CONTRACT LABOUR – CREATING LEGAL AWARENESS

Jayashree Swaminathan | September 2014

IMPORTANCE OF CONTRACTUAL WORK AND OBJECTIVEBEHINDFORMULATING THE CONTRACT LABOUR (REGULATION AND ABOLITION) ACT 1970

Contracted labourers have been the major part of workforce throughout industrialization of India and have led to increase in cost efficiency and reduction in direct liability for the Company.

Contractual employments include loading and unloading of goods and materials, canteen or catering services, security services, civil and construction works, housekeeping services, maintenance, etc.

Due to continuous exploitation of contract workers, need was felt to safeguard the interests of the Contract workers, leading to formulation of Contract labour (regulation and abolition) act 1970. The drafters intended to give the contract labourers equal status with the permanent workers of the establishment in terms of minimum wages, welfare policies and amenities.

CONTRACT LABOUR (REGULATION AND ABOLITION) ACT, 1970

MAHARASHTRA CONTRACT LABOUR (REGULATION AND ABOLITION) RULES, 1971

APPLICABILITY OF THE ACT

Engagement of 20 or more contract workers by an establishment directly or through a contractor, on any day of the previous 12 months, invites the legal provisions of this Act. It also applies to everycontractor engaging 20 or more contract workers on any day of the previous 12 months.

Legal Compliances

Hereunder analyzing the major legal obligations triggering under the Act on an owner/occupier of the establishment (Principal Employer) and on a contractor on whom the Act applies. For easier understanding, example of law prevalent in State of Maharashtra is referred (Contract Labour (Regulation and Abolition) Act, 1970 read with Maharashtra Contract Labour (Regulation and Abolition) Rules, 1971).

Does an establishment require any registration to engage contractors?

Yes. On applicability of the Act, the employer has to submit an application in Form I in triplicate to the Assistant Labour Commissioner, Mumbai with the prescribed fee (Rule 26(1)) and the authority shall grant registration certificate (Form II) in the name & address of the establishment. The registration certificate specifies the maximum number of workmen employed as contract labour, type of business or trade etc.

What legal obligations arise on the establishment in case of changes related to contractual Work post obtainment of registration certificate?

The principal employer needs to gets its registration certificate amended in case of major changes in details of the stablishment, nature of contractual work, number of contracted workforce, details of contractors, etc.

For amendment an application needs to be filed with the Labour Commissioner within 30 days from the date of change stating theparticulars and reasons for such change

How does a contractor obtain license for engaging contract workers?

Every contractor on applicability of the Act needs to file an application in triplicate in Form IV to the Assistant Labour Commissioner along with prescribed fee(Rule 26(2)) and obtain a License in Form VI for engaging contract workers

A certificate of engagement (Form V) issued by the principal employer needs to be attached with the license application. This form is an acknowledgement of engagement of Contractor by the Principal employer and that he undertakes to be bound by all the provisions of the Act and the rules.

Does registration certificate issued to establishment require renewal?

No. Registration certificate is issued once and only needsamendment as and when required.

Does license issued to contractor require renewal?

Yes. License issued to the contractor is valid till 31st December of the year for which it is issued. Renewal is done annually by making an application in Form VII (triplicate) to the Labour Commissioner with prescribed fee (Rule 26(2)) before 31st October every year.

How does the act regularize payment to the contract workers?

Establishment engaging less than 1000 contract workers needs to pay remunerations to such workers by 7th of next month in other cases by 10th of next month. A representative of the principal employer has to inscribe current time, date and company seal on the wage register maintained by the contractor to authentication timely payment of wages to contract workers.

What are the amenities provided to the contract workers under the act?

The principal employer on failure ofcontractor is legally bound to provide the following welfare facilities to the contract Labourers:

Canteen – Suitable canteen with dining hall, kitchen, store room and pantry etc. needs to be provided within 120 days of employment of 100 or more contract labour in the establishment accommodating at least 30% of such workers.
Restrooms – Where contract labour is required to halt at night for the work in the establishment, rest rooms should be provided within 30 days of employment having proper ventilation, lighting and adequate supply of wholesome drinking water.
Other Facilities – Other amenities include suitable washing facility, latrines and urinals, supply of wholesome drinking water and at least 1 first aid box for every 150 contract worker.

How is the authority monitoring restriction on violation of contract workers and proper welfare measures?

The Labour Commissioner does regular inspections of amenities provided and documents maintained at establishments to ensure compliance. The principal employer has to send an annual return in Form XXI in duplicate to the Labour Commissioner by 15th February following the close of the year.

What are the legal repercussions for non adherence to the provisions of this law?

The principal employer is liable to be prosecuted with imprisonment upto 3 months or fine with ` 1000/- or both in case of failure to obtain registration certificate or violation of conditions prescribed therein. A fine of ` 100/- shall be levied in case of continued offence, immediately after the day of conviction for first contravention. For every other violation, maximum liability is imprisonment upto 3 months or fine with ` 1000/- or both based on the severity of the offence.

About Author

Jayashree Swaminathan

Jayashree Swaminathan is currently working as the Chief Executive Officer at UnComplycate. With over 30 years of a proven track record advising corporates on their governance, risk and compliance mandates, Jayashree has been eyeing at a visionary approach to create a 100% compliant India Inc. With compliance as per passion, she possessed added skills in terms of business acumen in form of improving the financial performance, operating efficiency, cost control, revenue enhancing initiatives, practical system improvements, business development enhancement capabilities, etc.