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The Contract Labour (Regulation and Abolition) Act

The Contract Labour (Regulation and Abolition) Act has been enacted by the Indian Legislature in the year 1970. The act intends to prohibit the employment of contract labour in certain circumstances and to regulate the working conditions of contract labour during the employment. The Act attempts to provide basic facilities to the employees and ensure they do enjoy certain rights which are at par or equal to the benefits given directly to employees.
Written by:
Swati Shalini
Published on

Contract labour generally refers to “Workers employed by or through an intermediary on work of any establishment”. Such labour can be distinguished from the directly employed workers in terms of employer-employee relationship and the method of wage payment.

These contract labourers do not have any direct relationship with the principal employer. It has a different way of working unlike any other classes of labour like permanent, temporary, casual etc.

The contract labour system depends on triangular relationship between the Principal employers, the contractors including the subcontractors as middle man, and the labourers.

These labourers/workers are recruited by an outside agency or person and are supplied to the establishment or engaged on their work. Unlike direct labour, they neither feature on the muster roll of principal employers/establishments nor are they paid directly.

In India, the Contract Labour (Regulation and Abolition) Act 1970 was established as a Central law aimed at regulating the conditions under which contract labourer’s work and also provide for the gradual abolition of the contract labour system as and whenever possible.

The Act is also applicable to all establishments operating all over the country and both the Central and state governments are authorised to enforce the Act in their respective jurisdictions. The Act aims at minimization of the exploitation of the labour class; thereby improving the working conditions enjoyed by labourers employed on a contract basis.

Moreover, ensuring the welfare of the labour sector in the nation is the prime responsibility of the Central Government. For this reason, the Central Government has enacted various legislations aimed at securing the welfare of the labour class. However, the rights conferred to contract workers/labourers by way of the Constitution and various other state labour laws are not properly enforced.

Therefore, in order to secure the rights and address the welfare of contract labourers, the Central Government deemed it fit to pass the Contract Labour (Regulation and Abolition) Act, 1970.

Who is Contract labour?

Contract labourers form a large part of the total workforce in India. Most of these workers are engaged in seasonal or occasional employment as and when they are called for. The primary sectors that mainly function through contract labour are usually loading and unloading of goods and materials, catering including canteen services, civil and construction works, security services, electrical works, house-keeping work, computer maintenance etc.

Contract labourers are mainly recruited through the contractors who work as a link between the principal employers and the workers. However, over a period of time these contractors are indulging in large scale misuse and abuse of power. Workers are especially abused by being paid less wages than actually agreed upon, and they are even being forced into employment that is harmful to physical or mental health.

The term ‘contract labour’ under Contract Labour (Regulation and Abolition) Act, 1970 means a workman who is hired in or in connection with the work of an establishment by or through a contractor. It is pertinent to note that the word, ‘hire’, as used in the said Act has a significant connotation and it is not equivalent to the employee-employer relationship.

To which establishment does The Contract Labour (Regulation and Abolition) Act apply?

The act is applicable to every establishment in which twenty or more workmen are employed or were employed on any day of the preceding twelve months as contract labour. The Act is also applicable to all those contractors who employ twenty or more contract labourers in any establishment belonging to a primary employer.

Accordingly, any establishment that comes under the ambit of the Act should register itself as the principal employer by making an application to the registration officer who is appointed by the appropriate government. Further, it should be known that any establishment that does not register itself under the Act is barred from employing contract labour.

Also, all contractors who are engaged in recruiting and providing contract labour are supposed to obtain a license for the same. Such license has certain conditions such as hours of work, fixation of wages and provision of certain essential amenities etc. subject to which the contractor can recruit contract labourers.

It should be noted that the act will not be applicable to an establishment which performs an intermittent or casual nature of work and the Act is not applicable to establishments that work on a seasonal basis i.e. if work is performed for less than 120 days a year, it would amount to seasonal employment and such establishment need not be registered under the Act.


What is the definition of ‘Contractor’ under the Act?

The Act defines Contractor as a person who undertakes to produce a given result for the establishment, other than a mere supply of goods or articles of manufacture to such establishment, through contract labour or who supplies contract labour for any work of the establishment. 

In other words, Contractor is the person supplying contract labour to an establishment undertaking to produce a given result for it. It is noteworthy that subContractors or ‘piece wagers’ also qualify as Contractors who need to apply for the registration of the establishment and license.

Moreover, the definition of Contractor is given under Section 2 (1) (c) of The Contract Labour (Regulation and Abolition) Act, 1970.

Who is a ‘Principal Employer’?

A “principal employer” is a person who is responsible for the supervision and control of the establishment. In the case of a factory, such person would include the owner or occupier of the factory or a manager under the Factories Act, 1948. 

As per Section 2 (1) (g) of the Act, a principal employer would mean and include the head of any government or local authority; the ‘owner’ or ‘occupier’ or ‘manager’ of a factory (under the Factories Act, 1948); owner, agent or manager of a mine; or any person responsible for the supervision and control in an establishment. 

The obligations of a principal employer under the Contract Labour Act are that of vicarious liability on owners of establishments. The Contract Labour Act provides respite and recourse to contract labour from non-payment of wage by allowing them access to the principal employer in the occurrence of a default by the contractor.

What is the objective of the Contract Labour (Regulation and Abolition) Act?

The Objective of the Contract Labour (Regulation and Abolition) Act, 1970 is to prevent exploitation of contract labour and also to introduce better conditions of work. A workman is deemed to be employed as Contract Labour when he is hired in connection with the work of an establishment by or through a Contractor.

These Contract labourers are indirect employees. Contract Labour differs from Direct Labour in terms of employment relationship with the establishment and method of wage payment. Contract Labour, by and large is not borne on payroll nor is he paid directly. The Contract Workmen are hired, supervised and remunerated by the Contractor, who in turn, is remunerated by the Establishment hiring the services of the Contractor.

Another objective is to regulate the employment of contract labour and to bring them at par with directly employed labour with regard to the working conditions and other benefits and also to provide for abolition of contract labour in certain circumstances.

The other conditions given under the Act is to ensure healthy workplace environment, healthy working conditions, timely Payment of wages and payment of full wages. Section 16-19 of the Act cover basic facilities like canteen, rest rooms, first aid etc. to be provided to contract labourers.

However, Section 20 and 21 of the Act fixes the responsibility of the principal employer in case when these facilities are not provided by the contractor within the time prescribed thereof and also payment of wages. According to Section 21(3) of the Act, it shall be the duty of the contractor to ensure the disbursement of wages in the presence of the authorised representative of the principal employer.

What are the duties of the Principal Employer? 

It is the duty of the Principal Employer to provide the essential amenities like Canteen (above 100 contract labours), rest rooms, drinking water facilities and first aid facilities if the same is not provided by the Contractor (Sec 16 to 19).

The expenses incurred on amenities by the Principal employer may be recovered from the contractor either by deduction of any amount payable to the contractor under any contract or as a debt payable by the contractor (Section 20).

The Principal employer must ensure the disbursement of wages through Contractor within the expiry of prescribed period by nominating a representative.

If the Contractor fails to make payment or makes short payment then, the principal employer shall be liable to make payment of wages in full or the unpaid balance and recover the amount so paid from the Contractor either by deduction from any amount payable to the contractor under any contract or as a debt payable by the contractor. (Section 21).

There are some other duties of the Principal employer which are mentioned below:

  • To get the registration of the Establishment
  • To engage workers only through licensed contractors
  • To retrieve the expenses involved from the contractor through bills payable
  • Maintain a register of Contractors (Form XII)
  • To submit returns for each contractor within 15 days of start or completion of work (Form VIA)

What are the duties of a Contractor under the Act?

The following are the duties to be carried out by the contractor are explained below:

  • To get approval from the Employer
  • To obtain a License from the Licensing Authority
  • To submit the monthly printed bill to the firm for payment of the work done by him starting from the day of the month
  • To present the Name of the Inspector, Wages paid & abstract of the Act
  • To maintain Muster roll, Wages, Deductions, Overtime, Fines, Advance, Wage slips, Registers under Section 29 of the Act
  • To provide Welfare and Health facilities such as Canteens, if labour is above a hundred members restrooms has to be compulsorily provided and also drinking water, urinals, latrines, first aid under section 19 of the Act
  • To be responsible for the payment of wages before the 7th of each month under Section 21 of the Act
  • To disburse the salaries in the presence of the representative of the employer
  • To distribute employment cards to all the workers by three days of the start of work
  • To send the half early return in form xxiv after 30 days from the close of the half year, i.e. June and December

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