Dear Mr Azim,
The CL(R&A) Act is to regulate the workmen engaged & where it felt necessary the appropriate government abolish the engagement of the workmen under contract. We need to know by whom, who & where these workmen are being engaged to give result. It is the Principal Employer who engages workmen all natures (regular &contract) as per his requirement. Thus principal gets his registration under the CL(R&A) Act for engagement of workmen under contract.
In the first instance the contractor is liable for make payments under different statutes and welfare of the workmen so engaged by the contractor. Consequent upon the failure by the contractor to discharge the liability under statute becomes the liability of the principal employer to discharge.
The principal employer liable for the payment of the gratuity if not discharged by the contractor. Gratuity, payable under the Payment of Gratuity Act, 1972, is a gratuitous payment required to be made by an employer to his employee at the time of termination of services of the employee or upon such employee’s death. Section 21 (4) of the Contract Labour (Regulation and Abolition) Act, 1970 (CLRA), mandates that a principal employer is responsible for the payment of ‘wages’ to a contract employee in the event of a contractor’s failure to pay within the stipulated timelines or in the event of a contractor making a short payment. The principal employer then has the ability to recover the amount paid as 'wages', from the contractor. Section 2(h) of the CLRA defines the term 'wages' as all remuneration (whether by salary, allowances or otherwise) expressed in terms of money or capable of being so expressed, which would if the terms of employment, expressed or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment and includes, among others, "(d) any sum which by reason of the termination of employment of the person employed is payable under any law, contract or instrument which provides for the payment. The citation to be followed as pronounced by the Hon’ble Madras High Court “wages” .". However, it excludes "(6) any gratuity payable on the termination of employees in cases other than those specified in (d)." The judgment below has now held that gratuity payable under the Payment of Gratuity Act, 1972 falls within this definition of 'wages'. Superintending Engineer, Mettur Thermal Power Station, Mettur vs. Appellate Authority, Joint Commissioner of Labour, Coimbatore & Anr, 2012 LLR 1160.
The CLRA Act, as stated in the preamble, regulates the employment of contract labour in certain establishments and provides for its abolition in certain circumstances and for the matters connected therewith.
The Act contains provisions to be complied with by the principal employer and the contractor. The implementation of the provisions in normal circumstances and de-hors the Act may, evidence factors in support of or militating against, an employer-employee relationship between the principal employer or a contractor on the one hand and the worker on the other.
However, if the provisions are implemented merely by virtue of the provisions of the CLRA Act, absent anything else, they would not be relevant factors in determining an employer-employee relationship.
The liability of the principal employer to make payment to the worker on the failure of the contractor to do so, would not by itself bring about a contract of employment between the worker and the principal employer. Nor would such payment by the principal employer even be a factor to be considered in determining the existence of a contract of employment between the worker and the principal employer.
Upon the failure of a contractor to make payment, the liability of the principal employer by itself, would be a factor to be considered against the principal employer. This was not even the purpose of the CLRA Act, which is not concerned with the determination of the genuineness or otherwise of the contract between the contractor and the principal employer.
All the above are the opinion of the Honourable Apex Court. It is needless to discuss matter further, everyone is free to go by the line of their understanding.