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To do away with the abuses of the system of employment of contract labour

An Act to regulate the employment of contract labour in certain establishments and to provide for its abolition in certain circumstances and for matters connected therewith.

Inferior labour status, casual nature of employment, lack of job security and poor economic conditions are the major characteristics of contract labour. While economic factors like cost effectiveness may justify system of contract labour, considerations of social justice call for its abolition or regulation.
The concern for providing legislative protection to this category of workers, whose conditions have been found to be abysmal, resulted in the enactment of the Contract Labour (Regulation and Abolition) Act, 1970.

The Contract Labour (Regulation and Abolition) Act, 1970 Act and the Contract Labour (Regulation and Abolition) Central Rules, 1971 came into force on 10.2.71.


Short Title, Extent, Commencement And Application.

Section 1


2. It extends to the whole of India 4. It applies:(a) To every establishment in which 20 or more workmen are employed or were employed on any day of the preceding 12 months as contract labour (b)To every contractor who employees or who employed on any day of the preceding twelve months 20 or more workmen

5. Act does not apply to establishments where the work performed is of:a) Intermittent or Casual nature

b) Seasonal nature

What is Intermittent nature of Job?

If the work is performed for more than 220 days in the last 12 months or

If the work is of seasonal nature & it is performed more than 60 days in a year
then it shall not be deemed to be intermittent nature. 9

The Supreme Court of India in the case of Standard Vacuum Refinery Company Vs. their workmen (1960-II-ILJ page 233) observed that contract labour should not be employed where:
(a) The work is perennial and must go on from day to day; (b) The work is incidental to and necessary for the work of the factory; (c) The work is sufficient to employ considerable number of whole time workmen; and (d) The work is being done in most concerns through regular workmen.


Section 2

PRINCIPAL EMPLOYER In relation to any Govt. Office or Dept. or a Local Authority, head of that Office/Dept. or such other Officer as the Govt. or the Local Authority may specify in this behalf. In case of factory, the owner or occupier of the factory, & manager of the factory, if any so named under the Factories Act, 1948. In case of mine, owner or agent of mine & the manager of the mine, if any so named. In any other estt., any person responsible for the supervision & control of the estt.

Sec 2 (c) CONTRACTOR "contractor", in relation to an establishment, means a person who undertakes to produce a given result for the establishment, other than a mere supply of goods or articles of manufacture to such establishment, through contract labour or who supplies contract labour for any work of the establishment and includes a sub-contractor.

Sec 2 (i) WORKMEN

"workman" means any person employed in or in connection with the work of any establishment to do any skilled, semi-skilled or un-skilled manual, supervisory, technical or clerical work for hire or reward, whether the terms of employment be express or implied, but does not include any such person.

(A) Who is employed mainly in a managerial or administrative capacity; or

(B) Who, being employed in a supervisory capacity draws wages exceeding five hundred rupees per mensem or exercises, either by the nature of the duties attached to the office or by reason of the powers vested in him, functions mainly of a managerial nature; or (C) Who is an out-worker, that is to say, a person to whom any articles or materials are given out for certain process to return them back.

Any worker will be a contract labour when he is hired for work of establishment through a contractor, with or without the knowledge of the principal employer

The appropriate govts. 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. On the recommendation of the Board, have prohibited employment of contract labour in various operations/ category of jobs in various establishments.


CHAPTER III Registration of Establishments Employing Contract Labour




Every principal employer of an establishment to which this Act applies shall, make an application to the registering officer in the prescribed manner (FORM I) for registration of the establishment If the application for registration is complete in all respects, the registering officer shall register the establishment and issue to the principal employer of the establishment a certificate of registration containing such particulars as may be prescribed.



If the Registering Officer is satisfied that, the registration of any establishment has been obtained by misrepresentation or suppression of any material fact, or that for any other reason the registration has become useless or ineffective


In case an establishment required to be registered under Section 7 is not been registered within the time fixed for the purpose under that section, then punishment will be given as per section 36.


If -

the establishment has not been registered under the Act within the stipulated time ; or
the registration certificate has been revoked,

the principal employer of the establishment to which this Act applies, shall not employ contract labour after expiry of period or after the revocation of RC.



1. The appropriate Government may, after consultation with the Central Board or, as the case may be, a State Board, prohibit, by notification in the Official Gazette, employment of contract labour in any process, operation or other work in any establishment.


Before issuing any notification as aforesaid, the appropriate Government shall have regard to the conditions of work and benefits provided for the contract labour in that establishment and other relevant factors, such as a) Whether the process, operation or other work is incidental to, or necessary for the industry, trade, business, manufacture or occupation that is carried on in the establishment Whether it is of perennial nature, that is to say, it is of sufficient duration having regard to the nature of industry, trade, business, manufacture or occupation that is carried on in that establishment


c) Whether it is done ordinarily through regular workmen in that establishment or an establishment similar there off

d) Whether it is sufficient to employ considerable number of wholetime workmen.


Section 11- 15

Appoint such persons define the limits, within which a licensing officer shall exercise the powers conferred on licensing officers by or under this Act.



With effect from such date as the appropriate government , no contractor shall undertake or execute any work through contract labour except under and in accordance with a licence issued in that behalf by the licensing officer.


2. A Licence shall contain Such conditions including, in particular, Hours of work Fixation of wages

Other essential amenities

in respect of contract labour.

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.
The Contractor has to obtain License if employing more than 20 workers & deposit the required fees on FORM No. 4 along with the Principal Employer Certificate on FORM No. 5.


1. Every application for the grant of a licence under subsection(1) of section 12 shall be made in the prescribed form and shall contain the particulars


2. The licensing officer may make investigation

3. A licence granted shall be valid for the period specified therein and may be renewed from time to time

1. If the licensing officer is satisfied, either on a reference made to him in this behalf or otherwise, thata) Obtained by misrepresentation or suppression of any material fact b) Failed to comply with the conditions subject to which the licence has been granted 2. The licensing officer may vary or amend a licence granted under Section 12.


Terms and Conditions of License

License is non transferable Contract labour should not exceed, on any day, maximum specified in the license. Wages, hours of work and other conditions of service. Notify any change in no. of workmen or conditions of service.



Validity & Renewal

The License will be valid for one year and can be renewed thereafter before 30 days of its expiry Revocation, suspension & amendment of license If the license is obtained by misrepresentation or suppression Security Deposit The Contractor has to deposit the Security amount as prescribed by the State Govt

Chapter 5 Welfare And Health

Sections 16-21

The Act has laid down certain amenities to be provided by the contractor to the contract labour for establishment of canteens rest rooms arrangements for sufficient supply of wholesome drinking water latrines and urinals washing facilities and first aid facilities In cases of failure on the part of the contractor to provide these facilities, the principal Employer is liable to provide the same.


1. Appropriate Government may make rules (a) to which this Act applies, (c) wherein contract labour numbering 100 or more is ordinarily employed by a contractor, one or more canteens shall be provided and maintained by the contractor

Section 16: Canteen

2. Without prejudice to the generality of the foregoing power, such rules may provide for:(a) The date by which the canteens shall be provided;
(b) The number of canteens that shall be provided, and the standards in respect of construction, accommodation, furniture and other equipment of the canteens; (c) The foodstuffs which may be served therein and the charges which may be made thereof.


In every place wherein contract labour is required to halt at night in connection with the work of an establishment:-

Section 17: Rest-rooms

(a) To which this Act applies, and (b) In which work requiring employment of contract labour is likely to continue for such period as may be prescribed,

2. The rest rooms or the alternative accommodation to be provided (1) shall be sufficiently lighted and ventilated and shall be maintained in a clean and comfortable condition.

It shall be the duty of every contractor employing contract labour to provide and maintain:
a) A sufficient supply of wholesome drinking water

Section 18: Other facilities

b) A sufficient number of latrines and urinals situated as to be convenient and accessible to the contract labour and
c) Washing facilities

There shall be provided and maintained by the contractor so as to be readily accessible during all working hours a firstaid box equipped with the prescribed contents at every place where contract labour is employed by him.

Section 19: First-aid facilities

1. If any amenity required to be provided for the benefit of the contract labour employed in an establishment is not provided by the contractor within the time prescribed thereof, such amenity shall be provided by the principal employer within such time as may be prescribed.

Section 20: Liability Of Principal Employer In Certain Cases

2. All expenses incurred by the principal employer in providing the amenity may be recovered by the principal employer from the contractor either by deduction from any amount payable to the contractor under any contract or as a debt payable by the contractor.

Welfare Provisions
Sr. No.
1 Provision Canteen

Where 100 or more contract labour employed & employment of contract worker continue more than 6 months If contract labour is required to halt at night & employment of contract worker continue for 3 or more months

Rest rooms

Drinking Water Latrines & Urinals Washing Facilities First aid Facilities

Where 20 or more female contract labor are employed.

Sufficient supply at convenient place. At least one latrine for every 25 male & female contract labor separately Separate for female & male contract labor At least one First aid box for every 150 contract labor

4 5 6 7


1. A contractor shall be responsible for

Payment of wages to each worker employed by him Shall be paid before the expiry of such period as may be prescribed 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.

Section 21: Responsibility for Payment of Wages

No wage period shall exceed one month Wages of terminated worker shall be paid before the expiry of second working day from the day on which his services were terminated Wages to every worker shall be paid directly or to any person authorized by him. The wages paid to the contract workers shall be authenticated by the representative of the Principal employer at the end of the wage sheet Display of notice showing wage period Entries regarding payment of wages, etc. to be made in Register Payment to be made on working day Wages to be paid without deduction (except those permissible under Payment of Wages Act)

2. Duty of principle employer Shall nominate a representative to be present at the time of disbursement of wages Shall be the duty of such representative to certify the amounts paid as wages in such manner 3. It shall be the duty of the contractor to ensure the disbursement of wages in the presence of the authorized representative of the principal employer.

4. In case the contractor fails to make payment of wages within the prescribed period or makes short payment,
Then the principal employer shall be liable to make payment of wages in full or the unpaid balance due, Recover the amount so paid from the contractor either by deduction from any amount payable to the contractor under any contract or as a debt payable by the contractor.

Register & Records to be maintained:

Sr. No.

Register to be maintained Register of Contractor (by Principal Employer) Register of Person employed Employment card Service Certificate Muster Roll Register of wages Wages cum Muster roll register where is fortnightly or less Register of Deductions Register of Fines Register of Advances Register of Overtime Wages slip where wage period is more than one week

Form No. 12 13 14 15 16 17 18 20 21 22 23 29

1 2 3 4 5 6 7 8 9 10 11 12


All the records & register shall be preserved for a period of 3 years from the date of last entry. Annual Return Annual return in Form 25 (In duplicate) Principal employer by 15th Feb.

Half Yearly Returns Half yearly return in Form 24 (In duplicate) Contractor not later than 30 days from the close of half year.


For obstructing the inspector or failing to produce registers etc. - 3 months imprisonment or fine upto Rs.500, or both. (Sec. 22) For contravention of the provisions of the Act or any rules made thereunder, the punishment is imprisonment for a maximum term upto 3 months and a fine upto a maximum of Rs.1000/-. On continuing contravention, additional fine upto Rs.100 per day (Sec. 23) 53

Other Provisions
The Act makes provision for the appointment of Inspecting staff, for maintenance of registers and records and forvmaking Rules for carrying out the purpose of the Act. In the central sphere, officers of the Central Industrial Relation Machinery (CIRM) have been appointed as Inspectors.



Prohibition of Employment of Contract Labour

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 authorised, after consultation with the Central Board or State Board, as the case may be, to prohibit, by notification in the official gazette, employment of contract labour in any Establishment in any process, operation or other work 55

Sub-section (2) of Section 10 lays down sufficient guidelines for deciding upon the abolition of contract labour in any process, operation or other work in any establishment

The guidelines are mandatory in nature and are:-Conditions of work and benefits provided to the contract labour.


Whether the work is of Perennial nature (regular).

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 workman in that establishment or a similar establishment

Consequences of abolition
Contractor gets eliminated and so does the contract. Contract Labour does not automatically become direct employees of Principal Employer. Contract Labour gets preference for employment with Principal Employer subject to their meeting the employment requirements. The displaced Contract Labour can still raise an dispute claiming that contract was sham and they were always the direct employees of the Principal Employer. Contract Labour cannot be employed in such processes thereafter.

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 hereunder on such conditions and restrictions as may be prescribed.


2nd NCL 2002 Recommendation

Contract labour shall not be engaged for core production / service activities. However, for sporadic seasonal demand, the employer may engage temporary labour for core production / service activity. Off-loading perennial non-core services like canteen, watch and ward, cleaning, etc. to other employing agencies has to take care of three aspects
(1) there have to be provisions that ensure that perennial core services are not transferred to other agencies or establishments; (2) where such services are being performed by employees on the payrolls of the enterprises, no transfer to other agencies should be done without consulting, bargaining (negotiating) agents


and (3) where the transfer of such services do not involve any employee who is currently in service of the enterprise, the management will be free to entrust the service to outside agencies. The contract labour will, however, be remunerated at the rate of a regular worker engaged in the same organisation doing work of a comparable nature or if such workers does not exist in the organisation, at the lowest salary of a worker in a comparable grade, i.e. unskilled, semi-skilled or skilled.



Employment permitted by the State Govt for employment of Contract Labor Housekeeping Horticulture Loading & Unloading Material Movements Canteen Employment Security & Vigilance

Opposite views held by the trade unions and the employers organizations Some of the State Governments have proposed measures to liberalise the Act to spur the growth of industry, as for example, grant of exemption to Special Economic Zones and Export Oriented Units from the applicability of the Act to boost exports. Government of Andhra Pradesh have amended the Contract Labour Act with a view to prohibiting employment of contract labour in the core activities of an establishment and to allow engagement of contract labour in none-core activities of an establishment such as watch and ward, sanitation, cleaning works, etc. Government of Goa has introduced a bill in the legislature to abolish contract labour in core activities of an establishment.



Sl. No. Item 2003-04 2004-05 2005-06 1. No. of Registration Certificates issued to principal employers. No. of Licences issued to contractors*. 720 590 675





3. 4. 5. 6. 7.

No. of Inspections conducted. No. of Irregularities detected. No. of prosecutions launched. No. of convictions. No. of contract labourers covered by licences@.

4991 71632 3896 2072 853690

4540 59301 3356 2018 968792 1000

5663 59298 2914



No. of Licences revoked/ cancelled.





No. of registration certificates revoked.





Gujarat State Electricity Board Vs Union of India 09.05.1995
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. Vs United Labour Union & Others 06.12.1996
Though there exists no express provision in the Act for absorption of employees in establishments where contract labour system is abolished, the Principal Employer is under statutory obligation to absorb the CL the linkage between the contractor and employee stood snapped and direct relationship stood restored between principal employer and contract labour as its employees. 66

Steel Authority of India Ltd. & Others Vs National Union of Waterfront Workers 30.08.2001
Principal Employer cannot be required to order absorption of the contract labour working in the concerned establishment. The employer is not liable to absorb the contract employees if the contract was genuine. However, They can be given preference. The judgement in Air Indias case was overruled. 67


Why there is need of engaging Contract Labour? What are the pros and cons of Contract Labour? What precautions should be taken while engaging Contract Labour?
Registration Certificate of Principal Employer License of the Contractor Selection of the Contractor Terms and conditions of the Agreement Appointment of Contract Labour & terms and conditions of their employment Supervision & Control Disciplinary Matters Payment Statutory Compliance 68

In a situation where an organization ABC has outsourced any services say transport of some senior staff to a company EFG. EFG gain has outsourced it to 35 different vehicle owners cum drivers
Now who is the principal employer and what are the responsibilities of contractor? The contractor has not hired any manpower, they have engaged vehicle with driver to deliver certain services, similarly ABC has also hired company EFG for delivery of services not man-power. In such situation what are obligations on part of company ABC and contractor EFG? 69

What are the Advantages and Dis-Advantages of appointment of Contract Labour?
Minimum or no liability, Reduced Pay Roll burden, Economic and financial feasibility, no fear of unionisation Permission from the appropriate authorities, ensure that bonus, ESI contributions are remitted by the contractor , on non-compliance by contractor PE has to pay, no chance to judge CLs competency

Is there any minimum wage for Contract Labour?

Under CL (R&A) Act & rules if the work done by the contract workers are the same or similar that of employer's workmen then in that case wage rates will be the same as that of directly employed workers 70

Does one have to provide for PF, ESI, leave, Gratuity for Contract Workers?
PF, ESI, LEAVE yes. Gratuity No incase one has not completed 5 years of continuous service