Contract

Labour
(Regulation
& Abolition)
Act, 1970

Applicability
Establishment

Contractor

20 or more contract labours

On any day of the preceding 12 months

Exception

Act not applicable to any establishment in which

work of intermittent or casual nature is performed

Important Definitions
Contract Labour (S. 2(1)(b))

He must be a workman
He is hired by or through a contractor
He is hired in or in connection with the work of an establishment
Knowledge of his engagement to the Principal Employer is immaterial

Workman

Out worker

Defined under section 2(1)(i) of the Act

Does not include:
Manager or Supervisor (earning more than Rs.500)
Out worker

Person to whom articles given for processing

Processing carried out in out-workers home or any
premises outside PEs control

Important Definitions..
Contractor S. 2(1)(c)
A person who undertakes to produce a given result for the establishment
through contract labour
A person who supplies contract labour for any work of the establishment
Sub-contractor
Mere supplier of goods or articles of manufacture to establishment is NOT a
contractor

Principle Employer S. 2(1)(g)

Office or Dept of Govt HOD
Factory Owner/Occupier/Manager
Mine Owner/Agent/Manager
Other cases Person responsible for supervision and control of establishment

Important Definitions
Appropriate Government S. 2(1)(c)
Reference to the Industrial Disputes Act, 1947
Always decided with respect to the establishment and not the contractor

Why is the determination of AG important?

Registration and Registering Officer
License and Licensing Officer
Abolition of CL u/s 10

Registration
Application of registration to be made within the prescribed time from
the date the Act becomes applicable
PE cannot employ contract labour if registration not done

Forms
FORM I Application of Registration
FORM II Certificate of Registration

Revocation of Registration
Misrepresentation
Suppression of facts
Other reason rendering the registration useless/ineffective

License
Application of license to be made for each work that the contractor
undertakes
License may include conditions like hours of work, fixation of wages, etc
Application to be made to Licensing Officer appointed by AG

Forms
FORM IV Application of License
FORM V Certificate by PE
FORM VI License

Revocation of License
Misrepresentation
Suppression of facts
Failure to comply with the conditions of license

Welfare amenities
Canteen
Work requiring CL likely to continue for prescribed period (6 months)
100 or more CL ordinarily employed by contractor

Rest-Rooms
Work requiring CL likely to continue for prescribed period (3 months)
CL likely to halt at night in connection with the work of establishment

Other facilities
Drinking water
Latrines, Urinals & Washing facilities
First-aid box equipped with prescribed contents

Wages
Wage
As defined in Payment of Wages Act, 1936
For Scheduled employments, wage cannot be less than Minimum Wage
For same or similar kind of employment, wage should be the same as
regular employees
Wage period cannot exceed one month
If CL<1000 in an establishment, wage to be paid before expiry of 7 days
from last day of wage period
If CL>= 1000, then 10 days
Contractor to ensure disbursement of wages in the presence of the
Authorised Representative of the PE

Liability of PE
Amenities, if not provided by the contractor within the prescribed time,
should be provided by PE
Wages, if not paid by the contractor within prescribed time, or short
payment is made, the full or unpaid balance should be paid by PE
When PE provides amenities, and/or pays wages of CL, he can recover
the amount from the contractor:
By deduction from amount payable to contractor, or
As a debt by the contractor
These provisions ensure that the facilities and wages of the CL are
secured

Prohibition (Section 10)

Appropriate
Government

Only AG can prohibit

Courts cannot prohibit CL (SAIL II case)

Consultation
with Board

Consultation with appropriate Board mandatory

AG not bound to accept the advice of the Board

Consideration
of relevant
factors

Notification

SAIL I case (Non-application of mind of AG)

AG shall have regard to:
Conditions of work
Benefits provided
Other relevant factors (s.10 (2)(a-d)
AG has to notify in the Official Gazette

Important Judgments
Dena Nath v. National Fertilisers Ltd
If CL employed without registration/license, penal provisions will be attracted
The CL so employed will not automatically become regular employees of PE

Air India Case

Prohibition of CL automatic absorption of CL as regular employees of PE

SAIL I case
Prohibition of CL will not lead to automatic absorption of CL (overruled AI)
Consultation with Board and consideration of S.10(2) before prohibition

SAIL II case
Labour Court or Writ Court cannot prohibit employment of CL

Risk Factors
Same or Similar Kind of work
If CL perform same or similar kind of work as the regular employees of PE:
Wage rates
Holidays
Hours of work
Other conditions of service to be same as regular employees

Sham and Camouflage

If proved that contract between contractor and PE a sham/camouflage, then
CL will be declared employees of PE
Gujarat State Electricity Board gives the following tests:
Who pays the salary
Who has the power to remove/dismiss or initiate disciplinary action
Who has direction and control over the employee

Questions
from the Past

Canteen

In a particular factory of a leading FMCG major Hamesha Ulta

Limited, there are 220 permanent workmen and 45 contract
labour.

Is the management legally bound to provide a canteen facility?

If yes, should the management be reimbursed by the contractor

for providing canteen facility to the CL?

Will your answer change if the number of CL becomes 150?

License
A leading FMCG major Piyo & Giyo wants to use CL for loading
and unloading raw material/finished goods inventory.
The Labour Commissioner refused to give license on the ground
that loading and unloading is a core activity (his contention is that
if loading and unloading is stopped the plant will also stop and
hence it is a core activity).

Mr Ninel the HR manager knows only employee engagement and

has no idea of labour laws. Give him some gyaan and help him
keep his job.

Prohibition of employment
In a particular motorcycles factory of Zero Corp, CL are deployed
for the daily cleaning and maintenance of machines. The Central
Government sent a notice to the factory manager declaring that
employment of CL in daily cleaning and maintenance of machines
was being prohibited from next week for that particular factory.

What options does the HR manager have now?