Outside Workers Status in - Contract Labour (Regulation & Abolition) Act & the Indian Contract Act

Dear Patrons,

Greetings from Connect One Dynamic Synergies Private Limited.

Please find the following query addressed under the Contract Labour (Regulation & Abolition) Act and the Indian Contract Act, regarding a ticklish query as follows:

If the Principal employer has asked for 5 Contract workers for marketing/data collection job/collection of dues, will these 5 workers be considered under CLRA?

In the Contract Labour (Regulation & Abolition) Act, under the Workmen definition, it is found that work performed not on the premises of the establishment may be considered as exclusions of workmen. Please find the definition of Workmen below.

Worker definitions are as follows:

(i) "workman" means any person employed in or in connection with the work of any establishment to do any skilled, semi-skilled, or unskilled manual, supervisory, technical, or clerical work for hire or reward, whether the terms of employment are express or implied, but does not include any such person—

(A) who is employed mainly in a managerial or administrative capacity; or

(B) who, being employed in a supervisory capacity, draws wages exceeding five hundred rupees per mensem or exercises, either by the nature of the duties attached to the office or by reason of the powers vested in him, functions mainly of a managerial nature; or

(C) who is an out-worker, that is to say, a person to whom any articles or materials are given out by or on behalf of the principal employer to be made up, cleaned, washed, altered, ornamented, finished, repaired, adapted, or otherwise processed for sale for the purposes of the trade or business of the principal employer, and the process is to be carried out either in the home of the out-worker or in some other premises, not being premises under the control and management of the principal employer.

The question/query does not seem to be covered under the Contract Labour (Regulation & Abolition) Act, 1979. It is covered under the Indian Contract Act, 1872.

Under the aforesaid Act, Sec. 10 reads as follows:

What agreements are contracts. All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object and are not hereby expressly declared to be void.

However, first try to understand the difference between Contract of Service and Contract for Service. Then you can get the right answer.

Please be guided accordingly.

Thanks and Regards,
Connect One Compliance Team.

Why is he not covered by the CLRA Act? If he is engaged through a contractor, he will come under the purview of contract labor. Whether his engagement is legal or illegal is different, if he is under a third party rolls, he should be a contract worker.

It is true that he is working outside the boundaries of a factory, but that does not mean that he is an outworker. He is not working on any products and returning them to the company after completing or finishing them; instead, he is selling the products or collecting the dues. In order to be called an outworker, he should be working on the article that the principal employer has supplied, and he should be working from a place that has no connection with or control of the principal employer. Though there are differences of opinion about the concept of an outworker as defined, the same is a production work. Just because your collection boys or sales guys are 'working outside' the factory boundaries, how can they be called outworkers?

Regarding contracts under the Contract Act (the Act of 1872???), the two are totally different. The CLRA speaks about the engagement of employees through a contractor, and contract labor under it means an employee engaged through an outsider called a contractor. The Contract Act speaks about how a contract is made, like agreement, acceptance, consent, etc. That is the contract in the ordinary compliance and not from the employment angle.