Contract Labour

Contract Labour is a term which is applied to man power engaged by somebody else to produce a given result to principal employer where this man power has no direct relationship of employer-employee with the principal employer. This includes the simple supply of manpower to principal employer by contractor where contractor is not involved in specified activity. Contract Labour is a significant and growing form of employment. It is prevalent in almost all industries, in agriculture and allied operations and in service sector. It generally refers to workers engaged through an intermediary and is based on a triangular relationship between the user enterprises, the contractor (including the sub contractor) and the workers. These workers are millions in number and generally belong to the unorganised sector. They have very little bargaining power, have little or no social security and are often engaged in hazardous occupations endangering their health and safety. They are often denied minimum wages and have little or no security of employment. On the other hand, reasons like sporadic nature of work, difficulty in ensuring closer supervision by the employer or cost effectiveness, flexibility in manpower deployment, concentration in core competencies etc. justify the system of contract labour. Recognising the need for protecting the interest of contract labour, the Planning Commission in the second five year plan made certain recommendations, namely, undertaking of studies to ascertain the extent of the problem of contract labour, progressive abolition of the system of contract labour and improvement of service conditions of contract labour. The matter was discussed at various meetings of Tripartite Committees at which State Governments were also represented and the general consensus of opinion was that the system of contract labour should be abolished wherever possible and practicable, and that in cases where the system of contract labour could not be abolished altogether, the working conditions of contract labour could be regulated so as to ensure payment of wages and provision of essential amenities. Thus the recommendations of the Planning Commission and consensus opinion of the Tripartite Committees lead to the Contract Labour Regulation and Abolition Act, 1970.

Contract Labour Regulation and Abolition Act, 1970

Purview of the Act This act applies to any establishment in which 20 or more workmen are employed on a contract basis on any day of the last one year and also to all contractors who employ or have employed 20 or more workmen on any day of the preceding twelve months. The act however, does not apply to the establishments in which work is intermittent or casual in nature. While the decision regarding whether the work is of casual nature or not rests on the appropriate government, if the work is carried out on more than 120 days in a year it cannot be considered as intermittent. The Central and State Advisory Boards The Central Government (Sec- 3) and State Governments (Sec- 4) 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. The Central Government constitutes an advisory board called the Central Advisory Contract Labour Board to decide on matters arising from the administration of this Act. The Central Advisory Board, a tripartite body, holds meetings and considers various issues, in particular those relating to the abolition of the contract labour system in certain establishments. Similarly, the State Government also constitutes a State Advisory Contract Labour Board. The jurisdiction of the Central and State Government boards has been laid down by the definition of the Appropriate Government in Section 2(1) (a) of the Act as amended in 1986. Registration and Licensing The establishments covered under the Act are required to be registered as principal employers with the appropriate authorities. If Government at any point of time is dissatisfied with the practices followed, it can revoke the registration of an establishment. In addition, Government may, after consultation with the Central Board or the State Board, prohibit employment of contract labour in any process, operation, or other work in an establishment. 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 (Sec- 11 to 15). The licence granted is subject to such conditions as to

hours of work, fixation of wages and other essential amenities in respect of contract labour as laid down in the rules. Welfare and health of Contract labour The Act has laid down certain amenities to be provided by the contractor to the contract labour for establishment facilities required to be provided under sections 18 and 19 of the Act are sufficient supply of wholesome drinking water and a sufficient number of latrines and urinals. If contract labourers are required to halt at night in connection with the work, the contractor is bound to provide hygienic rest rooms and separate rooms for women workers (Sec- 17). If the number of contract workers in an establishment exceeds 100, canteen facilities need to be provided as well (Sec- 16). The Act delineates the necessary maintenance conditions of the canteen. First-aid facilities should also be available to the contract workers with a person trained in first aid in attendance (Sec- 19). Payment of Wages The contractor (Sec- 21) is required to pay wages and a duty is cast on him to ensure disbursement of wages in the presence of the authorised representative of the Principal Employer. 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. The contract labour who performs same or similar kind of work as regular workmen, will be entitled to the same wages and service conditions as regular workmen as per the Contract Labour (Regulation and Abolition) Central Rules, 1971. Prohibition 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 authorized after consultation with the Central or State Board to prohibit employment of contract labour in any establishment in any process operation or other work. Such restrictions are often decided on the following basis.

whether the work is perennial in nature; 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 workmen in that establishmentor a similar establishment.

The Central Government on the recommendations of the Central Advisory Board has prohibited employment of contract labour in various operations and categories of jobs in different establishments. More than 45 notifications have already been issued in this regard. 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 there under on such conditions and restrictions as may be prescribed (Sec- 31).

Precedent

Apart from the Contract Labour Act there are numerous Judgments of the Supreme court and other High courts in regard of Contract labour. Gujarat State Electricity Board Vs Union of India1, the 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 excontractor in the principal establishments, when the appropriate Government abolishes the contract labour. Air India Statutory Corporation Ltd. & Ors Vs United Labour Union & Others2, the Supreme Court held that though there exists no express provision in the Act for absorption of employees in establishments where contract labour system is abolished by publication of the notification under section 10 (1) of the Act, the principal Employer is under statutory obligation to absorb the contract labour. The linkage between the contractor and employee stood snapped and direct relationship stood restored between principal employer and contract labour as its employees. However the very above said judgement was overruled in a subsequent judgement of the same court. Supreme court in its decision in the case of Steel Authority of India Ltd. Vs National Union of Waterfront Workers & Others3 held that neither Section 10 of the Act nor any other provision in the Act whether expressly or by necessary implication provides for

1 2

(1995) 2 LLJ 790 (SC) (1997) 1 LLJ 1113 (SC) 3 (2006) 3 LLJ 1037 (SC)

automatic absorption of contract labour on issuing a Notification by the appropriate Government under sub section (1) of Section 10 prohibiting employment of contract labour in any process or operation or other work inmany establishment. Consequently the Principal Employer cannot be required to order absorption of the contract labour working in the concerned establishment. Thus judgement in Air Indias case was over-ruled prospectively. Air India Statutory Corporation ETC Vs United Labour Union and Others4, again this judgement the Supreme Court overruled its decision of the Gujarat Electricity Board case, the remedies provided where observed to be bested with irregularities and obstacles in the way of immediate absorption of Contract Labour. Daily Rated Casual Labour Vs UOI5, equal payment should be given to the Contract Workers as given to the permanent worker for same quantity and quality of work. The most detailed and elaborative discussion on this issue was done in the case of, Secretary of State of Karnataka Vs. Umadevi6, here B. K. Balsubramanyam, J. Specifficazly spoke of the Contract Labour as against the constitutional scheme of Public Employment. Airport Authority of India, Mumbai Vs Indian Airport Kamgar Union an Others7, the Petitioner here challenged the award made by the government allowing recognition and directing to treat the contract labourers to be treated as permanent labourers, and the same was held to be invalid. However, in another judgment of Chet Ram Vs Presiding Officer, Industrial Tribunal- cumLabour Court-1, Faridabad and Another8, the Supreme Court the Contract Labour Practice was upheld in some cases and the absorption of the contractual Labour as permanent labour was also said to be valid.

Contemporary Picture of Contract Labour

4 5

AIR 1997 SC 645. (1998) 1 SCC 122 6 (2006) 1 SCC(L&S) 753 7 (2011) 1 LLJ 211 (Bom) 8 (2011) 1 LLJ 271.

The Act although was constituted for the upliftment of the contract labourers and prohibit the practice of contractual recruitment in some instances, has not been able to satisfy its objective and purpose behind its existence. According to the contract labour act, the companies are supposed to adhere to the minimum wage norms. However there are workers still earning less than Rs 1000 per month, which clearly does not satisfy the minimum wage criterion. Secondly the percentage of contract workers who have been able to access their Provident Funds while leaving a work is only 36% of the total. Lastly the Act although provides for penalties for the unregistered agencies, has not been able to curtain their rising number. The stance of the court on the issue is also not clear, in the Steel Authority of India (SAIL), the Supreme Court reversed its own judgment in an Air India case a couple of years prior to this on the rights of contract labour. While the Air India judgment said contract labour had to be absorbed, the SAIL judgment stated that contract workers would have no right to automatic absorption. They would only have a right to a preference in employment if permanent workers were to be employed to fill in the vacancies created by the removal of the contract workers. In fact, the Maharashtra government has made a law where contract workers need to be considered first when regular vacancies emerge. Then again in the case of Chet Ram, the Supreme Court again overruled its judgment of Umadevi case where it considered the practice of contractual recruitment as unconstitutional, by allowing the recruitment of contract labourers as permanent labourers. And now is the judgement of the same court in the recent case Delhi International Airport Limited (DIAL), the courted by an order dated Sep 15, 2011, directed the DIAL to abolish all of its contractual labour work.

Thus it can be very well inferred from above discussion that as per the act contract labour has been slowed down but not completely done away with, and while dealing with the judgment of the courts their stance on the issue is vague.