10CONTRACT LABOUR IN INDIA

INTRODUCTION10.1 The system of employing contractlabour is prevalent in most industries indifferent occupations including skilled andsemi skilled jobs. It is also prevalent inagricultural and allied operations and to someextent in the services sector. A workman isdeemed to be employed as Contract Labourwhen he is hired in connection with the workof an establishment by or through a contractor.Contract workmen are indirect employees;persons who are hired, supervised andremunerated by a contractor who, in turn, iscompensated by the establishment. Contractlabour has to be employed for work which isspecific and for definite duration. Inferiorlabour status, casual nature of employment,lack of job security and poor economicconditions are the major characteristics ofcontract labour. While economic factors likecost effectiveness may justify system ofcontract labour, considerations of socialjustice call for its abolition or regulation.

10.2 The condition of contract labour in Indiawas studied by various Commissions,Committees, and also Labour Bureau, Ministryof Labour, before independence and afterindependence. All these have found theircondition to be appalling and exploitative innature. The Supreme Court of India in the caseof Standard Vacuum Refinery Company Vs.their workmen (1960-II-ILJ page 233) observedthat contract labour should not be employedwhere: —

(a) The work is perennial and must go onfrom day to day;

(b) The work is incidental to and necessaryfor the work of the factory;

(c) The work is sufficient to employconsiderable number of whole timeworkmen; and

(d) The work is being done in most concernsthrough regular workmen.

THE CONTRACT LABOUR (REGULATION ANDABOLITION) ACT, 1970

10.3 The concern for providing legislativeprotection to this category of workers,whose conditions have been found to beabysmal, resulted in the enactment of theContract Labour (Regulation and Abolition)Act, 1970.

OBJECTS AND PURPOSES OF THE ACT

10.4 The Contract Labour (Regulation andAbolition) Act, 1970 was brought on theStatute Book to regulate the employment ofContract Labour in certain establishments andto provide for its abolition in certaincircumstances and for matters connectedtherewith.

APPLICATION

10.5 The Contract Labour (Regulation andAbolition) Act, 1970 and the Contract Labour(Regulation and Abolition) Central Rules, 1971came into force on 10.2.71.The constitutionalvalidity of the Act and the Central rules werechallenged before the Supreme Court inGammon India Ltd. Vs. Union of India 1974-I-LLJ-480. The Supreme Court upheld theconstitutional validity of the Act & Rules andheld that there is no unreasonableness in themeasure. The Act & Rules were enforced w.e.f.21.03.1974.

10.6 The Act applies to every establishmentin which 20 or more workmen are employed orwere employed on any day on the preceding12 months as contract labour and to everycontractor who employs or who employed onany day of the preceding 12 months 20 or moreworkmen. It does not apply to establishments

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86 CONTRACT LABOUR IN INDIA

where the work performed is of intermittent orseasonal nature. An establishment whereinwork is of intermittent and seasonal naturewill be covered by the Act if the workperformed is more than 120 days and 60 daysin a year respectively. The Act also applies toestablishments of the Government and localauthorities as well.

APPROPRIATE GOVERNMENT10.7 The jurisdiction of the Central and StateGovernment has been laid down by thedefinition of the ‘Appropriate Government’ inSection 2(1)(a) of the Act, as amended in 1986.The Appropriate Government, in respect ofan establishment under the Contract Labour(Regulation and Abolition) Act, 1970 is thesame as that in the Industrial Disputes Act,1947.

10.8 As per the interpretation given by theSupreme Court, through its judgement dated30.08.2000, in Steel Authority of India Limitedand Ors Vs. National Union Water FrontWorkers & Ors., the ‘appropriate government’in relation to an establishment would be theCentral Government if (i) the concernedCentral Government company/ undertaking orany undertaking is included by name in clause(a) of Section 2 of the Industrial Disputes Act,or (ii) any industry carried on by or under theauthority of Central Government or by arailway company, or (iii) any such controlledindustry as may be specified in this behalf bythe Central Government, otherwise in relationto any other establishment, the Governmentof the State in which that other establishmentis situated, will be the appropriate government.

THE CENTRAL AND STATE ADVISORYBOARDS

10.9 The Central Government and StateGovernments are required to set up Centraland State Advisory Contract Labour Boardsto advise the respective Governments onmatters arising out of the administration ofthe Act as are referred to them. The Boardsare authorised to constitute Committees asdeemed proper.

10.10 The Central Advisory Board –a tripartiteBody was last re-constituted on 30th October,1996. On expiry of the term of appointment ofthe Chairman, he has been reappointed on 16th

November 1999 for a period of three years.The term of non-official members of the Boardwas three years but they will continue to hold

office till their successors are appointed. Theappointment of employer and employeemembers of the Board is under process. Fiftymeetings of the Central Advisory ContractLabour Board (CACLB) have so far been held.The last meeting was held on 22nd November2001.

10.11 The existing Central Advisory ContractLabour Board has held three meetings duringthe year under report and considered variousissues relating to abolition of contract laboursystem in certain establishments. The workingof the Act was also reviewed in these meetings.As a consequence, the Central Governmenton the recommendation of the Board, haveprohibited employment of contract labour invarious operations/ category of jobs invarious establishments. The position ofnotifications issued by the CentralGovernment during the period under report isgiven in Box 10.1.

REGISTRATION OF ESTABLISHMENTAND LICENSING OF CONTRACTORS

10.12 The establishments covered under theAct are required to be registered as principalemployers with the appropriate authorities.Every contractor is required to obtain a licenceand not to undertake or execute any workthrough contract labour except under and inaccordance with the licence issued in thatbehalf by the licensing officer. The licencegranted is subject to such conditions as tohours of work, fixation of wages and otheressential amenities in respect of contractlabour as laid down in the rules.

WELFARE AND HEALTH OFCONTRACT LABOUR

10.13 The Act has laid down certain amenitiesto be provided by the contractor to thecontract labour for establishment of Canteensand rest rooms ; and arrangements forsufficient supply of wholesome drinking water,latrines and urinals, washing facilities and firstaid facilities and have been made obligatory.In cases of failure on the part of the contractorto provide these facilities, the PrincipalEmployer is liable to provide the same.

PAYMENT OF WAGES10.14 The contractor is required to pay wagesand a duty is cast on him to ensuredisbursement of wages in the presence of theauthorised representative of the Principal

CONTRACT LABOUR IN INDIA 87

Employer. In case of failure on the part of thecontractor to pay wages either in part or infull, the Principal Employer is liable to pay thesame. The contract labour who performs sameor similar kind of work as regular workmen,will be entitled to the same wages and serviceconditions as regular workmen as per theContract Labour (Regulation and Abolition)Central Rules, 1971.

PENAL PROVISIONS10.15For contravention of the provisions ofthe Act or any rules made thereunder, thepunishment is imprisonment for a maximumterm upto 3 months and a fine upto a maximumof Rs.1000/-.

OTHER PROVISIONS10.16The Act makes provision for theappointment of Inspecting staff, formaintenance of registers and records and formaking Rules for carrying out the purpose ofthe Act. In the central sphere, officers of theCIRM have been appointed as Inspectors.

PROHIBITION10.17Apart from the regulatory measuresprovided under the Act for the benefit of thecontract labour, the ‘appropriate government’under section 10(1) of the Act is authorised,after consultation with the Central Board orState Board, as the case may be, to prohibit,by notification in the official gazette,employment of contract labour in anyestablishment in any process, operation orother work.

Sub-section (2) of Section 10 lays downsufficient guidelines for deciding upon theabolition of contract labour in any process,operation or other work in any establishment.The guidelines are mandatory in nature andare:-Conditions of work and benefits providedto the contract labour.

• Whether the work is of Perennial nature.

• Whether the work is incidental ornecessary for the work of anestablishment.

• Whether the work is sufficient to employa considerable number of whole-timeworkmen.

• Whether the work is being doneordinarily through regular workman inthat establishment or a similarestablishment.

10.18 The Central Government on therecommendations of the Central AdvisoryContract Labour Board, have prohibitedemployment of contract labour in variousoperations/ category of jobs in variousestablishments. So far 48 notifications havebeen issued since inception of the Act.

EXEMPTION10.19 The ‘appropriate government’ isempowered to grant exemption to anyestablishment or class of establishments orany class of contractors from applicability ofthe provisions of the Act or the rules madethereunder on such conditions andrestrictions as may be prescribed. Ninenotifications granting exemption toestablishments in exercise of this power in theCentral sphere have been issued.

ENFORCEMENT10.20 In the Central sphere, the CentralIndustrial Relations Machinery (CIRM) havebeen entrusted with the responsibility ofenforcing the provisions of the Act and therules made thereunder, through Inspectors,Licensing Officers, Registering Officers andAppellate Authorities appointed under theAct.

10.21 Regular inspections are beingconducted by the Field Officers of the CIRMand prosecutions are launched against theestablishments, whenever violations of theAct/Rules/notifications prohibitingemployment of contract labour are detected.From time to time, instructions/directions havebeen issued to the field officers of CIRM andState Government for proper implementationof the Act.

10.23 A statement indicating the number ofinspections carried out, prosecutionslaunched, licences issued, establishmentsregistered, etc. under the Act in the CentralSphere by the Industrial Relations Machineryis at Table-10.2.

10.24 A number of representations/petitionshave been received by the Deputy Chief LabourCommissioner (Central) under Rule25(2)(V)(a)&(b) from the contract worker or theirunions claiming that the contract workers areperforming the same or similar work asperformed by the workmen employed by theprincipal employer. Out of 83 cases received till2000 orders have been passed in 33 cases and50 cases are under investigation. Table-10.3.

88 CONTRACT LABOUR IN INDIA

10.25 The Labour Bureau of the Ministrylaunched a survey on contract labour and theimplementation of the Act in respect of CementIndustry including related mines, FCI Depotsand N.T.P.C. Units in March, 2000. The reportwas brought out in July, 2001 and by and largecompliance with the provisions of the Act hasbeen found.

IMPORTANT JUDGEMENTS OF THESUPREME COURT.

10.26 Three judgements delivered by theSupreme Court in the cases of Gujarat StateElectricity Board Vs Union of India, Air IndiaStatutory Corporation Ltd. & Ors Vs UnitedLabour Union & Others, and Steel Authorityof India Ltd. & Others Vs National Union ofWaterfront Workers and others on 09.05.1995,06.12.1996 and 30.08.2001 respectively, arelandmark judgements.

10.27 In Gujarat State Electricity Board case,inter-alia, the Supreme Court recommendedthat the Central Government should amendthe Act by incorporating a suitable provisionto refer to industrial adjudicator the questionof the direct employment of the workers of theex-contractor in the principal establishments,when the appropriate Government abolishesthe contract labour.

10.28 In Air India Statutory Corporation case,the Supreme Court held that though thereexists no express provision in the Act forabsorption of employees in establishmentswhere contract labour system is abolished bypublication of the notification under section10 (1) of the Act, the principal Employer isunder statutory obligation to absorb thecontract labour. The linkage between thecontractor and employee stood snapped anddirect relationship stood restored betweenprincipal employer and contract labour as itsemployees.

10.29 The Supreme Court in the case of SteelAuthority of India Ltd. Vs National Union ofWaterfront Workers & Others and others haveheld that neither Section 10 of the Act nor anyother provision in the Act whether expresslyor by necessary implication provides forautomatic absorption of contract labour onissuing a Notification by the appropriateGovernment under sub section (1) of Section10 prohibiting employment of contract labourin any process or operation or other work inany establishment. Consequently thePrincipal Employer cannot be required to order

absorption of the contract labour working inthe concerned establishment. The judgementin Air India’s case was over-ruledprospectively.

STREAMLINING CONTRACT LABOURLAW

10.30 In the wake of economic liberalisationas well as the judgements of the courts,proposals have been received from socialpartners to bring about amendments in theContract Labour Act.

Views of Employers’ Associations• Since 1970 when the Contract Labour

(Regulation and Abolition) Act wasenacted the economy has undergone asea-change, from an era ofprotectionism to liberalisation, fromrestricted domestic competition tointernational competitiveness.

• The system of contract labour offerstremendous opportunities foremployment and allows the employersflexibility to choose what is best forthem. This helps improve productivityand service competitiveness.

• The Act should be made applicable onlyto the main and core activities of theestablishment in so far as abolition ofcontract labour system is concerned.

• Supportive or allied activities of anestablishment like maintenance, housekeeping should be out sourced and theAct should only provide for regulatingthe working conditions and wages.

• The Principal Employer should,however, have to ensure payment ofwages to contract labour as laid downunder the law in force as also other basicamenities and social security benefits.

• Work requiring specialised skillsunavailable within the establishment.

• If the contract labour system, which iscost effective, is not allowed to continue,industries may go in for technologicalrestructuring with less number ofworkers leading to reduction inemployment.

Views of the Trade Unions

• The Trade Unions are totally opposed to theidea of contracting of services and in jobs

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which are perennial in nature for followingreasons:-

• Reduction of regular employment;• The contract labour generally belong to

weaker sections of the society and will bedeprived of the benefits that accrue to regularemployees.

• Efficiency will decrease as establishment willbe deprived of experienced staff.

• Coordination of activities of large number ofcontractors/sub-contractors will prove to bemore time consuming and costly than in houseactivity.

• What is required is not privatisation but inhouse improvements and restructuring.

• Out sourcing will only lead to a type ofemployment founded on discrimination andexploitation of contract labour in regard towages paid, working conditions, etc.

• The Second National Labour Commission hasbeen entrusted with the task of rationalisationof labour laws and hence its report should beawaited.

10.31 The Government, at the moment, hasundertaken a thorough review of the Act,keeping in view the aforesaid views of theemployers’ association and that of the tradeunions. The changes to be made in the law arestill being worked out.

90 CONTRACT LABOUR IN INDIA

BOX 10.1

NOTIFICATIONS ISSUED UNDER SECTION-10 OF THE CONTRACT LABOUR (REGULATION ANDABOLITION) ACT, 1970 (DURING THE YEAR 2001-2002 w.e.f. 01.03.2001)

Sl. Notification No. & Date Establishment/ Industry in Works/ Jobs prohibitedNo. respect of whom notification is

issued1. 1. No. S-16014/330/99-LW dated

1St March, 2001. No.S.O. 189 (E)

2. 44. U-23013/11/2000-LW dated4.7.2001

3. 45. U23013/5/2000-LW dated4.7.2001

4. 46. U-23013/8/99-LW dated4.7.2001

5. 47. U-23013/25/99-LW dated12.11.2001

6. No. S-16014/254/99-LW dated12.11.01

Hindustan PetroleumCorporation, LiquefiedPetroleum Gas Plant, WhiteField Road, Mahadevpura Post,Bangalore-560022.

Hospitals of the Employees’State Insurance Corporation atKandivali, Merol, Thane andUlahasnagar in the State ofMaharashtra.

Airport Authority of India, AirCargo Complex (Export andImport) at International AirportDivision at InternationalAirports, Calcutta and Chennai

Paradip Port Trust, ParadipOrissa

Godowns and depots of theFood Corporation of India(1) West Hill, Calicut, Kerala.(2) Mavelikkara, Kerala(3) Chalakudy, Kerala

Sree Chitra Thirunal Institute forMedical Sciences andT e c h n o l o g y ,Thiruvananthapuram.

Stacking of cylinders, removing ofexcess or under filled cylinders,transfer of defective cylinders and anyother related work in cylinder handlingin the process of bottling of liquefiedpetroleum gas

Electrical maintenance jobs of Wiremen,Khalasi, Air Condition Operator andPump Operator.

Computer operations.

Muck cleaning; and spillage removal .

Handling of foodgrains, including theirloading/unloading from any means oftransport, storing and stacking of thesame in the godown

Operation of air condition plant andallied installations namely air handlingunits, compressors, pipelines,connected electrical accessories,cooling towers, pumps, package units,solar units, chillers.

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Table-10.2

ENFORCEMENT OF CONTRACT LABOUR ( R & A) Act, 1970

ENFORCEMENT OF CONTRACT LABOUR (REGULATION & ABOTION) ACT, 1970

Sl. Item YearNo.

1996 1997 1998 1999 2000

1. No. of Registration Certificates issued toprincipal employers. 375 425 639 670 658

2. No. of Licences issued to contractors*. 3613 4660 5471 6632 7734

3. No. of Inspections conducted. 4653 3956 4263 5281 5479

4. No. of Irregularities detected. 72541 70709 65509 85936 83414

5. No. of prosecutions launched. 3705 3330 3147 3805 3857

6. No. of convictions. 2770 2240 2060 2019 2126

7. No. of contract labourers covered bylicences@. 489776 588678 664216 762425 773849

8. No. of Licences revoked/ cancelled. 757 1371 1669 1099 3562

9. No. of registration certificates revoked. 23 Nil Nil Nil 2

* Total no. of licensed contractors at the end of the year 2000: 24208.

@ Total no. of contract labourers covered by the license issued to the contractors a the end of year 2000:773849.

Table-10.3

No. of cases received/disposed of during the last five years under Rule 25(2) (v) (a) and (b) of the ContractLabour (Regulation and Abolition) Central Rules, 1971 relating to payment of wages.

Year No. of cases received during the last four years Order issuedunder Rule 25(2) (v) (a) and (b)

1996 04 01

1997 06 04

1998 15 03

1999 35 05

2000 23 20

** Rule 25 (2) (v) (a) of the Contract Labour (Regulation and Abolition) Central Rules, 1971 has beenamended vide notification No. GSR 41(E) dated 21st January, 1999 delegating powers to the DeputyLabour Commissioners (Central) instead of the Chief Labour Commissioner (Central).