Contract Labour (Regulation and Abolition) Act, 1970

Spirit of the act

History Objectives of the Act

Enacted to prevent exploitation of contract workers • Regulate employment of contract labour
Based on recommendations of the Planning Commission • Provide for abolition in certain cases
Influenced by Standard Vacuum Refining Company case of 1960 • Ensure payment of wages
judgment of the Supreme Court of India • Provide essential amenities
Abolish contract labour where possible; regulate where necessary • Protect rights of workers

Why Employers Prefer Contract Labour Issues:

• Lower cost and fewer legal liabilities • Low job security
• Greater workforce flexibility • Wage inequality
• Suitable for short-term or seasonal work • Weak bargaining power
 Key Definitions

Appropriate Government Contractor

Central Government: where it is the appropriate A person who undertakes to produce a given result
government under the Industrial Disputes Act, 1947 for an establishment through contract labour
State Government: for any other establishment situated Not a mere supplier of goods/articles
within the State. Includes a sub-contractor
Also includes a person who supplies contract labour
for any work of the establishment

Principal Employer Workman (Contract Labour)

In Government office/department : Head of the A workman is deemed to be contract labour when hired
office or specified officer through a contractor
In a factory : Owner or occupier May be hired with or without the knowledge of the principal
Where a manager is named under the Factories employer
Act, 1948, the named manager Works in or in connection with the establishment
 Responsibility for Payment of Wages
Contractor
Must pay at least minimum wages
Responsible for timely wage payment
Wages paid in presence of authorized representative of Principal Employer
Wage period not exceeding 1 month
Terminated worker: wages within 2 working days
Payment made directly to worker or authorized person

Principal Employer
Must nominate authorized representative during wage disbursement
Representative certifies wages paid
If contractor fails or makes short payment —
Principal Employer must pay full/unpaid wages
Amount recoverable from contractor (deduction or debt)
 Prohibition of Employment of Contract Labour
Power of Appropriate Government
May prohibit contract labour in any process/operation/work
Must consult Central/State Board
Notification issued in Official Gazette
Purpose of Section 10
Consultation is mandatory (Board role is advisory)
Final decision rests with Government Abolish contract labour where feasible
Otherwise regulate to ensure wages & amenities
Factors to Consider Before Prohibition Core test : Is contract labour necessary for the establishment?

Whether work is incidental/necessary to industry

Whether work is perennial (continuous nature)
Whether normally done by regular workers
Whether sufficient full-time workers are required

Decision of the Appropriate Government on perennial nature is final.

 Case Law – Sham Contract & Absorption of Contract Labour

Sham Contract Test Absorption After Prohibition

Workmen of Nilgiri Cooperative Marketing Society Ltd. v. State Steel Authority of India Ltd. v. National Union
of Tamil Nadu Waterfront Workers
(2004) 3 SCC 514 – Supreme Court of India) (2001) 7 SCC 1 – Supreme Court of India)

Tests to Identify Sham Contract:

Who is the appointing authority No automatic absorption of contract labour
Who pays wages (Paymaster) Absorption only if contract is proved sham
Who has the power to dismiss or take disciplinary action Otherwise, prohibition ≠ direct employment
Duration and continuity of service
Degree and extent of supervision & control
Nature of job – professional, skilled, or regular work
Nature and character of the establishment
Right to accept or reject the work performed

Conclusion:
If contractor is not genuine and principal employer is real
employer → Contract is sham.
 Forms under Old Act vs New Labour Code

OLD ACT NEW LABOUR CODE

Form 1 – Application for Registration Form 1 – Registration (Electronic)
Form 2 – Certificate of Registration Form 2 – Certificate of Registration(Electronic)
Form 4 – Application for Licence Form 13 – Unified Register (Workers, Wages, OT, Fine,
Form 5 – Certificate by Principal Employer Deductions)
Form A – Workmen Register Form 14 – Muster Roll (Electronic)
Form B – Wage Register Form 18 – Identity Card
Form C – Register of Deductions Form 23 – Unified Annual Return (Electronic)
Form D – Muster Roll Form 27 – Experience Certificate
Form 12 – Register of Contractors Form 28 – Common Licence (Electronic)
Form 14 – Employment Card
Half-Yearly Return
CAR – Consolidated Annual Return
 Section Provision as per Central act Responsibility Rule no. Required form as per Rules

Section 7 Registration of certain establishment Principal Employer Rule no.17 form 1(Application for Registration of Establishment). Form 2 Certificate of Registeration

Contractor; Principal Employer if

Section 12 Licensing of contractors Rule no. 21 and 22 Form 4(Application for Licence) and Form 5 (Certificate by Principal Employer)
contractor fails

One-Time Registration Documents

Note: The one-time registration documents need to be submitted in both hard & soft copies. The
hard copies must be duly signed & stamped.

1. Annexures

2· PF Registration

3· Work Order/Agreement/Purchase Order

4. Labor License (applicable if having 50 or more than 50 workmen)

5· GST Registration

6. WC Policy (With below-mentioned risk location):

Section 29 Registers and other records to be maintained Contractor; Rule no. 78 and 79

a. Swan Defence & Heavy Industries Limited (EOU Unit)

b. Swan Defence & Heavy Industries Limited (SEZ unit)

[Link] Registration (Applicable to civil work)

8. Partnership Deed or Memorandum

[Link] of one Partner or Director

10. Establishment PAN Card

[Link] Cheque of Establishment

[Link] Registration (Local: Rampara-2)

 Note: The monthly basis documents need to be submitted in both hard & soft copies. The
hard copies must be duly signed & stamped.

1. Form A (Workmen Register)

2. Form B (Register of Wage)(For Man Power supply monthly Payment of Bonus and leave
wages are mandatory)
Section 29 Registers and other records to be maintained Contractor; Rule no. 78 and 79

3· Form C (Register of Deduction (damage,loss),Fines and Advances with proof)

[Link] D (Attendance - Verified by department)

[Link] Statement with Bank Stamp (Paid on or before 7th of every month)

6. PF Challan (for this location)

7· PF ECR Copy

8· PF Paid Receipt (Paid on or before 15 of every month)

Registers and other records to be
Section 29 Contractor; Rule no. 78 and 79
maintained
9. PT Receipt(Local: Rampara-2 and Paid on or before 15th of every month)

Form 14 – Employment Card;

Form 11 : PF registeration
 Status of Compliance Compliance Gap Suggestions

Annexure 1: As per the Gujarat Rules, a crèche facility As SDHI is presently in the development and infrastructure-building
is required to be provided where 20 or more women stage, and until a dedicated facility is formally established, two rooms in
Not complied are employed as contract labour in an establishment. the Somnath Colony for SCS workers and two rooms in the Dwarka
Accordingly, two rooms are not provided as a crèche Colony for BCS workers may be temporarily designated and made
facility available as a crèche facility to ensure interim compliance.

[Link] is the appointing authority. The candidates are

identified and interviewd by SDHI and then their
registeration and onboarding is handed over to agency .
By understanding the process of contract labour management and
[Link] pays wages (Paymaster). Wages are calculated applying the Sham Contract Test laid down in Workmen of Nilgiri
completely by the SDHI and paid by the agency to the Cooperative Marketing Society Ltd. v. State of Tamil Nadu (2004) 3 SCC
workers. 514 decided by the Supreme Court of India, it is understood that SDHI
presently holds major responsibility in the management of contract
[Link] has the power to dismiss or take disciplinary labour, while the agency is handling only the administrative part. As the
action. Monitered by SDHI . ACTIONS taken by the
establishment is gradually building and processes are being streamlined,
agency
and since the CLMS portal is still under development, it is advisable that
[Link] and extent of supervision & control. The work once the portal becomes fully functional, the complete process of
is supervised by the particular department . The maintaining attendance, leave and overtime records should be handed
complied partially
attendence is marked by SDHI biometric and maintened over to the agency. This would help ensure that SDHI remains compliant
by the SDHI. Before handing over to Agency for both on paper and in actual practice. At present, the existing
payment through agency . arrangement is being followed beacuse to ensure proper monitoring and
to guarantee that every worker is fairly paid and treated, especially since
earlier external agency management had led to certain compliance gaps,
[Link] of job – professional, skilled, or regular work.
as understood through discussion with bharat sir . However, for ensuring
Skilled work
a more legally sound structure and to reduce the risk of being viewed as
the real employer under the sham contract principles,The maintainace of
[Link] and character of the establishment.
Attendence ,leave, overtime should be managed by agency in practice as
Manufacturing .
well.

[Link] to accept or reject the work Primarily done by

Concerned deptof SDHI where worker works but
comlied by the Agency.
THANKYOU !