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The Contract Labour (Regulation and Abolition) Act, 1970. Objectives. To regulate employment of contract Labour and their terms and conditions Where it is found necessary, to abolish contract labour. Case Law 1. Standard Vacuum Refining Company V/s its Workmen 1960 II LLJ 233
to abolish contract labour
Standard Vacuum Refining Company
its Workmen 1960 II LLJ 233
The case of the respondents was that the contractor used to change sometimes from year to year with the result that the workmen employed by the previous contractor were thrown out of employment.
As an instance, it was said that previous to October 1, 1957, the contract was with Gowri Construction Company. That company employed 67 workmen to do the work. But when the contract was given to Ramji Gordhan and Company, all these 67 workmen were thrown out of employment, though 40 of them were subsequently re-employed as fresh employees by Ramji Gordhan and Company.
The result of the system therefore was that there was no security of service to the workmen who were in effect doing the work of the company. Besides the contractors were paying much less to the workmen that the amount paid by the company to its unskilled regular workmen.
Further, the workmen of the contractors were not entitled to other benefits and amenities such as provident fund, gratuity, bonus, privilege leave, medical facilities and subsidized food and housing to which the regular workmen of the company were entitled. The work was of a permanent nature, but the contract system was introduced to deny the workmen the rights and benefits which the company gave to its own workmen.
It further held that doing of this work through annual contracts resulted in the deprivation of security of service and other benefits, privileges, leave, etc., for the workmen of the contractor. Therefore considering the nature of the case it was of opinion that this was a proper case where a direction should be given to the company to abolish the contract system with respect to this work.
In the result the company was directed with effect from November 1, 1958, to discontinue the practice of getting this work done through contractors and to have it done through workmen engaged by itself.
So far as this work is concerned, it is incidental to the manufacturing process and is necessary for it and of a perennial nature which must be done every day.
Such work is generally done by workmen in the regular employ of the employer and there should be no difficulty in having regular workmen for this kind of work.
The matter would be different if the work was of intermittent or temporary nature or was so little that it would not be possible to employ full-time workmen for the purpose.
Under the circumstances the order of the tribunal appears to be just and there are no good reasons for interfering with it.
“If the work for which Contract Labour is employed is incidental to and closely connected with the main activity of the industry and is of a perennial and permanent nature, the abolition of Contract Labour would be justified”.
Section 10 of the Contract Labour Act :-
The Supreme Court inVegoils
(1971 2 SCC 724 )
1. The feeding of hoopers in the solvent extraction plant is an activity closely and intimately connected with the main activity of the appellant, namely, crushing oilcakes and oilseeds for extraction of oil and other chemical production. Excepting a few days, this work has to go on continuously almost throughout the year. It is not as if the work of an intermittent or temporary nature or so little that it would not be possible for the appellant to employ full-time workmen for this purpose. The fact that this work is done by departmental workmen in other concerns shows that it is an essential part of the industry.
2. If the work for which contract labour is employed is incidental to and closely connected with the main activity of the industry and is of a perennial and permanent nature, the abolition of Contract Labour would be justified. These principles are also incorporated in the Contract Labour Act.
3. In view of the facts of the present case, therefore, there should be no difficulty in having regular workmen in the employment of the appellant to do this type of work.
4. In the present case the work of loading and unloading is not done on all the working days and on some days a number of wagons and trucks suddenly arrive necessitating employment of large number of workers and they are to be ……..
….cleared from the railway wagons within a limited time to avoid demurrage. The fact that in other units also, the work is done by contract labour shows that it is not profitable to employ full time workers for this purpose and no directions can, therefore, be given for abolition of contract labour.
(1) The appropriate Government has power to prohibit the employment of contract labour in any process, operation or other work in any establishment;
(2) before issuing a notification prohibiting contract labour, the appropriate Government has to consult the Central or State Board, as the case may be, comprises of the representatives of the workmen, contractor and the industry;
(3) before issuing any notification under sub-s. (1) of S. 10, prohibiting the employment of contract labour the appropriate Government is bound to have regard, not only to the conditions of work and benefits provided for the contract labour in a particular establishment, but also other relevant factors enumerated in clauses. (a) to (d) of sub-s. (2) of S. 10 and
(4) under the explanation which really relates to clause (b), the decision of the appropriate Government, on the question whether any process, operation or other work is of perennial nature, shall be final.
6. Under the Act (37 of 1970), the appropriate Government when taking action under S. 10 will have an overall picture of the industries carrying on similar activities and decide whether contract labour is to be abolished in respect of any of the activities of that industry. Therefore, it is reasonable to conclude that the jurisdiction to decide about the abolition of contract labour, or to put it differently, to prohibit the employment of contract labour, is now to be done in accordance with S. 10. Therefore, it is proper that the question whether the contract labour in the appellant’s industry is to be abolished or not, is left to be dealt with by the appropriate Government under the Act, if it becomes necessary..
The Supreme Court in:
Catering Cleaners of S. Rly.
Union of India
(1987 1 SCC 700)
1. The petitioners are catering cleaners working in the catering establishments in various railway junctions of the Southern Railway and in the pantry cars of long distance trains running under the control of the Southern Railway. Since a long time they have been agitating for the abolition of the contract system and for their absorption as regular employees of the principal employer, namely, the Southern Railway. They complain that they are not even paid minimum wages. They are paid a pittance averaging from Rs. 2.00/- to Rs. 2.50/- per day. Although the contract system has been abolished in almost all the other railways, the Southern Railway persists in employing contract labour for cleaning its catering establishments and pantry cars. ……
2. Against that the Railway Administration contended that it has not been found to be possible to abolish the contract labour system because the nature of the cleaning work in the catering units of the Southern Railway was fluctuating and intermittent. The contract labour system is followed not only in the Southern Railway but also in the South Central Railway and the South Eastern Railway..….
They claim that any departmental unit not working profitably could be handed over to a private licensee and this was the alternative that was adopted by the Southern Railway in the case of catering cleaners. Experience showed that it was difficult to extract work from catering cleaners if they were engaged on a regular basis by the railway and it was not possible to supervise their work effectively. To ensure satisfactory service to the public the work had to be entrusted to a private agency……
“(a) The Railway Administration has only made vague and general statements for which no facts or figures in support thereof have been placed before the Court. In fact their contentions stand contradicted by the Report of Parliamentary Committee of Petitions which went into this question.”
“(b) On facts, all the relevant factors stated in clauses (a) to (d) of S. 10 (2) are satisfied. That catering establishments make profit is also established. The history and object of the Act support abolition of contract labour in this case. However, in the circumstances, instead of issuing a mandamus to the Central Government, the Central Government is being directed to take appropriate action under S.10 within six months.”
“(c) The work of cleaning catering establishments and pantry cars will be done departmentally by employing those workmen who were previously employed by the contractor on the same wages and conditions of work as are applicable to those engaged in similar work by the Western Railway.”
Section 12 of the CLRA provides for the Contractor to obtain license.
The Supreme Court in Dena Nath
National Fertilisers Ltd.,
(1992 1 SCC 695)
“In proceedings under Art. 226 of the Constitution merely because contractor or the employer had violated any provision of the Act or the rules, the Court could not issue any mandamus for deeming the contract labour as having become the employees of the principal employer.”
The Supreme Court in
Gujarat Electricity Board, Thermal Power Station
Hind Mazdoor Sabha
(1995 5 SCC 27)
“After the coming into operation of the Contract Labour (Regulation and Abolition) Act,(for short the Act), the authority to abolish the contract labour is vested exclusively in the appropriate Government which has to take its decision in the matter in accordance with the provisions of Section 10 of the Act. No Court including the industrial adjudicator has jurisdiction to do so. However, the authority to abolish the contract labour under Section 10 of the Act comes into play only where there exists a genuine contract.
In other words, if there is no genuine contract and the so-called contract is a sham or a camouflage to hide the reality, the said provisions are inapplicable. When, in such circumstances, the workmen concerned raise an industrial dispute for relief that they should be deemed to be the employees of the principal employer, the court or the industrial adjudicator will have jurisdiction to entertain the dispute and grant the necessary relief.”
The Supreme Court in
Air India Statutory Corpn.
United Labour Union
(1997 9 SCC 377)
1. The Central Government, exercising the power under Section 10 of the Act, on the basis of recommendation and in consultation with the Central Advisory Board constituted under Section 10(1) of the Act, issued a notification on 9-12-1976 prohibiting "employment of contract labour on and from 9-12-1976 for sweeping, cleaning, dusting and watching of the buildings owned or occupied by the establishments in respect of which the appropriate government under the said Act is the Central Government".
2. Since the appellant did not abolish the contract system and failed to enforce the notification of the Government of India dated 9-12-1976, the respondents filed writ petitions for direction to the appellant to enforce forthwith the aforesaid notification abolishing the contract labour system in the aforesaid services and to direct the appellant to absorb all the employees doing cleaning, sweeping, dusting, washing and watching of the buildings owned or occupied by the appellant-establishment, with effect from the respective dates of their joining as contract labour in the appellant's establishment with all consequential rights/benefits, monetary or otherwise.
“(a) The contractor is an intermediary between the workmen and the principal employer. The moment the contract labour system stands prohibited under Section 10(1), the embargo to continue as a contract labour is put an end to and direct relationship has been provided between the workmen and the principal employer. Thereby, the principal employer directly becomes responsible for taking the services of the workmen hitherto regulated through the contractor. The object of the penal provisions was to prevent the employer from committing breach of the provisions of the Act and to put an end to exploitation of the labour.
and to deter him from acting in violation of the constitutional right of the workmen to attain decent standard of life, living wages, right to health etc. When the appropriate Government finds that the employment is of a perennial nature etc. contract system stand abolished, thereby, it intended that if the workmen were performing the duties of the post which were found to be of perennial nature on par with regular service, they also require to be regularised. The Act did not intend to denude them of their source of livelihood and means of development, throwing them out from employment.
The Act is a socio-economic welfare legislation. Right to socio-economic justice and empowerment are constitutional rights. Right to means of livelihood is also a constitutional right. Right to facilities and opportunities are only part of and means to right to development. Without employment or appointment, the workmen will be denuded of their means of livelihood and resultant right to life, leaving them in the lurch since prior to abolition, they had the work and thereby earned livelihood.”
“(b) The award proceedings as suggested in Gujarat Electricity Board case ((1995) 5 SCC 27 : 1995 SCC (L&S) 1166) are beset with several incongruities and obstacles in the way of the contract labour for immediate absorption. Since, the contract labour gets into the service of the principal employer, the Union of the existing employees may not espouse their cause for reference under Section 10 of the ID Act. The workmen, on abolition of contract labour system have no right to seek reference under Section 10 of the ID Act.
Moreover, the workmen immediately are kept out of job to endlessly keep waiting for award and thereafter resulting in further litigation and delay in enforcement. The management would always keep them at bay for absorption. It would be difficult for them to work out their right. Moreover, it is a tardy and time-consuming process and years would roll by. Without wages, they cannot keep fighting the litigation endlessly. The right and remedy would be a teasing illusion and would be rendered otiose and practically compel the workmen to remain at the mercy of the principal employer.”
“(c) When these contract workers carry out the work of the principal employer which is of a perennial nature and if provisions of Section 10 get attracted and such contract labour system in the establishment gets abolished on fulfillment of the conditions requisite for that purpose, it is obvious that the intermediary contractor vanishes and along with him vanishes the term "principal employer". Unless there is a contractor agent there is no principal. Once the contractor intermediary goes the term "principal" also goes with it. ……….
Then remain out of this tripartite contractual scenario only two parties - the beneficiaries of the abolition of the erstwhile contract labour system i.e. the workmen on the one hand and the employer on the other who is no longer their principal employer but necessarily becomes a direct employer for these erstwhile contract labourers. Implicit in the provision of Section 10 is the legislative intent that on abolition of contract labour system, the erstwhile contract-workmen would become direct employees of the employer on whose establishment they were earlier working and were enjoying all the regulatory facilities …..
that very establishment under Chapter V prior to the abolition of such contract labour system.”
“(d) engagement of contract labour has been found to be unjustified by a catena of decisions of this Court. When the work is of perennial nature and instead of engaging regular workmen, the system of contract labour is resorted to, it would only be for fulfilling the basic purpose of securing monetary advantage to the principal employer by reducing expenditure on work….
force. It would obviously be an unfair labour practice and is also an economically short-sighted and unsound policy, both from the point of view of the undertaking concerned and the country as a whole. Such a system was tried to be put to an end by the legislature by enacting the Act but when it found there are certain activities of establishment where the work is not of perennial nature then the contract labour may not be abolished but still it would be required to be regulated so that the lot of the workmen is not rendered miserable. The real scope and ambit of the Act is to abolish contract labour system as far as possible from every establishment.
Consequently, on abolition which is the ultimate goal, the erstwhile regulated contract labour cannot be thrown out of establishment as tried to be submitted on behalf of the management taking resort to the express language of Section 10 of the Act. Such a conclusion reached by the two member Bench in Dena Nath case, flies in the face of the very scope and ambit of the Act and frustrates the very scheme of abolition of contract labour envisaged by the Act. Such a conclusion, with respect, cannot be countenanced, as it results in a situation where relatives of the patient are told by the operating surgeon that operation is successful but patient has died. "
“1. On Prohibition of Contract Labour, intermediary goes away. Contract Labourers are direct employees of Principal employers”.
“2. Abolition means automatic absorption of Contract Labour”
The Supreme Court in
Secy., Haryana SEB
(1999 3 SCC 601)
2. In order to keep the said plants and stations clean and hygienic, the appellant-Board, awards contracts to contractors
3.One such contract was awarded to one K for cleaning, sweeping and removal of garbage from the Main Plant Building" at Panipat for a payment of a certain amount per month with a stipulation to engage a minimum 42 Safai Karamcharis for a year
4. After completion of more than 240 working days in the year, services of these Safai Karamcharis were terminated. They raised an industrial dispute for permanent absorption in the employment of the Board on the ground of completion of the said length of service. The question was whether these Safai Karamcharis were employees of the Board.
5.Both the Labour Court and the High Court answered in the affirmative and directed reinstatement of the respondent Safai Karamcharis with continuity of service, albeit without back wages. It was found that the Board exercised supervision over the attendance of the Safai Karamcharis and maintained record of other statutory duties and liabilities.
6.Documents on record showed that overall control of the working of the contract labour including administrative control of the working of the contract labour was with the Board. It was found by the Labour Court, as confirmed by the High Court on applying the doctrine of lifting of the veil to the facts of the case, that K was merely a name lender, a broker or an agent of the Board for procuring labour for the Board from the open market. There was no proof of K being even a licensed contractor.In such circumstances, dismissing the Board’s appeal.
“(a) The democratic polity ought to survive with full vigour : socialist status as enshrined in the Constitution ought to be given its full play and it is in this perspective the question arises - is it permissible in the new millennium to decry the cry of the labour force desirous of absorption after working for more than 240 days in an establishment and having their workings supervised and administered by an agency within the meaning of Article 12 of the Constitution - the answer cannot possibly be in the affirmative - the law courts exist for the society and in the event law courts feel the requirement in accordance with principles of justice, equity and good conscience, the law courts ought to rise up to the occasion……
…meet and redress the expectation of the people. The expression "regulation" cannot possibly be read as contra public interest but in the interest of the public. “
“(b) Had there been any genuine contract labour system prevailing with the appellant Board, then obviously it had to be abolished as per Section 10 of the Contract Labour (Regulation and Abolition) Act after following the procedure laid down therein. However, on the facts of the present case, there was no genuine contract system…..
prevailing at the relevant time wherein the Board could have acted as only the principal employer and K as a licensed contractor employing labour on his own account, more so when the Board at the relevant time was not registered as the principal employer under the Contract Labour Regulation and Abolition Act. Once the Board was not a principal employer and the so-called contractor K was not a licensed contractor under the Act, the inevitable conclusion is that the so-called contract system was a mere ……….
camouflage, smoke and a screen and disguised in almost a transparent veil which could easily be pierced and the real contractual relationship between the Board, on the one hand, and the employees, on the other, could be clearly visualised.”
The Supreme Court upheld the relief of reinstatement granted to the Safai Karamcharis by the High Court.
Contract Labour engaged in statutory Canteens (LEGAL POSITION)
The Supreme Court in
Parimal Chandra Raha
(1995 Supp (2) 611)
1. The facts on record it appeared that canteen services have been provided to the employees of the Corporation for a long time and that it was the Corporation which has been from time to time, taking steps to provide the said services. The canteen committees, the Cooperative Society of the employees and the contractors entrusted to run and manage the canteens had only been acting for and on behalf of the Corporation as its agencies to provide the said services. ……..
It was the Corporation which had been appointing the contractors and entering with them into agreements which had been appointing the contractors and entering with them into agreements which were in the nature of directions regarding the manner in which the canteen was to be run and the canteen services rendered. Both the appointment of the contractor and the tenure of the contract is as per the stipulations made by the Corporation in the agreement…
only to the Corporation and the Corporation had been taking steps to remedy the defects in the canteen service. Further, whenever there was a temporary breakdown in the canteen service, on account of the agitation or of strike by the canteen workers, it was the Corporation which had been taking active interest in getting the dispute resolved and the canteen workers had also looked upon the Corporation as their real employer and joined the Corporation as a party to the industrial dispute raised by them.
“a) In the circumstances of the case, the canteens of the respondent – Corporation have become a part of the establishment of the Corporation. The canteen committees, the cooperative society of the employees and the contractors engaged from time to time are in reality the agencies of the Corporation and are, only a veil between the Corporation and the canteen workers. Therefore, the canteen workers are in fact the employees of the Corporation.”
“b) What emerges from the statute law and the judicial decisions is as follows :
(i) Whereas under the provisions of the Factories Act, it is statutorily obligatory on the employer to provide and maintain canteen for the use of his employees, the canteen becomes a part of the establishment and, therefore, the workers employed in such canteen are the employees of the management.
(ii) Where, although it is not statutorily obligatory to provide a canteen, it is otherwise an obligation on the employer to provide a canteen, the canteen becomes a part of the establishment and the workers working in the canteen, the employees of the management. The obligation to provide a canteen has to be distinguished from the obligation to provide facilities to run canteen. The canteen run pursuant to the latter obligation, does not become a part of the establishment.
(iii) The obligation to provide canteen may be explicit or implicit. Where the obligation is not explicitly accepted by or cast upon the employer either by an agreement or an award, etc., it may be inferred from the circumstances, and the provision of the canteen may be held to have become a part of the service conditions of the employees. Whether the provision for canteen services has become a part of the service conditions or not, is a question of fact to be determined on the facts and circumstances in each case.
Where to provide canteen services has become a part of the service conditions of the employees, the canteen becomes a part of the establishment and the workers in such canteen become the employees of the management.
(iv) Whether a particular facility or service has become implicitly a part of the service conditions of the employees or not, will depend, among others, on the nature of the service/facility, the contribution the service in question makes to the efficiency of the employees and the establishment, …
whether the service is available as a matter of right to all the employees in their capacity as employees and nothing more, the number of employees employed in the establishment and the number of employees who avail of the service, the length of time for which the service has been continuously available, the hours during which it is available, the nature and character of management, the interest taken by the employer in providing, maintaining, supervising …..
and controlling the service, the contribution made by the management in the form of infrastructure and funds for making the service available etc.”
In the case of
Workers in Canteen of SRF Ltd.,
Government of Tamilnadu & Other Cases,
1996 (88) FJR 220 (Mad,D.B):1995 II CLR 136
The Workers of statutory canteen run by contractor or by Co-op Society cannot be treated as workmen of the Company merely because it is a statutory canteen but that has to be decided on specific evidence.
“………… The question whether there exists the employer- employee relationship between the proprietor of the factory and the canteen employees, is not a matter of presumption, but it is a question of fact, which has to be decided in each case on the facts and circumstances of such case. The statutory canteens may be run by the independent contractors or by the co-operative societies of the workers as provided under rule 70(6) of the Tamil Nadu Factories Rules, 1950, or may be run by the occupier of the factory itself in……
discharge of the obligation under section 46 of the Factories act. In the first two categories, the workers in the canteen cannot be considered to be employees of the occupier of the factory in the absence of specific evidence showing that even such canteen employees are the employees of the occupier of the factory………….. the workmen employed in the canteen by such contractor cannot be treated as the workmen of the principal employer, viz., occupier or proprietor of the factory.
In such a case, there is no employer-employee relationship between the proprietor of the factory. In such a case, there is no employer-employee relationship between the proprietor of the factory and the canteen employees………….”
In the case of Hindustan Machine Tools Employees’ Union
Hindustan Machine Tool Ltd.& Other cases,
1996 II LLN 680 (Raj. H.C)
The employees of Co-op Society running statutory canteen cannot be the employees of Company since Co-op Society is registered one, maintains employees attendance register, pays pay bills, exercises power of appointment or dismissal of the employee and is a separate legal entity.
“…….. I am satisfied from the documents produced and the evidence on record that the company has given the contract for running the canteen to the co-operative canteen to discharge its statutory obligation and the co-operative canteen is a separate legal entity. The employees of the co-operative canteen cannot be considered to be the employees of the Company ……….” (Page 695,para 52)
“ The Tribunal has processed on the basis that the Company is under statutory obligation to maintain the canteen but, by that reason alone it cannot be considered that the canteen is managed and run by the Company, when the contract has been given to co-operative society……” (Page 696, Para 57)
“………….The attendance register of the employees of the canteen is separately maintained. The pay-bills are separately prepared. The registration of the………….
Co-operative canteen under the Co-operative Societies Act as well as under the Act of 1970, proves that the H.M.T. Employees Co-operative Canteen was not a fictitious entity. The power of appointment and dismissal of an employee of the canteen could be exercised by it.” (Page 697, Para 57)
The Supreme Court in
Indian Petrochemicals Corporation
(1999 6 SCC 439)
(a)“In view of Section 2(l) and 46 of the Factories Act, the Management has rightly conceded that the respondent workman by virtue of the definition of the “Workman under the Act, are the employees of the appellant Management for purposes of the Act. The Factories Act does not govern the rights of employees with reference to recruitment, seniority, promotion, retirement benefits etc. These are governed by other statutes, rules, contracts or policies…..
Therefore, the workmen’s contention that employees of a statutory canteen ipso facto become the employees of the establishment for all purposes cannot be accepted.”
(b)“In Raha case, 1995 Supp (2) SCC 611 the Supreme Court did not specifically hold that the deemed employment of the workers is for all purposes nor did it specifically hold that it is only for the purpose of the Factories Act, …..
However, a reading of the judgment in its entirely makes it clear that the deemed employment is only for the purpose of the Factories Act, Therefore, it has to be held that the workmen of a statutory canteen would be the workmen of the establishment for the purpose of the Factories Act only and not for all other purposes.”
(c)“The next question that arises is whether from the material on record it could be held that the workmen are, infect, the employees of the Management for all purposes. Normally, this being a question of fact, the Supreme Court would have been reluctant to examine this question which in the ordinary course should be first decided by a fact-finding tribunal. However, in the present case parties have filed detailed affidavits and documents which are sufficient for deciding this question without the need for any oral evidence.”
(d)“Though the canteen in the appellant’s establishment is being managed by a contractor, it is also an admitted fact that the canteen has been in existence from the inception of the establishment. It is also an admitted fact that all the employees who were initially employed and those inducted from time to time in the canteen have continued to work in the said canteen uninterrupted albeit under an order of the Industrial Court which has become final. This clearly suggests that the Management accepted as a matter of fact that the respondent workmen were permanent employees of the Management’s canteen.”
(e) “Considering these factors cumulatively, in addition to the fact that the canteen in the establishment of the Management is a statutory canteen, it has to be held that in the instant case, the respondent workmen are in fact the workmen of the appellant Management.”
(f)The Second contention of the appellant would have had some substance if in reality the Management had engaged a contractor who was wholly independent of the Management, but that is not situation in the present case.”
The Supreme Court in
Hari Shankar Sharma
Artificial Limbs Mfg. Corpn.,
(2002 1 SCC 337)
1. The Respondent Company owned a factory where more than 700 persons are employed.
2. The Respondent set up a canteen for its employees.
3. From time to time agreements were entered into between Respondent and different contractors under which the contractor agreed to prepare and serve foodstuffs and other refreshments at the canteen.
4. After unsuccessful claiming before the Labour Court and the High Court to be regular workmen of the respondent, the appellant employees of the canteen approached the Supreme Court. They contended that since Section 46(1) of the Factories Act was applicable to the Respondent’s factory and the Respondent was statutorily obliged to provide and maintain a canteen for the use of its employees, the canteen was part of Respondent's establishment and therefore..
the appellants were the employees of Respondent . They contended that their claim was supported by the facts that: (i) in terms in the contract between the contractor and Respondent the appellants were under the direct supervision and control of Respondent and (ii) the appellants had continued to be employed in the canteen despite several changes of contractors. Dismissing the appeal.
(a) “It cannot be said as an absolute proposition of law that whenever in discharge of a statutory mandate, a canteen is set up or other facility is provided by an establishment, the employees of the canteen or such other facility become the employees of that establishment. It may depend on how the obligation is discharged by the establishment. It may be carried out wholly or substantially by the establishment itself or the burden may be delegated to an independent contractor.”
(b) “There is nothing in Section 46 of the Factories Act, nor has any provision of any other statute, which provides for the mode in which the specified establishment must set up a canteen. Where it is left to the discretion of the establishment concerned to discharge its obligation of setting up a canteen either by way of direct recruitment or by employment of a contractor, it cannot be postulated that in the latter event, the persons working in the canteen would be the employees of the establishment.”
(c) “It may be, and has been often so found, that the employees of a contractor are de facto employees of the establishment despite the existence of a written agreement between the contractor and the establishment. From a scrutiny of the agreement, it is clear that although Respondent had agreed to provide the contractor with the basic infrastructure, the actual running of the canteen was the responsibility of the contractor alone.”
(d) “It is true that the Respondent agreed to pay to the contractor service charges of Rs. 73,372.48 per month up to 700 employees but this may have only ensured that the margin of profit of the contractor was reasonable and fixed on relevant considerations. Besides, the agreement must be construed in the background of the Rules framed by the State Government under Section 46(2) of the Factories Act, 1948. In view of the …….
provisions of Section 46(2) merely because there is compliance with the Rules by providing the equipment and for the rate at which the foodstuffs would be sold at the canteen by the contractor would not necessarily mean that the employer was running the canteen through the agency of the contractor. There must be something more.”
(e) “Under the agreement the contractor was given the discretion to employ the workers already working in the canteen (like the…..
appellants) but it was made clear that the contractor could take action against the canteen workers. The Respondent had no say as to who should be employed by the contractor nor the method of recruitment to be followed by the contractor. There was no obligation on the contractor to employ the persons who had served under earlier contractors. Even if the agreement had contained a condition that the contractor must retain the old employees, it would not necessarily mean that those employees were the employees of the establishment.”
“The issue is, therefore, primarily and ultimately one of fact to be determined by a fact-finding Tribunal. In the Present case the terms of the agreement are inconclusive.”
“After a detailed analysis of the evidence, the Labour Court concluded that the appellants were not the employees of Respondent. The finding cannot be termed to be perverse. Therefore, it would have been inappropriate for the High Court …..
under Article 226 to reappreciate the evidence and come to a different factual conclusion. The High Court did not do that nor does the Supreme Court propose to do so under Article 136.”
The Supreme Court in
Steel Authority of India Ltd.,
National Union Waterfront Workers, (2001 7 SCC 1)
(a) “Question that arose was: “whether automatic absorption of contract labour, working in the establishment of the principal employer as regular employees, follows on issuance of a valid notification under Section 10(1) of the CLRA Act, prohibiting the contract labour in the establishment concerned.” Answering the said question in the negative,”
(b). “The Statement of Objects and Reasons of the act also does not allied to the concept of automatic absorption of the contract labour on issuance of notification for prohibition of employment of the contract labour.”
(c). “Admittedly, the consequence of prohibition notification under Section 10 (1) of the CLRA Act, prohibiting employment of contract labour, is neither spelt out in Section 10 nor indicated anywhere in the Act.
the eloquence of the CLRA Act in not spelling out the consequence of abolition of contract labour system, discerned in the light of various reports of the Commissions and the Committees and the Statement of Objects and Reasons of the Act, appears to be that Parliament intended to create a bar on engaging contract labour in the establishment covered by the prohibition notification, by a principal employer so as to leave no option with him except to employ the workers as regular employees directly.
Section 10 is intended to work as a permanent solution to the problem rather than to provide a one-time measure by departmentalizing the existing contract labour who may, by a fortuitous circumstance be in a given establishment for a very short time as on the date of the prohibition notification. It could as well be that a contractor and his contract labour who were with an establishment for a number of years were changed just before the issuance of prohibition notification.
In such a case there could be no justification to prefer the contract labour engaged on the relevant date over the contract labour employed for a longer period earlier.”
(d) “By definition the term ‘ Contract labour” is a species of workman. Where a workman is hired in or in connection with the work of an establishment by the principal employer through a contractor, he merely acts an agent so there will be master –and – Servant relationship between the principal employer and the workman.
But where a workman is hired in or in connection with the work of an establishment by a contractor, either because he has undertaken to produce a given result for the establishment or because he supplies workmen for any work of the establishment, a question might arise whether the contractor is a mere camouflage, if the answer is in the affirmative, the workman will be in fact an employee of the principal employer; but if the answer is in the negative, the workman will be a contract labour.”
5. “Therefore, it is not possible to perceive in Section 10 any implicit requirement of automatic absorption of contract labour by the principal employer in the establishment concerned on issuance of notification by the appropriate Government under Section 10 (1) prohibiting employment of contract labour in a given establishment. Consequently the principal employer cannot be required to order absorption of the contract labour working in the establishment concerned.”
6. “The principle that a beneficial legislation needs to be construed liberally in favour of the class for whose benefit it is intended, does not extend to reading in the provisions of the Act what the legislature has not provided whether expressly or by necessary implication, or substituting remedy or benefits for that provided by the legislature. The CLRA Act regulates the conditions of service of the contract labour and authorizes in Section 10(1) prohibition of contract labour system by the appropriate Government on consideration of factors enumerated in sub-section (2) of Section 10 of the Act ……..
among other relevant factors. But, the presence of some or all those factors, provides no ground for absorption of contract labour on issuing notification under sub-section (1) of Section 10. Admittedly, when the concept of automatic absorption of contract labour as a consequence of issuing notification under Section 10(1) by the appropriate Government, is not alluded to either in Section 10 or at any other place in the Act and the consequence of violation of Sections 7 and 12 of the CLRA Act is explicitly provided in Sections 23 and 25 of the CLRA Act, it is not for the High Courts or this …………..
Court to read in some unspecified remedy in Section 10 or substitute for penal consequences specified in Sections 23 and 25 a different sequel, be it absorption of contract labour in the establishment of principal employer or a lesser or a harsher punishment.”
“A glance through the said notification makes it manifest that with effect from 1-3-1977, it prohibits employment of contract labour for sweeping, cleaning, dusting and watching of buildings owned or occupied by establishment in respect of which the appropriate Government under the said Act is the Central Government. This clearly indicates that the Central Government had not adverted to any of the essentials, referred to above, except the requirement of consultation with the Central Advisory Board.
Consideration of the factors mentioned above has to be in respect of each establishment, whether individually or collectively, in respect of which notification under sub-section (1) of Section 10 is proposed to be issued. The impugned notification apart from being an omnibus notification does not reveal compliance with sub-section (2) of Section 10. This is ex facie contrary to the postulates of Section 10 of the Act. Besides, it also exhibits non-application of mind by the Central Government. We are, therefore, unable to sustain the said impugned notification dated 9-12-1976 issued by the Central Government.”
“ In exercise of the power conferred by sub-section (i) of Section 10 of CL (R& A) Act 1970, the Central Government after consultation with the Central Advisory Contract Labour Board, hereby prohibits employment of contract labour on and from 1.3.1977, for sweeping, cleaning, dusting and watching of buildings, owned or occupied by establishments in respect of which the Appropriate Government is the Central Government.”
“Provided that this notification shall not apply to outside cleaning and other maintenance operations or multistoreyed buildings where such cleaning or maintenance operations cannot be carried out except with specialized experience.”
In the case of
Vividh Kamgar Sabha
Kalyani Steels Ltd and Another
(2001 11 SCC 381)
“The prohibitions of the MRTU and PULP Act can only be enforced by persons who admittedly are workmen. If there is dispute as to whether the employees are employees of the Company , then that dispute must first be got resolved by raising a dispute before the appropriation forum. It is only after the status as a workmen is established in an appropriate forum that a complaint could be made under the provisions of the MRTU and PULP Act.”
In the Case of
Maharashtra General Kamgar Union
(2001 3 SCC 101)
1. The Respondent union of the workmen, filed a complaint under Section 28 of the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971 (for short "the Act") against the appellant for unfair labour practices under items 1(a), (b), (d) and (f) of Schedule IV of the Act.
2. The Respondent alleged that the appellant had been engaging persons to keep its factory premises and the surroundings thereof clean, hygienic and dust-free but on paper they were shown as “contract workmen” working for the contractor, Respondent 2 herein. That in the past, the appellant used to appoint such persons on casual or temporary basis and terminate their services from time to time with a view to deprive them of the permanent status and wages and other benefits as applicable to permanent workmen.
3. The Labour Court held the arrangement between the appellant and second respondent to be bona fide and dismissed the Complaint. Revision application was dismissed by the Industrial Tribunal. However, the High Court allowed the complaint.
4. Allowing the Appeal.
(a) “The object of the enactment is, amongst other aspects, enforcing provisions relating to unfair labour practices. Therefore, unless it is undisputed or indisputable that there is employer-employee relationship between the parties, the question of unfair practice cannot be inquired into at all. The respondent Union came to the Labour Court with a complaint that the workmen were engaged by the appellant through the contractor and though that is ostensible relationship the true relationship is one of master and servant between the appellant and the workmen in question. …..
By that process, workmen repudiate their relationship with the contractor under whom they were employed but claimed relationship of an employee under the appellant. That exercise of repudiation of the contract with one and establishment of a legal relationship with another can be done only in a regular Industrial Tribunal/Court under the ID Act and not in the Labour Court or the Industrial Court constituted under the Act..
(b) Labour Court does not have any jurisdiction to deal with abolition of contract labour as it is purely the job of appropriate Government.
“But one thing is clear - if the employees are working under a contract covered by the Contract Labour (Regulation and Abolition) Act then it is clear that the Labour Court or the industrial adjudicating authorities cannot have any jurisdiction to deal with the matter as it falls within the province of an appropriate Government to abolish the same……..”(Page : 1067, para 8.)
In the Bombay High Court Case of
Contract Laghu Udyag
( 2001 II CLR 1011)
1. "(4) It applies :-
(a) to every establishment in which twenty or more workmen are employed or were employed on any day of the preceding twelve months as contract labour;
(b) to every contractor who employs or who employed on any day of the preceding twelve months twenty or more workmen.” (Para 10)
2. On a plain reading of clause (a) of sub-section 4, of section 1 of the said Act, it would appear that the Act would apply to every establishment in which twenty or more workmen are employed on any day of the preceding twelve months as contract labour. (Para 11)
3. There is nothing in the Act to suggest that the prescribed number of workmen must be employed as contract labour by the said establishment through one agency (Contractor) or otherwise.
4. We are of the view that the Act would apply to every establishment in which 20 or more workmen are employed or were employed on any day of the preceding twelve months as contract labour, irrespective of the fact that they were employed by the establishment directly or through one or more contractors.
5. On a plain reading of clause (b) of sub-section 4, of section 1 of the said Act, it would appear that, similarly, the provisions of the Act would apply to every contractor who employs or who employed on any day of the preceding twelve months twenty or more workmen.
There is nothing in the Act to suggest that the contractor should have had employed the prescribed workmen in one establishment or otherwise. Further, there is nothing in this provision to suggest that the Act would apply only to such contractor who employs or who employed on any day of the preceding twelve months prescribed number of workmen in an establishment to which this Act applies.
6. In our view, clause (a) and clause (b) of sub-section 4 of Section 1 of the Act are mutually exclusive. Once the Act becomes applicable, ….
the establishment or the contractor concerned, are under obligation to comply with the mandatory requirement of registration or licensing in terms of sections 7 and 12 of the Act, as the case may be. It is, therefore, not possible to countenance the argument advanced on behalf of the respondents, that licensing of the contractor be necessarily on establishment wise basis and that the Act would apply only against such contractor who has engaged workmen as contract labour in an establishment which is registered under the Act and to which provisions of the Act of 1970 are attracted.
7. To illustrate our point, it would be apposite to take a hypothetical case. Take a case where the establishment gets the work done, which are essentially of perennial nature, though not its main activity/work, just as in the present case, of sweeping, cleaning etc., through more than one contractor by employing more than the prescribed workmen as contract labour; and also ensures that none of the contractor would engage 20 or more workmen in a given day so as to extricate from the the clutches of the provisions of this Act. (Para 12)
8. Similarly, in another situation, where the contractor has a workforce of more than 20 workmen and continuously supplies contract labour to more than one establishment, but ensures that none of the establishment has more than 20 workmen employed as contract labour on a given day during the preceding 12 months with a view to frustrate the provisions of the Act.
9. In our view, therefore, the provisions of the Act would become applicable not only where the establishment, but also when the contractor, as the case may be, or both or either, fulfill the requirement of engaging 20 or more workmen as contract labour on any day of the preceding 12 months.
In the Case of
Alath Factory Thezhilali Union
(1978 4 SCC 257)
As a work done by workman was an integral part of industry, their work was under the control of management and they produce goods for the business of management, the presence of intermediate contractor was of no consequence and the real employer was management and not contractor.
(a) “The true test is where a worker or group of workers labours to produce goods or services and these goods or services are for the business of another, that other is, in fact, the employer. He has economic control over the workers' subsistence, skill, and continued employment. If he, for any reason, chokes off, the worker is, virtually, laid off. The presence of intermediate contractors with whom along the workers have immediate or direct relationship ex contractu is of no consequence when, ….
on lifting the veil or looking at the conspectus of factors governing employment, the naked truth is discerned, and especially since it is one of the myriad devices resorted to by managements to avoid the responsibility when labour legislation casts welfare obligations on the real employer based on Articles 38, 39, 42, 43 and 43-A. If livelihood of the workmen substantially depends on labour rendered to produce goods and services for the benefit and satisfaction of an enterprise, the absence of direct relationship or the presence of dubious intermediaries cannot snap the real life-bond…..
If, however, if there is total dissociation in fact between the disowning Management and the aggrieved workmen, the employment is, in substance and in real-life terms, by another.”
(b) “The facts found are that the work done by the workmen was an integral part of the industry concerned; that the raw material was supplied by the Management; that the factory premises belonged to the Management; that the equipment used also belonged to the Management and that the finished product was taken by the Management for its own trade.
(c) The workmen were broadly under the control of the Management and defective articles were directed to be rectified by the Management.
(d) This concatenation of circumstances is conclusive that the workmen were the workmen of the petitioner.
1. Hindustan Lever Ltd.
Hindustan Lever Employees’ Union
2001 II LLN 945
(Bombay High Court).
Contract Labour, doing the work of perennial nature for years together, in the absence of genuine contract between company and contractors, they become entitled to be regularized in employment.
“………………….We cannot lose sight of the fact that the petitioner is a multinational company and a corporate body and, therefore, it will always act through proper resolutions and decisions and written contracts. In the case of engaging a contractor it could never be believed that the petitioner company had entered into an oral agreement, as whispered by Shri Rele, to engage the watchmen as contract labour through the alleged contractors. The petitioner have not proved even a paper arrangement of contract with them...
According to me, there was no such contract in existence between the petitioner company and the alleged contractors and the concerned watchmen were in fact and in reality employed by the petitioner company……………..”(Page 949, Para 6)
2.Krishna Vasudeo Kotwal & Ors V/s
State of Maharashtra & Ors.,
2002 LLR 94 (BOM. DB) : 2001 III CLR 1091.
Since contractor was paying better salary to security guards and other conditions of service offered by the contractor was satisfactory, there was no exploitation of the labour and therefore Government rejecting petitioners demand of abolition of contract labour system does not suffer from any infirmity warranting interference by High Court in its extra ordinary jurisdiction.
“………………….The contractor was paying at the rate of Rs. 30/- per day, which is in excess of the remuneration being paid to the guards registered with the Board. The Advisory Board also found that the other conditions of service offered by the contractor are satisfactory and it cannot be said that there was any exploitation of the labour employed by the contractor” (Page 95, line 30)
“…………………….The Board's Report appears to have been considered by the State Government and by order dated 11.9.1989, the State Government rejected the demand made by the petitioners to abolish contract system of supplying security guards to the contractor. The order passed by the State Government cannot be said to be vitiated by any error of law nor the consideration of the matter by the Board can be said to suffer from any infirmity warranting interference by this Court in its extraordinary jurisdiction”(Page 95 B.L.: 11)
3. International Airport Authority
International Airports Authority of India, 2001 I LLJ 549 (S.C.)
The airport includes passenger facility like car parking which is a part of airport building and hence the sweepers employed in car parking on contract basis are entitled to be absorbed.
“…………..The airport includes not only landing and taking off areas for the aircrafts, the runways and aircrafts maintenance areas, but also passenger facilities. Passenger facilities would certainly include car parking and it cannot be said that car parking is not a part of the building. Building in its ordinary sense would include appurtenances which form part thereof unless it be that expression “building” is to be understood as was done by the Merchant of Venice with reference to the pound of flesh. Therefore, we cannot agree with the stand of the respondents.” (Page: 550, Para : 2, T.L.: 22)
Steel Authority of India Ltd. & Ors.
National Union Waterfront Workers & Ors.
2001 II LLJ 1087 (S.C.)
Once notification prohibiting the employment of contract labour in any particular process operation or other work of the establishment is issued by Government and if principal employer intends to employ regular workmen in those processes, he shall give preferences to the erstwhile contract labour, if found suitable by relaxing the conditions like maximum age prescribed etc.
“(6) If the contract is found to be genuine and prohibition notification under Section 10(1) of the CLRA Act in respect of the establishment concerned has been issued by the appropriate Government, prohibiting employment of contract labour in any process, operation or other work of any establishment and where in such process, operation or other work of the establishment the principal employer intends to employ regular workmen,…….
he shall give preference to the erstwhile contract labour, if otherwise found suitable and, if necessary, by relaxing the condition as to maximum ageappropriately, taking into consideration the age of the workers at the time of their initial employment by the contractor and also relaxing the condition as to academic qualifications other than technical qualifications.” (Page:1132, Para: 119 (6))
Association of Chemical Workers, Bombay
1998 III LLJ 800 S.C.)
On prohibition of the contract labour, preference should be given to the erstwhile contract labour for employment as and when vacancy arises in their respective operational areas
“………………..It appears appropriate that while their somewhat exaggerated claims for reinstatement and back wages require to be, and are hereby, rejected, they should be afforded an opportunity of being considered for fresh recruitment with Respondent 2 as and when the vacancies, existing or future, are filled up in the respective operational areas of contract labour which have been abolished………………….” (Page : 801, Para : 10)
Cominco Binani Zinc Ltd.,
1989 I LLJ 452 (Kerala High Court)
The workers in the canteen are not employees of the Company and so they are not entitled to claim gratuity from the Company
“ The Tribunal while dealing with the issue relating to gratuity took the view that workers in the canteen are directly employed by the petitioner, that they are integral part of the factory and on that account they are entitled to gratuity from the Petitioner. This finding is also against the provisions of law. As stated earlier, the workers in the canteen are not the employees of the petitioner and so they are not entitled to claim gratuity from the petitioner.” (Page: 455. Para : 9)
Hindustan Steelworks Construction Ltd.
Commissioner of Labour,
1997 I LLJ 656 (S.C.)
The Contractor has to pay to contract workers equal wages as paid by principle employer to his employees for similar work and failure to pay will amount to breach of conditions subject to which a license is granted to him.
“Rule 25 of the Andhra Pradesh Contract Labour (Regulation and Abolition) Rules, 1971 imposes on the contractor certain conditions subject to which a license is granted to him. One such condition is to the effect that the contractor shall not pay to the contract labour in his employment wages which are lower than the wages paid by the principal employer to his own workers which do the same or similar kind of work…………….” (Page: 658, Para : 14)
Southern Security and Detective Bureau, Mysore
Commissioner of Labour, Government of A.P., 1998 (80) FLR 642
The license of Contractor is liable to be cancelled if he does not pay same wages to his employees as paid to direct employees.
“…………In a way, by justifying his actions the petitioner has all along admitted that the personnel employed through them were not being paid same wages as the Security Guards who had been engaged by the Paper Mill itself……………Admittedly the petitioners had violated and contravened Rule 25(v)(a). Therefore, the respondents were well within their rights to cancel the licence in terms of Section. 14 of the Act.” (Page : 645, Para 1, B.L.: 16)
This Contract of Agreement is made and entered on this __________ day of ___________ between M/s __________ having their office situated at __________ (hereinafter referred to as “the Company”) of the ONE PART AND M/s. ___________ having his office or establishment situated at _______________(hereinafter referred to as “ The Contractor”) of the OTHER PART.
WHEREAS the Company is in the business of ______________ and is on the look out for a suitable Contractor who can undertake/render services for the Factory/Establishment in respect of (Details of the job to be given).
AND WHEREAS the Contractor has the expertise to do such kind of work and has taken or done similar such type of jobs in other concerns.
AND WHEREAS the Company wants to give and the Contractor has agreed to undertake the said job on the terms and conditions set out hereunder:
I. Details of the job to be given:
a)The Contractor will be paid compensation on job basis;
b)The Contractor agreed to execute/fulfill and discharge jobs agreed upon by him efficiently and to the full satisfaction of the Company within the stipulated time;
III. Raw material and machinery etc:
a)The Company, if found necessary, shall give machinery required for the purpose of execution of work entrusted to the contractor and the Contractor shall be responsible for the same for its use and has to maintain and to upkeep the same in proper order.
b)In respect of the raw materials, the Contractor shall maintain proper register and give account of the raw materials consumed by him and the balance is to be returned to the Company.
a)In the event the raw material has not been fully consumed, the balance account of the same is to be given to the Company and in default, the Company is to be reimbursed the payment of the same.
b)Similarly any damage or loss caused to the equipment entrusted to the Contractor, the Contractor shall reimburse the payment of the same to the Company.
Rights and Obligations of the Contractor:
a) To perform the job as per the assignment, details of which are given in the agreement.
b) To receive the payment from the principal employer for performance of the job.
c) The Contractor shall decide the number of workmen required for the completion of the job. He will review his work as to the number of workmen required from time to time i.e. decrease or increase the workforce of his job.
d) The Contractor shall decide the mode and manner of work to be done by his workmen. The Contractor shall exclusively supervise and control the work of all workmen engaged by him.
e) The Contractor shall decide the working conditions of his workmen and shall decide about their salary and other service conditions and payment thereof.
f) The Contractor also will decide and take disciplinary action against the workman if he is found to have committed any acts of misconducts and take disciplinary action as deemed necessary including discharge or dismissal after compliance with the labour law. He shall also decide about the retrenchment etc.
g) The Contractor shall pay wages to his workmen on or before 7th of every month
h) The Contractor shall comply with the following acts or any other Labour Laws:
1.Employees’ State Insurance Act;
2.Provident Fund Act;
3.The Minimum Wages Act;
4.The Factories Act;
5.The Payment of Wages Act;
6.Maternity Benefit Act;
7.Contract Labour (Regulation & Abolition) Act, 1970.
8 .Any other labour law.
i) In case Contractor contravenes any provisions of the law, and the Company suffers any damage or loss or harm due to any acts of commission or omission of the Contractor, the Contractor is bound to indemnify the Company. The Contractor shall also be responsible for the discharge of all legal liabilities towards the Company and also for observing all laws and Government rules relating to labour laws.
j) The Contractor shall be responsible for damage or loss to the Company caused due to the negligence of the workmen employed by him and shall be assessed and determined by the Company.
k) The Contractor shall submit the bills to the Company along with documents of performance of work as per contract and shall be paid on the basis of those documents.
l) The Contractor shall not disclose to any one regarding the information, formulae of the Company adversely affecting the interest of the Company.
m) The Contractor shall, at the expiry or the termination of the contract after completion of terms of extension, if any, hand over the vacant possession of the premises to the Company.
Rights and Obligations of the Company:
i) To provide the Contractor articles agreed to provide as mentioned in the agreement.
ii) To make the payment to the Contractor on the details given by him of the work done at the rate agreed upon on or before.__________
iii) To deduct the amount from the bills of the Contractor proportionately to the defective job/work/performance.
iv) To check up whether the Contractor has paid salary to his workmen and also have made payment in respect of provident fund, ESI or any other statutory dues.
V) The Company will have right to deduct Income tax or TDS as applicable from time to time.
This Contract of Agreement comes into force with effect from__________ and shall remain in force for a period of 11 months i.e. till ___________ . However,, this Contract of Agreement shall be liable to be terminated at the expiry of the terms of the contract and in event it is to be extended, it shall be done by mutual consent in writing.
Notwithstanding anything contained herein above, this Contract of Agreement can be terminated earlier than the period agreed upon by giving one month’s notice to the Contractor without assigning any reason therefore and without prejudice to the rights of the Company to recover any money becoming due under this Contract of Agreement.
In case of any dispute/grievance arising out of under this Contract of Agreement, the same shall be mutually discussed and settled, failing which it shall be referred to arbitration of a Single Arbitrator under the provisions of Conciliation and Arbitration Act and the venue of arbitration shall be at _____________ and Arbitrator’s decision shall be final and binding on both the parties.
The Contractor has accepted and agreed and herein confirms that he shall abide and is willing to execute the work assigned to him in accordance with the terms and conditions of this Contract of Agreement and in turn the Company also agrees to engage the Contractor with effect from _______________.
SIGNED AND DELIVERED )
For and on behalf of ) ____________.
In the presence of ) ____________
SIGNED AND DELIVERED )
For and on behalf of ) ____________.
In the presence of ) ____________
Guidelines for the Employer in respect of genuine contractor.
1. An employee of the Company should not be made as a contractor. be an independent contractor. As far as possible, the preference should be given to a contractor, who has got the contract in similar concern of the same type.
2. If the contractor has similar type of contract in different concerns, then he should try to transfer the employees from one establishment to another establishment. Hence the contract employees should be transferable. This is a with a view that the contractor should not employ the contract workmen in the same establishment for not more than a certain stipulated period.
3. The contractor shall select and appoint the workmen without any interference of the Company. The supervision and control on the workmen of contractor will be solely by the Contractor. Hence the Company will not have supervision and control over the contractor’s workmen.
4.If the contract workmen are large in number, the contractor should engage a supervisors and/or supervisors for supervising, directing and controlling the work of his employees.
5.The contractor shall determine the mode, method and manner of working. The Company shall not interfere in regard to the same.
6.The contractor shall employ the workforce according to his requirement but he shall not in any case exceed the number of workmen shown in the license or do any other work what is not given in the license.
7.Similarly Employer shall register itself under the Contract Labour (Regulation & Abolition ) Act, 1970
8. The Contractor shall submit monthly printed bill to the Company for payment of the work done by him 1st day of following month and the printed bill should be signed under the Rubber Stamp.
9. The Employer has to ensure that the Contractor is paying the workmen minimum wages and the payment to them is made on or before 7th of every month in presence of the representatives of the Company who shall also sign on the master/register.(Rule 21 of CLRA)
10. The Contractor shall deduct the income tax as per income tax act or any other law applicable from time to time from payment made to his workmen
11. The Contractor shall pay his own taxes as per provisions of statutory acts.
12. The Contract shall be given for the job to be done and rates of job shall be paid to contractor as per mutual agreed basis.
13. The Company shall ensure while making payment to the contractor that the contractor has paid the employees’ provident fund and ESI contributions deduction both of employees and the contractor on time (along with copy of challan paid).
14. The Company shall check up that the Contractors renews his license from time to time.
15. The Contractor shall decide about the disciplinary action to be taken against his employees in case of any acts of misconducts committed by his employees.
16. The Company shall see that if possible the Contractor has obtained separate code numbers of Employees State Insurance and Employees Provident Fund under the respective Acts.
17. It is preferable that the contractors have their own ESI/PF Codes. However, in the absence of contractors having ESI/PF codes, merely because the principal employer remits ESI/PF contributions in respect of contract labour, it cannot be construed that they are employers of principal employer.
18. The Contractors shall maintain necessary records such as identify card, attendance register and other statutory registers through his staff and not by the staff of the company.
19. The Contract workmen shall do the specific work of the contract and not any other work of the Company.
20. Contract Labourers are not to be employed for doing perennial and permanent nature of jobs of the Company.
21. Contract Labourers should not be employed for doing any main activity of the Company.
22. Employer should ensure that he should not engage contract labour on the same operations on which he is employing his own directly recruited labour, otherwise the contract labour can claim the same wages on par with regular workmen (Suppose in 1 machine, 4 are direct workmen, and 2 are contract labourers, the 2 contract labourers could claim the same wages drawn by regular workmen.
Rule 25 (V) (a) of CLRA Rules:-
“ In cases where the workman employed by the contractor perform the same or similar kind of work as the as the workmen directly employed by the principal employer of the establishment, the wages rates, holidays, hours of work and other conditions of service of the workmen of the contractor shall be the same as applicable to the workmen directly employed by the principal employer of the establishment on the same or similar kind of work.”
23. Rotation of contract Labour from one establishment to another is preferable/ helpful to employers. Contract Labourers cannot say that they are directly recruited by Principal employer. The Contractor is himself transferring workmen from one establishment to another.
24. Have contractors/ specify in contracts that contractor can take up work for other employers
a. It should not be a sham arrangement.
b. Economically viable;
c. No direct Supervision should be done.
d. Should not be at the cost of keeping own labour idle,
e. Jobs requiring high skills and not possessed by our own employees can be vendored out
1. No unreasonable restrictions can be placed on employers to manage business in best possible and economical manner. (inherent right)
2. While engaging Contract Labour through Contractors, there should be no exploitation of labour; fix minimum wages, comply with Statutory requirements.
3. Owing to our economy being exposed to global competition where MNC’s are competing; there should be least possible fetters on the freedom of employers to mange its business in the best possible manner.
Supreme Court in
Ghatge and Patil Concerns’ Employees’ Union
Ghatge and Patil (Transport) (P) Ltd.,
1968 I LLJ 566
A transport company made arrangements with its drivers who joined the service voluntarily and agreed to work on the vehicles on contract basis. The drivers did it voluntarily because the terms were more favourable than the terms of their previous employment. There is no bar in law to the introduction of this system. The present case is not analogous to the case of contract labour where employment of labour through a contractor or middleman put the labour at a disadvantage n collective bargaining and robbed labour of one of its main weapons in its armoury.
“A person must be considered free to so arrange his business that he avoids a regulatory law and its penal consequences which he has, without the arrangement, no proper means of obeying.”