Navigating Labor Licenses: Who Handles It When A is the Contractor and B the Subcontractor?

We want to know about labor license input. If A is a contractor and B is a subcontractor of A, then who is responsible to get a labor license under the Contract Labour Act?

If A is, what is the process? If B is, then what is the process? If both, then what is the process?

Hello friends,

Good evening. We want to know about labor license requirements. If A is a contractor and B is a subcontractor of A, then who is responsible for obtaining the labor license under the Contract Labor Act?

If A is the contractor, what is the process?
If B is the subcontractor, what is the process?
If both are involved, what is the process?

Thank you,
Hemant Kumar

Dear Hemant Kumar,

As per the CLRA Act, there is no subcontractor term; every subcontractor will be a direct contractor to the principal employer. In your case, being an immediate employer, you are liable to obtain a labor license. The principal employer is responsible for all statutory compliance.

Regards,

K S T Krishna Rao

Sir,

Thank you for your prompt response. I know more about who is responsible for maintaining records of registers under the Contract Labour Act of a subcontractor if A is obtaining a labor license. This is because A is the main contractor, and B works under A as a labor supplier at the project. In the following situation, if A has a labor license but B does not have a labor license, as you mentioned, B is registered with the EPFO scheme.

Dear Hemant,

There is no subcontract concept in CLRA, so you have to follow all the compliance through a registered contractor only. In your case, A is a registered contractor, and B is the subcontractor. All manpower should only be shown in A contractor, including all compliance.

Thank you.

Responsibility for Maintaining Registers and Records

As per CLRA, a contractor includes a subcontractor as well. Though the contractor is primarily responsible for maintaining relevant registers and records for contract workers, the principal employer will be held responsible to maintain them in case the contractor fails to do so. Therefore, it is incumbent on the principal employer to check and ensure that the contractor maintains them properly, pays the wages correctly, and it is better to obtain a certificate of compliance from the contractor every month.

Other views are welcome.

Regards, B. Saikumar HR & Labour Relations Consultant

Dear Hemant Kumar,

There is no such thing as a sub-contractor. The contractor obtained a labor license based on the form V issued by their principal employer. The entity you refer to as a sub-contractor is actually your sub-agency. The sub-contractor can also obtain a labor license if the principal employer issues form V, but ultimately, the contractor will be the responsible party.

Thank you.

Definition of a Contractor Under the Contract Labour Act

The definition of a contractor includes a subcontractor as per the Contract Labour (R & A) Act, 1970. Form V (now Form III in Central Govt) is issued to the subcontractor by the Principal Employer if the agreement between the main contractor and Principal Employer permits the main contractor to engage a subcontractor.

Specialized Tasks and Subcontractor Licensing

In big project work, some specialized tasks have to be assigned to specialist agencies, such as the construction of chimneys or electrical work. In that case, the Principal Employer can directly provide Form V to the subcontractor. The subcontractor can then obtain a license and is also responsible for maintaining all registers and records under the CL Act separately for their own employees.

Liability in Case of Violations

In case of any violation by the subcontractor, only the subcontractor is liable for action, and no responsibility can be transferred to the main contractor or Principal Employer except under Section 17 to 21(4), where the Principal Employer is also liable if the contractor fails to provide certain amenities or pay minimum wages.

Labor Suppliers in the Construction Industry

Labor suppliers in the construction industry cannot be considered subcontractors by statute. Therefore, the main contractor must maintain records of such workers provided by labor contractors, including contributions to PF and ESI.

Exactly, there is no subcontract word in CLRA. Every contractor working directly or indirectly has to obtain a labor license and hence be treated as a contractor of the Principal Employer only.

On the above subject, I require the following clarification.

We are in the construction stage and have been awarded the work. A contractor has subcontracted the work to 5 subcontractors, each with labor forces of 15, 10, 12, 18, and 13 workers respectively. Does a license need to be obtained? If so, who is responsible for obtaining the license?

Venkatesh.P

Mr. Venkatesh, it seems you are representing the Principal Employer. You have awarded a contract for construction to a contractor, and there is an agreement between your company and the contractor. The contractor has undertaken to produce the given result for you. If you have not allowed him to engage a subcontractor in your agreement, then the contractor has to obtain a license under the Contract Labour Act. The records of subcontractors have to be maintained by the main contractor as if the workers employed by the main contractor are ignoring the existence of the subcontractor.