Is the principal employer liable to pay bonus of 8.33% to the contract labours engaged?

I have a specific question. If the principal employer is exempted from the application of the Payment of Bonus Act, 1965 i.e. under Sec. 20, is the principal employer liable to pay bonus of 8.33% to the contract labours engaged by it through contractors?

Dear Ashish,

For the purpose of statutory rights and obligations pertaining to contract labor in general, all the Acts applicable to the Principal Employer's establishment during the contract period are the sources of entitlement. If the PE's establishment, being a Public Sector establishment, is exempt under Sec. 20 or 32 of the PB Act, 1965, the PE need not pay any bonus to the contract labor employed during the exemption period. However, such contract labor still have the right to demand bonus from the Contractor.

Sir,

Thank you for the input. If the same can be substantiated by judgments, then the above will have a greater thrust.

The contractor is liable to pay a bonus, failing which it becomes the liability on the part of the Principal Employer to make such payment.

Nowhere in Section 20 of the Payment of Bonus Act, 1965, does it speak of any exemption of the principal employer.

Dear All,

Based on the definition of an Employee stipulated under the Payment of Bonus Act Section 2(13), which does not include Contract Labour. Please deliberate upon the Kerala High Court Judgment in the case of Cominco Binani Zinc Ltd. vs Pappachan on December 28, 1988.

Furthermore, the Apex Court in the matter of Food Corporation of India, 1985 II LLJ 4, has considered the relationship of the contractor Labour with the Principal Employer.

Regards

Dear Ajim,
Do not misinteprete the things on own understanding, ''Section 2(13) in The Payment of Bonus Act, 1965 (13) “employee” means any person (other than an apprentice) employed on a salary or wage not exceeding 10 [ten thousand rupees] per mensem in any industry to do any skilled or unskilled manual, supervisory, managerial, administrative, technical or clerical work for hire or reward, whether the terms of employment be express or implied; the defination is crystal clear the word used "employee'' to be understand as employee of the contractor and work for hire means contractual.
The FORM V issued by PE already given undertaking to the authority as per follwing;
(See Rule 21(2)
From of Certificate by Principal Employer
Certified that I have engaged the applicant (name of the contractor) as a contractor in my establishment. I undertake to be bound by all the provisions of the Contract Labour (Regulation and Abolition) Act, 1970, and the Contract Labour (Regulation and Abolition) Central Rules, 1971,in so far as the provisions are applicable to me in respect of the employment of Contract Labour by the applicant in my establishment.
Place Signature of Principal Employer

Dear "PRABHAT RANJAN MOHANTY",

With due respect to you and to your chair, I have not misinterpreted the things on my own understanding as alleged. I request you to spell my name correctly.

A specific question raised by Ashish: Is the principal employer liable to pay a bonus of 8.33% to the contract laborers engaged by it through contractors under Section 20 of the Payment of Bonus Act, 1965.

Kindly do not jump to baseless conclusions without applying the mind. I request you to go through the entire judgment laid down by the Kerala High Court in the case of Cominco Binani Zinc Ltd 1989 I LLJ 452, the Karnataka High Court in the case of Shachindra Kumar, Factory Manager, HUL, 2013 LLR 595, and the Apex Court in the matter of Food Corp of India, 1985 II LLJ 4, which has considered the relationship of the Contractor Labor with the Principal Employer.

After all, your word is not above the law as interpreted by the Honorable Courts of Law.

Regards,

Small correction in Mr. Prabhat Ranjan Mohanty's statement:
The Amended retrospective (01.04.2014)Payment of Bonus Act, 1965 (13) “employee” means any person (other than an apprentice) employed on a salary or wage not exceeding 10 [ten thousand rupees] per mensem to be read as not exceeding (Rs.21,000/- Twenty One Thousand Rupees).
Suresh

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.

Dear PRABHAT RANJAN MOHANTY,

The ratio of judgment analyzed by you is distinguishable, the opinion given therein by the Madras High Court, by Hon'ble Justice K. Chandru pertaining to Gratuity payable to the Contract Employee, The Superintending Eng. v/s Appellate Authority. And further stated by you, all the above are the opinion of the Hon'ble Apex Court is misleading as the opinion given by the Madras High Court and not by the Apex Court in the above matter.

The query raised in the forum by Ashish pertains to whether Bonus is payable to the Contractor Employer by PE. Please do not shirk your responsibility towards members of Cite HR by stating, "It is needless to discuss the matter further, everyone is free to go by the line of their understanding."

Regards,