Contract Labour Act, 1970:- Application

Dear All,

Need a small clarifications on the implementation of Contract Labour rules in any company or contractor:-

As per act, 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 a contract labour.

b)-To every contractor who employs or employed on any day of the preceding twelve months two or more workers.......

Please clarify:-

Scenario-I:- we have small contractors working for us having less than 20 workers in establishment but in total we employ more than 20 contract employees from various agencies. Do contract labour act rules is applicable on those vendors also who are working with us with merely 5-6 employees?

Scenario-II:- We have 1 contractor who have 100 employees in total but in our establishment we have less than 20 workers. Do contract labour rules will be applicable on it?

Secenario-III :- We have 1 contractor who have 100 employees in total but suppose if principal employer employs less than 20 contract workers in total than contract labour rules is applicable on him?

Request you to please clarify the same.

Regards

Ranjeet

The law is in 2 parts.
For the principal employer, the law applies from the time he has 20 or more contract worker, irrespective of whom he takes them from. He has to register and follow the rules that applies to him
For the contractor, it applies from the time he as 20 or more workers irrespective of where he deploys them. He would be required to take a license for each location where he deploys the workers.
However, you also need to see the state rules. Most states ask for license only if the contractor has more than 20 employees at a particular location. So if the contractor has less than 20 in one factory, he does not need to take a license.

Dear Ranjeet,

You have desired to know the law position in three different situations relaing Contract Labour (Regulation & Abolition) Act,1970. Let me try to answer your query according to my wisdom.

Scenario-I:- we have small contractors working for us having less than 20 workers in establishment but in total we employ more than 20 contract employees from various agencies. Do contract labour act rules is applicable on those vendors also who are working with us with merely 5-6 employees?

Answer- You being the Principal empolyer and employing more than 20 workers in establishment, you need to register your establishment under the Act. Since the contractors employ less than 20 workers in your establishment, they need not take licence under the Act.



Scenario-II:- We have 1 contractor who have 100 employees in total but in our establishment we have less than 20 workers. Do contract labour rules will be applicable on it?

Answer- Since you have employed less than 20 contract workers in your establishment, the Act doesn't apply to you but if you have any other contractor and if the total no. of contract workers exceed 20 at any time, you will be covered under the Act.

Secenario-III :- We have 1 contractor who have 100 employees in total but suppose if principal employer employs less than 20 contract workers in total than contract labour rules is applicable on him?

Answer- You have repeated the same query as in Scenario-II.

I would like my seniors to correct me, if I am wrong.

BS Kalsi

Dear Mr.Ranjeet,

If your establishment is employing only direct employment and not employing any workers through contractor, then the Contract Labour Act does not apply. In case your establishment desire to engage the workers through contractors irrespective of any numbers of workers and any number of contractors, as a principal employer you have to register your establishment as required u/s 1 of Sec.7 of Contract Labour (R&A) Act, 1970 and there under rules. The application for registration of your establishment to be made in Form-I to the Registering Officer of the area in which the establishment sought to be registered located., along with prescribed fee and list of contractors along with details of proposed number of workers are to be engaged and period of contract. Once the R.C. is received and subsequent changes if any ie additions or deletions are to be intimated and get RC amended.

Now applicability of the Act, to principal employer, if total strength of all the contractors exceeds 20 or more then your establishment is covered under the Act as a Principal employer and bound to maintain the Register of Contractors in Form XII and required to send Annual Return in Form XXV on calendar year basis to the Registering authority.

Now the applicability of the Act to the contractors, if any contractors so engaged by you are employing 20 and more, then the act is applicable to the particular contractor and comply with the same. In such case the contractor also required to be registered and get certificate/license by paying prescribed fee and security deposit.

I think I have clarified your query.

Adoni Suguresh

Sr.Executive (Pers, Admin & Ind.Rels) Rtd

Labour Laws Consultant

Dear Adoni Suguresh,

I appreciate your mail and way of explanation in reference to the query in the Ranjit's thread. I am sorry I have little reservation in accepting your contention that " In case your establishment desire to engage the workers through contractors irrespective of any numbers of workers and any number of contractors, as a principal employer you have to register your establishment as required u/s 1 of Sec.7 of Contract Labour (R&A) Act, 1970 and there under rules."

In connection with the above, I would like to highlight Section 7 (1) of CL(R&A) Act,which stipulates that every principal employer of an establishment to which this Act applies shall, within such period as the appropriate government may, by notification in the Official Gazette, fix in this behalf with respect to establishment generally or with respect to any class of them, make an application to the registering officer in the prescribed manner for registration of the establishment. The important part of this Secion is 'TO WHICH THIS ACT APPLIES". The application of the Act is mentioned in Section1(4)(a) which says that 'It applies to every establishment in which twenty or more workmen are employed or were employed on any day of the preceding twelve montns as contract labour.

In view of the discussion,I am of the opinion that the Principal employer need to register his establishment under CL(R&A) Act only when he employs twenty or more workmen as contract labour.

The seniors are requested to give their views.

BS Kalsi

Dear Mr.Kalsi,
The contention of your opinion I agree with your opinion. But as a Principal Employer, before engaging the contract labour , his establishment should registered under the Act even though the strength of contractor workers is less than 20 and maintain the Register of Contractors in Form XII. The liabilities of Principal employer under the Act will be applicable when the strength is exceeds 20 and above. In any case the Registration is must..
Thanks and Regards
Adoni Suguresh

Respected Sh Keshav Korgaonkar Sir,

I am grateful to you for appreciating my mails from time to time, which constantly encourages and inspire me. I have received a mail from our reverend member Sh Adoni Suguresh which is produced as under:-

"The contention of your opinion I agree with your opinion. But as a Principal Employer, before engaging the contract labour , his establishment should registered under the Act even though the strength of contractor workers is less than 20 and maintain the Register of Contractors in Form XII. The liabilities of Principal employer under the Act will be applicable when the strength is exceeds 20 and above. In any case the Registration is must.."

I hold my firm views that the Principal employer need to register his establishment under CL(R&A) Act only when he employs twenty or more workmen as contract labour. The question of maintenance of register shall only arise when the Principal employer register his establishment on consequence of employment of twenty or more workmen as contract labour.



As there is a diiference of opinion,I seek your expert opinon to have a clear conception and enrich my knowledge.

Regards,

BS Kalsi

Dear Mr Kalsi
You are correct and the provisions of the Contract Labour (Regulation and Abolition) Act 1970 as per Section 4 (a) will be applicable only if twenty or more workmen are employed as contract labour in your establishment. You need not apply for Certificate of Registration till such time the overall strength of contract labour from various Contractors - including AMC and others reaches 20 or more.
Regards
N Nataraajhan, Sakthi Management Services (HP : + 91 94835 17402 ; e-mail : [Login to view])

Sir(s),

1. I personally feels that the views as expressed by Mr. Kalsi as above are more in accordance with the provisions of CLRA particularly section 4(a) (b) of said Act. However, this is also supported from the provisions contained in Rules 26 & 32 of CLR Central Rules, 1971 which lays down the rates of Fee payable for grant of registeration of principal employer and Grant of Temporary Certificate of Registeration and Licence. In both these rules, the rates are prescribed for 20 or more workmen. Had there been any requirement for registeration under CLRA with having less than 20 contract labour, then the said rules may have prescribed in a separate manner.

2. Though I have no practical experience in registeration procedure under CLRA, but after going through the provisions of said Act, in my opinion, the coverage/uncoverage of principal employer or contractor will be as follows in following situations:-

(a) In case where the establishment is employing any number of direct workmen, say 100 and no contract labour, no registeration under above Act is required(because there are no contract labour at all);

(b) In case, where the establishment is employing say 85 direct employees, and 15 contract labour (total 100), neither registeration by principal employer, not licence by Contractor under above Act is required (because the number of contract labour are less than 20);

(c) In case, where the establishment is employing say 50 direct employees and 50 contract labour (total 100) and the said 50 contract labour are engaged by 3 separate contractors- A contractor employing 30 contract labour, B & C contractors employing 10 each contract labour. Then in this case principal employer is required to get registeration for 50 contractor labour and Contractor A is required to get licence for 30 contract labour under provisions of said Act & Rules. Contractors B & C are not required to get licence under said Act (because the number of employees engaged by them is less than 20 each).

(d) In case, where the establishment is employing say 50 direct employees and 50 contract labour (total 100) and the said 50 contract labour are engaged by 2 contractors -A & B, both employing 25 contract labour each, then in this case the principal employer will be required to get registeration for 50 contract employees and both contractors A & B will be required to get licence for 25 number of contract labour each.

3. I have cited the example of CLR (Central) Rules, 1971 above only for reference and discussion. The position may be different in Rules framed by the State appropriate Govts.

4. As mentioned by me above, I will also like seniors and experts like S/Sh. Korgaonkar ji & Madhu T.K.ji, who may have actually done registeration work under above Act and rules framed thereunder to kindly see the situations as mentioned above and express their valueable views so that the same may be helpful for us in having a balanced and legal view of the provisions of above Act and rules framed thereunder.

Dear Kalsi ji,
Thanks for referring to me.
I would appeal my friends to read section 1(4) which is given below verbatim:
Section 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 labor;
(b) to every contractor who employs or who employed on any day of the preceding twelve months twenty or more workmen.
It is mentioned clearly here that this Act is applicable:
1. to any establishment employing 20 or more contract labours; and
2. to any contractor employing 20 or more workers.
Under such circumstances, the statement - establishment should registered under the Act even though the strength of contractor workers is less than 20 is wrong and needs to be corrected.
Also the registering establishment is never before engaging contract labour.
Register of contractor is applicable when the Act is applicable to the establishment.
I Hope I have brought clarity in the subject matter.