Contractual work is the most critical element of any industry yet the most exploited segment. The industrial unrest with such workers is due to lack of job and social security, exploitation in the hands of contractors, low wages, unequal treatment compared to permanent workers. Statistics show that contracted workers represent 55% of public sector workforce, 45% in private sector, 45 % in Government Sector and 69% in cooperatives, trusts and societies. Yet 90% of them are without health insurance and other basic benefits and amenities.
It has been noticed over the years that unsatisfied labour has led to catastrophic effect for the employers, like miscount with management, slowdown of work, strike, physical violence and ultimately financial penalties or cumbersome court proceedings. In this segment we intent to clarify certain key prevailing issues between the employer and contract labourers.
Yes, courts have held that no distinction can be made against Contract labourers and permanent employees carrying out work of similar nature. Not only same wages but they are entitled to same holidays, hours of work and conditions of service as are applicable to direct workmen under the appropriate industrial and labour laws.
Supreme Court in Hindustan Steel Works Construction Ltd. vs. Commissioner of Labour, (1996)
Maharashtra High Court in Hindustan Lever Ltd. vs. Hindustan Lever Employees Union, (2001)
Madras High Court in Airport Authority of India rep. By its Airport Director, Coimbatore Airport, Coimbatore vs. Authority under rule 25 (2)(v)(a) dated 14th June, 2011
Yes HRA constitutes part of the overtime wages. One major aspect missed by the Companies is that contract workers are also covered within the purview of the Factories Act, 1948 hence eligible for double wages for overtime. The legislation and Courts clearly state that for calculation of overtime wages the basic wages plus Dearness Allowance, House Rent Allowance, City Compensatory Allowance, Travelling Allowance and all other allowances are to be considered except bonus.
Supreme Court in Heavy Vehicles Factory vs Union Of India Rep. dated 30th Nov, 2011
Yes, the principal employer is liable to pay the EPF and ESI dues in case the contractor fails to pay the same. The PF Act and ESI Act have very clearly stated that the deduction from the contract worker and the contribution from the Contractor have to be paid by the Principal Employer and thereafter to be recovered from the Contractor.
Most recent is the case of BSNL Co. that has received several Government orders and is facing major labour unrest and strike due to non-payment of ESI and PF dues
Delhi High Court in MMTC Limited vs. Employees’ Provident Fund Organisation (2013 LLR 347)
Bombay High Court in Bajaj Tempo Limited vs The Employees State Insurance decided on 2 May, 2006
No, principal employer is only liable to pay wages to the contract workers on failure of contractor. Since Gratuity and Bonus do not form part of ‘wages’ under the act the employer cannot be held liable for nonpayment of such dues. Yet in certain cases it is noticed that the principal employer was directed to pay bonus and gratuity considering the long continued service of the contract worker. Hence it is advised that the employer ensures that contract pay right dues to the contract workers.
Karnataka High Court in Mr.Shachindra Kumar, Factory Manager, Hindustan Unilever Ltd. V. State of Karnataka, Department of Labour (2013 LLR 595)
Kerala High Court in Cominco Binani Zinc Ltd. VS. Pappachan, 1989 LLR 123
Madras High Court in Superintending Engineer, Purchase &Admn.vs. Appellate Authority, Joint Commissioner of Labour, Coimbatore &Anr. (2013 LLR 374)
Yes, the Court has the power to order aparticular facility to absorb such contract workers who perform work of continuous nature which is incidental to the work of the factory, or an activity which requires employment of considerable number of whole time workmen and such work is being done by regular workmen in similar industries.
Recent example is regularisation of workers engaged with the Haryana/ Central Government (in the state of Haryana), who have completed 3 years of regular service (Notification date 20th June, 2014).
Also Telangana Chief Minister K. Chandrasekhar Rao has announced regularization of posts of contract workers in Greater Hyderabad Municipal Corporation, understanding the continuous nature of their work (July, 2014).
The most popular case is of Airport Authority of India where DIAL was directed to pay 5 lakh compensation to 136 contract workers who were sacked and could not be regularized (Supreme Court in M/S Delhi International Airport vs Union of India &Ors. on 15 September, 2011).
Delhi High Cout in Management of Ashok Hotel vs. Their Workman &Anr. (2013 LLR 352)
Bombay High Court in Bharatiya Kamgar Senavs Udhe India Ltd. and Anr. dated 26 June, 2007
Supreme Court in R.K. Panda Vs. Steel Authority of India dated 12 May, 1994
Apart from Contract Labour (Regulation and Abolition) Act, 1970, India has other major legislations like Industrial Dispute Act, 1947, Minimum Wages Act, 1948, Interstate Migrant Workers Act, 1979, along with Factories Act, 1948 that protect the basic rights of the contract workers. In a 2014 report by Morgan Stanley, India listed very low in employee employer relations standing at 61st position . Our initiative is to make the Companies aware of their responsibilities towards contract labourers because ultimately industrial harmony is one of the key routes to economic growth.
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