Query On Lay Off & Retrenchment Compensation For Contract Workers

Hi All,

Please suggest on the following:

1. Our company has issued a job contract to a contractor for a certain volume spread over a fixed period, say one year. The contractor has engaged labor at our premises for the completion of the same.

2. Due to a lack of orders, we, the principal employer, asked the contractor to stop work for one month. The contractor restricted labor entrance citing the reason of non-availability of site clearance.

3. In view of that, contract workers' unions are demanding layoff compensation as they were available during the period, but the contractor failed to provide work. On the other hand, the contractor is rigid not to pay wages for one month, citing the reason of "No work, No pay." In this case, isn't the contractor required to pay layoff to his workers?

4. Further, in a different case, whether a contractor who has engaged labor for six months (less than 240 days) is liable to pay retrenchment compensation to the workers after completion of the work?

Regards,
SDG

In this case, two issues are involved. First, the lay off of contract labor. As far as the Principal employer is concerned, his responsibility ends when the notice of stoppage of engagement (of workers) is given to the contractor. It will be a civil litigation between the Principal Employer and the Contractor if the agreement between them has no such termination clause, and it will not form part of an industrial dispute. When the contractor is asked to stop engaging workmen, he is expected to comply. Retaining his workforce or providing alternative employment to them during this period is solely the contractor's responsibility, and in that regard, the Principal employer has no liability.

If the contractor decides to declare a layoff, he is liable to pay layoff compensation of 50% pay and cannot escape this responsibility. Simultaneously, if the contractor employs fewer than 50 employees, Chapter VA of the Industrial Disputes Act will not apply. However, following the decision in Workmen Vs Firestone Tyre & Rubber Co [1976(1)LLJ493 SC], the contractor will have to pay full wages during the period in which work could not be provided to the employees. In either scenario, the Principal employer is not liable to take over the layoff wages of the contractors' workers.

When the work for which the workmen are engaged is completed, the relationship ends automatically. This does not constitute the closing down of the establishment within Section 25FFA of the ID Act. While describing the compensation payable in the case of the closing down of an undertaking in Section 25FFF, subclause 2 states that in cases where an undertaking is set up for the construction of buildings, bridges, etc., and is closed down within two years of its establishment due to the completion of work, no compensation is payable to the workmen. However, if the work for which the undertaking was established is closed down due to completion after two years of its commencement, then the workers will receive compensation and notice as provided in Section 25F. Therefore, the period within which the work is completed is also relevant in determining the retrenchment compensation.

Regards,

Madhu.T.K