The Contract Labour (Regulations and Abolition) Act, 1970 and Rules.
A contractor employs a contract laborer, whether or not acknowledged by the main employer, to work in a company for a specified duration. These laborers, who are indirectly employed workers, typically receive compensation through daily wages or a monthly aggregate. The contractor is responsible for recruiting, supervising, and compensating them.
The practice of contract labor has long prevailed in India, both pre- and post-independence. Numerous commissions, committees, and even the Ministry of Labour have extensively scrutinized the working conditions of contract laborers.
Research indicates that contract laborers frequently endure poor economic conditions and face job insecurity due to the casual nature of their employment. Moreover, employers and contractors historically exploited them in the absence of regulations. Consequently, to combat this issue, the government enacted the Contract Labour (Regulation and Abolition) Act, 1970, which came into effect on February 10, 1971. This Act aims to regulate contract labor employment and safeguard them from exploitation nationwide.
The primary goals and scope of the Act include:
- Preventing the exploitation of contract labourers
- Ensuring adequate working conditions
- Establishing rules and regulations for registering establishments that employ contract labour
- Outlining requirements and procedures for licensing contracts
Who is covered by the Act?
The Act will be applicable to establishments meeting the following criteria:
– Any establishment where 50 or more workers are employed or were engaged as contract labour during any day within the last 12 months.
– Any contractor who employs or has employed 50 or more workers as contract labour on any day within the preceding 12 months.
Establishment to which the Act does not apply.
The Act excludes establishments engaged in casual or intermittent work, as well as seasonal work lasting less than 60 days. Intermittent work refers to activities performed for fewer than 120 days in the preceding 12 months.
Main Definitions.
Principle Employer
The Principal Employer encompasses various roles, including the head of any government or local authority, the proprietor or occupant, or the Manager of a factory as per the Factories Act. Additionally, it includes the Owner, Agent, or Manager of a mine, or any individual accountable for supervising and controlling the establishment.
Contractor
The term “contractor” pertains to any individual who provides contract labour for tasks at an establishment, which may also encompass subcontractors. Contractors falling under the Act’s purview are required to obtain a license as mandated by the Act.
Establishment and composition of the Advisory Boards.
The Contract Labour (Regulation and Abolition) Act, 1970 mandates the formation of central and state Advisory Boards. These Boards are tasked with advising the central and state governments, respectively, on issues related to the Act’s administration and performing functions designated by the Act.
The Central Advisory Board
The Central Government establishes the Central Advisory Board, which includes representatives from various sectors such as government, railways, coal industry, mining, contractors, workers, and other relevant sectors as determined by the government. Additionally, the Central Government may appoint eleven to seventeen members to the Advisory Board. Moreover, the number of members from the workers’ side must not be fewer than those representing the principal employer and contractors. The Board also includes a chairman appointed by the Central Government and the Chief Labour Commissioner.
The State Advisory Board.
The State Advisory Board is established by the respective State Governments and comprises a chairman appointed by the government. Additionally, in the absence of the Labour Commissioner of that State, the State Government will designate another officer to serve on the Board.
In addition to these individuals, the State government has the authority to appoint nine to eleven members representing various sectors, such as government, industry, contractors, workers, and other sectors chosen by the State government.
Furthermore, the number of members representing workers must not be fewer than those representing the principal employer and contractors. Additionally, both the central and State Advisory Boards are empowered to establish committees as deemed necessary under the Act. Moreover, these committees will fulfill their duties and responsibilities in accordance with the provisions of the Act.
Registration of Establishment hiring contract labour.
Every establishment intending to employ contract labour must acquire a registration certificate from the appropriate government authority. Additionally, the registration process involves submitting Form No. 1 along with the prescribed registration fee receipt to the Registration Authority. Furthermore, upon thoroughly examining and verifying the application, the Registering Authority may register the establishment and issue a registration certificate in Form II. This certificate will also include essential details such as the establishment’s name and address, the maximum number of contract workers to be hired, the nature of the business, and any other relevant particulars.
The Responsibilities of the Employer.
The employer must adhere to the following duties:
- Registering the establishment.
- Employing contract labour exclusively through licensed contractors.
- Posting a notice in both English and the local language, displaying the name and address of the Inspector, along with wage details and payment dates.
- Ensuring that the contractor pays wages according to government-set standards or, in the absence of such standards, provides fair wages, as determined by the Commissioner of Labour.
Licensing of Contractors.
Any contractor intending to engage in work using contract labour must obtain a license from the Licensing Authority. This requirement applies to contractors who employ fifty or more workers on any day of the month.
The Procedure for obtaining a License.
The license is issued under Sec.12 of the Act by the licensing authority.
Contractors must submit an official request and application form to the Licensing Authority.
A security deposit must be deposited along with the application.
Conditions such as working hours, wage fixation, and amenities for contract labour are specified in the license.
The application form should include details about the establishment’s location, nature of work, and other relevant information.
The license remains valid for the specified period and can be renewed periodically by paying the relevant fee.
Provide the following facilities:
When employing 100 or more workers for a period of at least six months, establishments must provide a canteen for contract labour.
Separate urinals for men and women must be adequately provided.
Amenities such as drinking water, washing facilities, first aid, and a crèche are to be provided.
Various registers and records must be maintained appropriately.
A separate register of Contractors in Form XII should be maintained.
Annual returns must be filed to the licensing authority by February 15th of each year.
Responsibilities of the Contractor.
The contractor must seek approval from the Principal Employer.
Obtaining a license from the Licensing Authority is mandatory.
Monthly bills for payment to contract labour must be raised.
Maintenance of all relevant registers such as Muster Roll, Wage register, etc., is required.
Wages must be paid on or before the 7th of each month.
Wages should be disbursed in the presence of the employer’s representative.
Employment cards must be distributed to all workers three days before work commences.
Half-year returns in Form XXIV must be filed within 30 days from the close of each half-year period, i.e., June and December.
Penalties.
Individuals who breach any provision of the Act or its associated rules may face imprisonment for up to three months, a fine of One Thousand rupees, or both. Moreover, in cases of persistent violation, authorities may impose an additional fine of one hundred rupees per day for each day of contravention.
Shortcomings in the Act that need change.
The Contract Labour (Regulation and Abolition) Act, 1970 exhibits various shortcomings that require legislative attention to enhance implementation effectiveness.
The Act fails to distinguish between core and peripheral activities, resulting in poor enforcement.
The Act applies to establishments with 50 or more contract labourers, enabling establishments and contractors to evade responsibility by hiring fewer than 50 labourers.
Establishments exploit loopholes by obtaining licenses under different names; adopting a unified system for registration issuance and appointing a licensing authority in each state can address this issue
Principal employers often opt to pay penalties rather than comply with Act provisions due to inadequate penal provisions.
Extending education schemes to contract labourers is imperative, considering their predominantly unskilled, illiterate, and uninformed status regarding their rights.
The Act’s lack of direct or independent provisions for filing claims necessitates submitting them under the Payment of Wages Act or Minimum Wages Act, highlighting the need for their inclusion within the Act itself.
Conclusion.
The central government introduced the Contract Labour (Regulation and Abolition) Act, 1970 to safeguard contract labourers from exploitation by employers and contractors. The Act grants them specific rights and legal recourse to claim their rightful dues. However, legislative measures are essential to address existing deficiencies and enhance the provisions. Additionally, simplifying the Act for principal employers and contractors is imperative, along with incorporating provisions for improved safeguards and amenities for contract labourers.
With extensive experience in managing payroll and ensuring compliance with statutory regulations, Serve HR has successfully supported clients in meeting their contract labour needs. We proficiently address all aspects related to contract labour employment, and establishments have benefited from our expertise in this area. Our advanced cloud-based e-compliance portal simplifies these processes, providing organizations easy access to relevant information whenever needed.
Please note: –
Registration forms and number of employees differs from state to state.