.
• The appropriate government may, with a two-month notice, apply the act to establishments or contractors employing fewer than 20 workmen.

Sec I (5) Act does not apply to

• Establishments where work is performed only intermittently or casually.
• The appropriate government will decide if the work is intermittent or casual after consulting the Central or State Board.

For work to be deemed not intermittent

• It must be performed for more than 120 days in the preceding 12 months.
• It must be seasonal and performed for more than 60 days in a year.

Definitions

Contractor Sec 2 (c)

• A person who undertakes to produce a specific result for an establishment using contract labour, excluding mere supply of goods, or who supplies contract labour for any work.
• This includes subcontractors.

Establishment Sec 2 (e)

• Any office or department of the government or a local authority.
• Any place where industry, trade, business, manufacture, or occupation is carried out.

Principal employer Sec 2 (g)

• The head of an office or department in the government or local authority, or an officer specified by the government or local authority.
• In a factory, the owner, occupier, or manager as per the factories act 1948.
• In a mine, the owner, agent, or manager as per the mines act.
• In any other establishment, the person responsible for supervision and control.

Workman Sec 2 (i)
A person employed in any establishment to do skilled or unskilled, manual, supervisory, technical, or clerical work for hire or reward, regardless of whether the terms of employment are express or implied. However, it does not include:

• Persons mainly employed in managerial or administrative roles.
• Supervisors earning more than 10,000 rupees per month who primarily perform managerial tasks.
• Outworkers, who are given articles or materials to process for sale outside the principal employer's premises.

The Advisory Boards

Sec 3 Central advisory board

• The Central Government shall establish a Central Advisory Board to provide guidance on matters related to the administration of this act and to carry out other assigned functions.

Constitution

• The Central Board will consist of a Chairman appointed by the Central Government, the Chief Labour Commissioner (Central), and up to 17 members nominated by the Central Government to represent various interests.

Sec 4. State Advisory Board

• The State Government may form a State Advisory Contract Labour Board to advise on matters related to the administration of this Act.
• The State Board will include a Chairman appointed by the State Government, the Labour Commissioner or a nominated officer, and up to 11 members representing various interests.
• The term of office and other conditions for members will be prescribed, ensuring a balance in representation.

Sec 5. Power to constitute committees

• The Central or State Board may form committees for specific purposes, following prescribed procedures for meetings and member allowances.

Registration of establishment employing contract labour

Sec 6 appointment of registering officers

• The appropriate Government can appoint Gazetted Officers of Government as registering officers for this Chapter and define their limits of authority.

Registration of certain establishments

• Every principal employer of an establishment to which this Act applies must apply to the registering officer for registration within a period fixed by the appropriate Government.
• The registering officer may entertain late applications if there is sufficient cause.
• If the application is complete, the registering officer will register the establishment and issue a certificate of registration.

Corporation of India workers Union v. Food Corporation of India and others

• The Gujarat High Court held that under section 7 of the Act, the principal employer is required to obtain a certificate of registration issued by the appropriate government and under section 12 The contractor is required to obtain a licence.
• The workmen can be employed as contract labour only through a licensed contractor.
• Unless both the aforesaid conditions are complied, the provisions of this act would not be attracted.
• In a situation wherein either of these two conditions is not satisfied a workman employed by an intermediary would be deemed to have been employed by the principal employer.
• Therefore in relation to the period when either the principal employer did not possess the certificate of registration or the contractor did not possess the licence, that they are directly employed by the principal employer.

Revocation of registration in certain cases

• If a registering officer believes that the registration of an establishment was obtained through misrepresentation, suppression of facts, or has become ineffective, they may revoke the registration after giving the principal employer a chance to be heard and with the appropriate Government's approval.

Effect of non-registration

• Principal employers of establishments required to be registered under section 7 but not registered within the specified time, or whose registration has been revoked under section 8, cannot employ contract labour after the specified period or after revocation.

Prohibition of employment of contract labour

• The appropriate Government may, after consulting the Central or State Board, prohibit employment of contract labour in certain processes, operations, or works in establishments.
• Before issuing such a notification, the Government must consider the conditions of work and benefits provided for contract labour, and other relevant factors like the nature, duration, and necessity of the work for the establishment.
• The Government's decision on whether a process or operation is of perennial nature is final.

Sandeep Verma and others V. Union of India and others

• Employees working as clerks, peons, electricians, etc., in the Central Board of Secondary Education under a contractor were involved in a legal dispute regarding their employment status.
• The court observed that the contractor paid the wages, and the employees' services were terminated by the contractor, not by the principal employer.
• The relationship of employer and employee was not established as the principal employer did not terminate the employees' services and the appointments were not in accordance with the principal's rules.
• The employees were not direct employees of the principal employer.

In UP State Electricity Board Lucknow V. Presiding Officer Industrial Tribunal U.P

• Employer UP State Electricity Board gave the contract of security of its employee's Colony to Industrial security service Allahabad.
• Initially, the contract was for 6 months and extended later.
• Workers of ISI raised demands regarding their service conditions, which were against the contract terms.
• They filed a case under the authority of payment of wages act.
• Authority held that the employer is not liable for payment of wages.
• Security of the colony was disturbed because of employee agitation, and security Commission recommended removal of staff.
• Agitated employees were removed and replaced with new staff.
• Agitated employees raised an industrial dispute against their removal.
• Industrial Tribunal ordered absorption of contract employees.
• Employer approached the High Court.
• High court held that absorption order is incorrect as security work is not a permanent and perennial nature of work of the electricity board.
• Term of the contract that under no circumstances members of the security staff of the contractor shall be treated to be the employees of the Board.
• Termination of employment is well within the contract, in case of negligence on the part of the security personnel, on the recommendation of the security committee.

Appointment of licensing officers Sec 11

• The appropriate Government may appoint Gazetted Officers of Government as licensing officers for this Chapter and define their limits of authority.

Licensing of contractors Sec 12

• No contractor to whom this Act applies shall undertake or execute any work through contract labour except under and in accordance with a licence issued by the licensing officer.
• A licence under sub-section (1) may contain conditions regarding hours of work, wages, and other essential amenities for contract labour as deemed fit by the appropriate Government.

General Labour Union V. K.M.Deasi

• There is no provision in the Contract Labour Regulation and abolition act whereby it can be construed that in case of failure on the part of the contractor to register his contract under section 12 of the act, the employees employed by the contractor would become the direct employees of the company.
• Failure on the part of the contractor to register the contract would lead to invoking penal provisions.
• It was held in United labour Union and others V. Union of India and others that mere existence of penal provisions does not detract from the position that there can be no deemed Contract labour if the two conditions relating to registration of the principal employer and obtaining of a valid licence by the contractor are not satisfied.
• If the protection or right given by reason of a deeming provision is not available, then the natural consequence must follow in addition to the penal consequence, unless there is provision to the contrary.

Grant of licences Sec 13

• Applications for grant of a licence under section 12 must contain particulars about the establishment's location, nature of work, and other prescribed details.
• The licensing officer may investigate applications and must follow prescribed procedures during investigations.
• Licences granted under this Chapter are valid for specified periods and can be renewed under prescribed conditions.

Revocation, suspension and amendment of licences Sec 14

• If a licence under section 12 is obtained by misrepresentation or suppression of facts, or if the conditions of the licence are not complied with, the licensing officer may revoke or suspend the licence after giving the holder a chance to explain.
• The licensing officer may also amend a licence granted under section 12, subject to any rules made in this regard.

Appeal Sec 15

• Aggrieved persons can appeal against orders under sections 7, 8, 12, or 14 within 30 days of communication of the order.
• The appellate officer, nominated by the appropriate Government, may entertain late appeals if sufficient cause is shown.
• The appellate officer will dispose of appeals as quickly as possible after hearing the appellant.

Welfare and Health of Contract Labour

Canteens

• The appropriate Government can create rules mandating the provision of canteens in certain establishments where contract labour is employed.
• If the establishment employs a significant number of contract labour (usually 100 or more) and the work is expected to continue for a prescribed period, one or more canteens must be provided and maintained by the contractor.
• The rules may specify:
• a. Deadline for when the canteens should be set up.
• b. Number of canteens required and standards for their construction, accommodation, furniture, and equipment.
• c. Types of food that can be served and the charges for them.

Rest-Rooms

• If contract labour needs to stay overnight at a work site, the contractor must provide and maintain rest-rooms or suitable alternative accommodation.
• These facilities must be adequately lit, ventilated, and kept clean and comfortable.

Other Facilities

• Contractors are responsible for providing and maintaining essential facilities for contract labour, including:
• a. Drinking Water: A sufficient supply of clean drinking water at convenient locations.
• b. Latrines and Urinals: Enough latrines and urinals of prescribed types, conveniently located and accessible.
• c. Washing Facilities: Sufficient washing facilities.

First-Aid Facilities

• Contractors must provide and maintain a first-aid box with prescribed contents, easily accessible during working hours, at every location where contract labour is employed.

Liability of Principal Employer in Certain Cases

• If a contractor fails to provide required amenities for contract labour, as specified in sections 16, 17, 18, or 19, within the prescribed time, the principal employer must provide these amenities.
• The principal employer can recover the expenses incurred in providing these amenities from the contractor, either by deducting from payments due to the contractor or as a debt payable by the contractor.

Responsibility for Payment of Wages

• a. Contractor's Responsibility: The contractor is responsible for paying wages to each worker employed as contract labour before the end of the prescribed period.
• b. Principal Employer's Role: The principal employer must nominate a representative to be present during wage disbursement by the contractor and certify the amounts paid.
• c. Duty of Contractor: The contractor must ensure wage disbursement in the presence of the principal employer's representative.
• d. Principal Employer's Liability: If the contractor fails to pay wages on time or pays less than due, the principal employer is liable to pay the full wages or the unpaid balance to the contract labour and recover the amount from the contractor.

Penalties and Procedure

• Obstructions: If someone obstructs or refuses to assist an inspector in performing their duties under this Act, they can face imprisonment for up to three months, a fine of up to five hundred rupees, or both.
• Contravention of Provisions: Violating any provision of this Act or its rules regarding the employment of contract labour can result in imprisonment for up to three months, a fine of up to one thousand rupees, or both. Continuous violations may incur additional fines for each day of contravention.
• Deva Nath and Others V. National Fertilizers Ltd: The court determined that it is not the High Court's role to decide on the abolition of contract labour in specific processes or operations within an establishment. This decision rests with the government, following the considerations outlined in section 10 of the Act. The Act prescribes penal provisions for violations of sections 9 and 12, as stated in Sections 23 and 25 of the Act. In a writ petition, the High Court cannot declare contract labour as employees of the principal employer.
• SB. Deshmugh V. Labour Enforcement Officer: A complaint was lodged against the chief Regional Manager of the State Bank of India and a contractor under the Act for employing 12 individuals as contract labour for maintenance and cleaning of the Bank's building. This was prohibited by a notification issued by the Central Government under Section 10 (1) of the Act. The court ruled that the prohibition under Section 10 (1) is not against the establishment itself but against a specific activity of contract labour. The employment of contract labour in any process, operation, or other work in any establishment is prohibited. In case of contravention, the principal employer of the establishment would be prosecuted, and if the contractor aided or abetted the offence, they could also be prosecuted.
• Other Offences: Contravening any provisions of this Act or its rules, where no specific penalty is provided, can lead to imprisonment for up to three months, a fine of up to one thousand rupees, or both.
• Cognizance of Offences: Cognizance of offences under this Act can only be taken on a complaint by, or with the prior written approval of, an inspector. Offences punishable under this Act can only be tried by a Presidency Magistrate or a first-class magistrate.
• Limitation of Prosecutions: Cognizance of offences under this Act can only be taken if the complaint is made within three months of the offence coming to the inspector's knowledge. For offences involving disobedience of a written order by an inspector, complaints can be made within six months.

Inspecting Staff

• The appropriate Government can appoint inspectors for this Act through a notification in the Official Gazette and define their local limits of power.

Powers of Inspectors

• a. Inspectors can enter premises where contract labour is employed to examine registers, records, or notices required by this Act.
• b. Inspectors can examine individuals in these premises whom they believe are workmen employed there.
• c. Inspectors can require information about workmen and payments related to contract work.
• d. Inspectors can seize or copy relevant registers, records, or notices related to offences under this Act.
• e. Inspectors can exercise other prescribed powers.
• Individuals required to produce documents or information to inspectors are legally bound to do so.
• Provisions of the Code of Criminal Procedure, 1898, apply to searches or seizures by inspectors.

Registers and Other Records to be Maintained

• Principal employers and contractors must maintain registers and records of contract labour details, including work nature, wages, and other particulars as prescribed.
• Notices about work hours, duties, and other information must be exhibited in the establishment where contract labour is employed.

Effect of Laws and Agreements Inconsistent with this Act

• This Act prevails over any inconsistent laws, agreements, contracts, or standing orders regarding contract labour, but more favorable benefits under agreements or contracts remain valid.
• Contract labour can enter agreements for better rights or privileges than those under this Act.

Power to Exempt in Special Cases

• The appropriate Government can exempt certain establishments or contractors from this Act's provisions in emergencies, as specified in a notification.

Protection of Action Taken under this Act

• Legal action cannot be taken against government officials or members of the Central or State Boards for actions taken in good faith under this Act.
• The Government is not liable for damages caused by actions taken in good faith under this Act.