Engaged contractor Non compliance of Contractual labor - To minimize the risk of future indemnity, what should I do to protect myself?

Hello, I am the principal employer of the contractual construction company working under me for the renovation of the building work inside the factory located in Gujarat.

My client never asked for such labor compliance. We are asking our contractor to secure ourselves from future complications. The duration of the project is about eight months with a workforce of 25-30 individuals.

The engaged contractor didn't comply with any labor laws during this period. To minimize the risk of future indemnity, what should I do to protect myself? Is there any affidavit or declaration from a contractor? As the project ended last month, kindly suggest a solution for this.

You should have ensured that the contractor who engages workers in your plant has ESI, PF registrations, and has obtained a license under the CLRA Act. The failure will be non-compliance on your part only. Having completed the project, you are responsible for the payment of contributions. It is true that workers engaged in a construction site are not covered by ESI. But when they are engaged in the construction or renovation of a building within the boundaries of a factory, they will come under the purview of the ESI Act. Similarly, the payments would attract PF also. It is defendable that these contributions are made only in respect of those who come under the scope of the respective Acts by means of wages drawn per month. When the matter is raised by the ESIC or EPFO, you will have to establish that the workers were hired on a salary above the threshold limits of Rs 21,000 for ESI and Rs 15,000 for EPF. Then you may be asked to produce the Workmen Compensation Policy in respect of these workers. If not covered, they should be covered under the Employees' Compensation Act. Above all, when you engage a contractor to supply or engage 20 or more workers, you should have registration under the CLRA Act. And since you have given the work to one contractor and he is engaging more than 20 workers at a time, he should have a license also. All these are non-compliances.

In respect of projects completed, the ESI will allow a one-time settlement by paying the required contribution of 4 percent of 60% of the cost of the project. There is no such settlement under EPF. But in the absence of inspection and the client being not at all worried about legal compliances, you can also keep silent. Still, when you take another project, please ensure that compliances would make you feel good even though it costs you a few amounts.

Dear Sir,

Thank you for your brief explanation. Is there a provision to secure my company from future damage? Can we make an agreement on stamp paper between the company and the contractor, declaring that all future damage or penalty would be borne by the contractor? Otherwise, are there any other alternatives to safeguard ourselves.

Past liabilities cannot be put on the contractor. For future projects, you can make a contract that is legally binding and will make the contractor solely responsible for contributions and payments due on his employees.

Moreover, it will be beneficial for you to obtain Form 13 of the CLRA Act from your contractor.