CONTRACT LABOUR IN INDIA

BACKGROUND

1. Contract Labour is a significant and growing form of employment. It is prevalent in almost all industries, in agriculture and allied operations and in service sector. It generally refers to workers engaged through an intermediary and is based on a triangular relationship between the user enterprises, the contractor (including the sub contractor) and the workers. These workers are millions in number and generally belong to the unorganised sector. They have very little bargaining power, have little or no social security and are often engaged in hazardous occupations endangering their health and safety. They are often denied minimum wages and have little or no security of employment. On the other hand, reasons like sporadic nature of work, difficulty in ensuring closer supervision by the employer or cost effectiveness, flexibility in manpower deployment, concentration in core competencies etc. justify the system of contract labour.

2. Recognising the need for protecting the interest of contract labour, the Contract Labour (Regulation and Abolition) Act, 1970 was brought on the Statute Book to regulate the employment of Contract Labour in certain establishments and to provide for its abolition in certain circumstances and for matters connected therewith.

3. The Contract Labour (Regulation and Abolition) Act, 1970 Act and the Contract Labour (Regulation and Abolition) Central Rules, 1971 came into force on 10.2.71. The Constitutional validity of the Act and the Central Rules was challenged before the Supreme Court in Gammon India Limited Vs. Union of India 1974-I-LLJ-480. The Supreme Court upheld the constitutional validity of the Act & Rules and held that there is no unreasonableness in the measure. The Act & Rules were enforced w.e.f. 21.03.1974.

PROVISIONS OF THE ACT & THE PRESENT STATUS

4. The Act applies to every establishment/contractor in which 20 or more workmen are employed or were employed on any day in the preceding 12 months as contract labour and to every contractor who employs or who employed on any day of the preceding 12 months, 20 or more workmen. It does not apply to establishments where the work performed is of intermittent or seasonal nature. An establishment wherein work is of intermittent and seasonal nature will be covered by the Act if the work performed is more than 120 days and 60 days in a year respectively. The Act also applies to establishments of the Government and local authorities as well.

Appropriate Government

5. The jurisdiction of the Central and State Government has been laid down by the definition of the ‘Appropriate Government” in Section 2(1)(a) of the Act, as amended in 1986. The Appropriate Government, in respect of an establishment under the Contract Labour (Regulation and Abolition) Act, 1970 is the same as that in the Industrial Disputes Act, 1947.

The Central and State Advisory Boards

6. The Central Government and State Governments are required to set up Central and State Advisory Contract Labour Boards to advise the respective Governments on matters arising out of the administration of the Act as are referred to them. The Boards are authorised to constitute Committees as deemed proper.

7. The Central Advisory Board- a tripartite Body was reconstituted on 24^th June 2002 and the non-official members hold office for a term of three years. The Chairman of the Board was appointed on 10^th June 2005 for a period of three years. Seventy-three meetings of the Central Advisory Contract Labour Board (CACLB) have been held so far. The last meeting was held on 2^nd June, 2008. The re-constitution of the CACLB as well as the nomination of the Chairman is under process.

8. The existing Central Advisory Contract Labour Board has held four meetings during 2007-2008 under report and considered various issues relating to abolition of contract labour system in certain establishments. The working of the Act was also reviewed in this meeting.

Registration

9. The establishments covered under the Act are required to be registered as principal employers with the appropriate authorities. Every contractor is required to obtain a licence and not to undertake or execute any work through contract labour, except under and in accordance with the licence issued in that behalf by the licensing officer. The licence granted is subject to conditions relating to hours of work, fixation of wages and other essential amenities in respect of contract as prescribed in the rules.

Facilities for Contract Labour

10. The Act has laid down certain amenities to be provided by the contractor to the contract labour for establishment of Canteens and rest rooms; arrangements for sufficient supply of wholesome drinking water, latrines and urinals, washing facilities and first aid facilities have been made obligatory. In case of failure on the part of the contractor to provide these facilities, the Principal Employer is liable to provide the same.

Payment of Wages

11. The contractor is required to pay wages and a duty is cast on him to ensure disbursement of wages in the presence of the authorised representative of the Principal Employer. In case of failure on the part of the contractor to pay wages either in part or in full, the Principal Employer is liable to pay the same. The contract labour who performs same or similar kind of work as regular workmen, will be entitled to the same wages and service conditions as regular workmen as per the Contract Labour (Regulation and Abolition) Central Rules, 1971.

Penal Provisions

12. For contravention of the provisions of the Act or any rules made thereunder, the punishment is imprisonment for a maximum term upto 3 months and a fine upto a maximum of Rs.1000/-.

Other Provisions

13. The Act makes provisions for the appointment of Inspecting staff, for maintenance of registers and records and making of Rules for carrying out the purpose of the Act. In the central sphere, officers of the Central Industrial Relation Machinery (CIRM) have been appointed as Inspectors.

Prohibition

14. Apart from the regulatory measures provided under the Act for the benefit of contract labour, the 'appropriate government' under section 10(1) of the Act is authorised, after consultation with the Central Board or State Board, as the case may be, to prohibit, by notification in the official gazette, employment of contract labour in any establishment in any process, operation or other work.

Sub-section (2) of Section 10 lays down sufficient guidelines for deciding upon the abolition of contract labour in any process, operation or other work in any establishment. The guidelines are mandatory in nature and are: -

- Conditions of work and benefits provided to the contract labour.

- Whether the work is of a perennial nature.

- Whether the work is incidental or necessary for the work of an establishment.

- Whether the work is sufficient to employ a considerable number of whole-time workmen.

- Whether the work is being done ordinarily through regular workman in that establishment or a similar establishment.

15. The Central Government on the recommendations of the Central Advisory Contract Labour Board, have prohibited employment of contract labour in various operations/ category of jobs in various establishments. So far 76 notifications have been issued since inception of the Act.

Exemption

16. The 'appropriate government' is empowered to grant exemption to any establishment or class of establishment or any class of contractors from applicability of the provisions of the Act or the rules made thereunder on such conditions and restrictions as may be prescribed. Fifteen notifications granting exemption to establishments in exercise of this power in the Central sphere have been issued.

Enforcement

17. In the Central sphere, the Central Industrial Relations Machinery (CIRM) has been entrusted with the responsibility of enforcing the provisions of the Act and the rules made thereunder, through Inspectors, Licensing Officers, Registering Officers and Appellate Authorities appointed under the Act.

18. Regular inspections are being conducted by the Field Officers of the CIRM and prosecutions are launched against the establishments, whenever violations of the Act/Rules/notifications prohibiting employment of contract labour are detected. In order to ensure compliance with the labour laws from time to time, instructions/directions have been issued to the field officers of CIRM and State Government for proper implementation of the Act.

19. A number of complaints alleging violation of contract labour Act especially the notifications prohibiting the employment of contract labour are being received. These complaints are being investigated and remedial action taken in accordance with the provisions of the law by launching prosecutions if considered necessary. References are received for regularisation of the contract labour or abolition of the contract labour system on the ground of perennial nature of work/ ordinarily done through regular workmen etc. Writ Petitions are also being filed by Union/Workers seeking absorption where the contract labour system has been abolished or pleading that the contract is sham. The requests for abolition of contract labour system are examined in consultation with the Central Advisory Contract Labour Board and notifications abolishing contract labour system in various establishments in different jobs have been issued. So far as the regularisation of the workers is concerned, no such provision, either express or implied, exists in the Act. This has also been affirmed by the Constitution Bench of the Supreme Court in the matter of Steel Authority of India Limited Versus Water Front Worker’s Union on 30^th August, 2001.

20. A statement indicating the number of inspections carried out, prosecutions launched, licences issued, establishments registered, and number of cases received during the last three years under rules 25(2)(v)(a)&(b) of the Contract Labour (R&A) Central Rules, 1971 relating to payment of wages is annexed (Annexure-I).

EMERGING ISSUES/PROBLEMS

21. In the context of globalisation, privatisation and liberalisation, in March 2000 a GOM was constituted to examine the proposal of the Ministry to suitably amend the provisions of the Act with a view to facilitating outsourcing of activities to specialized firms having professional experience and expertise in the relevant area and at the same time to provide for a safety net to contract labour in such outsourced activities. Such a measure, it was felt, would generate employment growth. The GOM held a series of meetings in the years 2000, 2001 and 2003. After in-depth deliberations on the issues involved it was agreed that certain activities which form support services of an establishment be excluded from the application of Section 10 of the existing Act, which provides for prohibition of employment of contract labour in certain circumstances. However, the same could not be finalized.

22. While the trade unions have demanded that the Act should be amended to provide for automatic absorption of contract labour in the event of prohibition of employment of contract labour, the employers organizations are vehemently opposed to it. According to them such a step would lead to capital-intensive measures like mechanization, automization, etc. and fall in employment. Their view is that the employers should be given flexibility to determine the composition of the workforce for the industry to survive in the competitive environment. Further, according to them, contract labour should not be abolished in non-core activities of an establishment and should be allowed to be parcelled out to specialized agencies, which have grown rapidly, for better time management, better operational efficiency and high percentage of consumer satisfaction.

23. Some of the State Governments, in tune with the changing times, have proposed measures to liberalise the Act to spur the growth of industry, as for example, grant of exemption to Special Economic Zones and Export Oriented Units from the applicability of the Act to boost exports. The Government of Andhra Pradesh have amended the Contract Labour Act with a view to prohibiting employment of contract labour in the core activities of an establishment and to allow engagement of contract labour in none-core activities of an establishment such as watch and ward, sanitation, cleaning works, etc. The Government of Goa has introduced a bill in the legislature to abolish contract labour in core activities of an establishment.

ISSUE FOR CONSIDERATION

24. In view of the diametrically opposite views held by the trade unions and the employers’ organizations, on the issue of absorption, and the present thinking of some State Governments, a view needs to be taken on amending the Act to facilitate outsourcing or prohibit employment of contract labour in core activities and to mandate automatic absorption of existing contract labour.

No discretionary relaxation of eligibility in appointments

Discretionary relaxation or alteration in requisite eligibility qualification, relating to appointments or admissions, cannot be allowed at the fag end of the process, the Delhi High Court has said.

"The general rule is that while applying for a post or admission a person must possess the eligibility qualification on the last date fixed unless there is an express provision to the contrary. There can be no relaxation in the matter of holding the requisite eligibility qualification by the date fixed," Justice Sunil Gaur observed.

The court's observation came in a verdict on the plea of Raghunath Prasad Saket, who was not only denied appointment to the post of lecturer in Economics in a Delhi University (DU) college but another candidate was preferred over him following the alteration in the eligibility criteria.

Justice Gaur noted that the DU and the University Grants Commission had taken the consistent stand that appointment of Madhavi Moni to the post by a committee of SatawatiCollege was irregular and violative of the rules.

According to the eligibility criteria for appointment as a lecturer, the candidate should possess a certificate of qualifying the National Eligibility Test (NET).

However, the criteria was changed at the time of appointment of Moni by the committee which recommended her name for the post on probation, giving her liberty to submit the certificate at a later stage.

Service tax exemption for specified goods

The Finance Ministry has now given service tax exemption on transportation of certain specified goods by rail or through inland water and coastal shipping.

The exemption has been given keeping in mind the common man, a Finance Ministry official said.

The Budget 2009-10 had imposed service tax on transport of goods by rail. Separately, it had also brought services provided in relation to transport of coastal goods and goods through inland water, including national waterways under the service tax net. All the Budget announcements on service tax came into effect from Tuesday.

In case of rail services, the Finance Ministry has now said that transport of defence/military equipment, railway equipment/materials, postal mail bags, luggage of train passengers, parcels (including newspapers/magazines), foodgrains, sugar, fertilisers, milk and milk products, fruits and vegetables and motor vehicles will not attract service tax.

Also, kerosene oil meant for supply through public distribution system, petroleum products including LPG cylinders booked by public sector oil marketing companies and transported by Indian Railways will now be service tax exempt.

For transport of goods through inland water and coastal shipping, the exempted items include edible oils, foodgrains, fruits, vegetables and flowers, tea and coffee, sugar, sugarcane, grocery, fertiliser, sarees, petroleum and petroleum products, raw jute and jute textile, hank yarn made from cotton, medicine and pharmaceutical products and newspapers and magazines.

“All essential items and those used by Government have been service tax exempt in the case of transportation of goods by rail or through inland water and coastal shipping,” Mr Pratik Jain, Executive Director, KPMG, told Business Line.

Meanwhile, for transport of goods by rail, the Finance Ministry has now specified an abatement rate of 70 per cent.

DEDUCTING TAX AT SOURCE FROM HOSPITAL BILLS MUST FOR TPAs

Third party administrators (TPAs) processing health insurance claims and making payments to hospitals for treatment of subscribers in cashless systems would soon have to deduct tax at source from the payments they make to hospitals. The apex direct tax body, Central Board of Direct Taxes, is likely to issue a directive to this effect, an income-tax department official told ET. The move would increase working capital requirement of hospitals-the TDS rate is a significant 10% of the billed amount and hospitals can claim a refund on these tax payments only when filing their annual tax returns. The additional capital requirement could push up the cost of healthcare for consumers. The move would place additional burdens on TPAs as well. The CBDT’s proposed move comes in the wake of a recent Bangalore High Court ruling that makes deduction of tax at source mandatory for TPAs. In 2008, tax authorities had carried out surveys on TPAs, raising a tax demand for the tax the CBDT expected them to deduct at source from hospitals under Section 194J of the IT Act. Under this section, providers of professional services have to deduct tax at source from their clients. TPAs had challenged these tax demands on the ground that they were making payments to hospitals on behalf of individuals (patients) and individuals are exempt from the requirement to deduct tax. The Bangalore High Court has upheld the tax authorities’ position. The big question is if TPAs will be required to carry out TDS with retrospective effect or prospectively. If the CBDT wants tax deducted at source retrospectively, it would mean prolonged wrangles between TPAs and hospitals, which are unlikely to readily cough up any tax payments for past periods for which they have already filed their tax returns And TPAs would have to pay penalty as well, and the combined burden could be in the range of Rs 50 crore-Rs 100 crore, if the circular is effective retrospectively. Usually, tax which is deducted by TPAs can be set off or adjusted by hospitals when they file their returns. But, receiving less payment upfront increases their working capital requirement. Any increase in working capital requirement has to be then made up by other means which could mean a cost for hospitals. Hospitals could then pass on the additional cost to consumers, thereby raising cost of healthcare in a country where only 2-3% of the population has a health cover. For tax authorities, TDS represents an efficient and non-intrusive way of collecting tax. According to an official with a TPA which has approached the CBDT on the issue, TPAs could not be brought under TDS as they were only making payments to hospitals on behalf of individuals and individuals were not under an obligation to deduct tax from payments to hospitals. Moreover, the official with the TPA, who did not wish to be identified, said tax authorities’ contention that these payments should come under those for professional services also did not hold as service rendered by hospitals were not treated as professional services under the present TDS regime.

Consumers to pay

Hospitals are unlikely to cough up tax payments for past periods for which they have already filed tax returns. TPAs will have to pay penalty as well, and the combined burden for all players could be Rs 50-100 crore per year. Usually, tax deducted by TPAs are set off by hospitals when they file their returns. But receiving lower amounts upfront could mean a cost for hospitals. Hospitals may then pass on the additional cost to consumers, thereby raising the cost of healthcare in a country where only 2-3 % of the population has a health cover. For tax authorities, TDS represents an efficient and non-intrusive way of collecting tax. According to an executive with a TPA, which has represented to the CBDT on the issue, TPAs could not be brought under TDS as they were only making payments to hospitals on behalf of individuals.

Importance Of Employment Contracts - Know Their Value

Importance Of Employment Contracts - Know Their Value

By Abhishek Agarwal

Anyone who works for an employer for a regular wage or salary automatically has a contract of employment, regardless of whether it is written or not. The majority of employees work under open-ended contracts of employment. In other words, the contract continues until such time as the employer or employee ends it.

Many other employees however, work under fixed-term or specified-purpose contracts which are contracts which end on a specified date or when a specific task is completed. The contract of employment will include some or all of the following elements (regardless of whether the employer and employee have specified them or not):

The terms that the courts say are in every contract of employment. Examples include the duty of every employer to provide a safe workplace and the duty of every employee to carry out the job to the best of his/her ability. This part of the contract is occasionally referred to as "common law".

Terms that must be part of the contract as a result of laws passed. Examples include the right to take maternity leave. Such terms are part of the contract of employment even if the employer and employee do not specifically include them and replace any agreement between the employer and employee not to apply the particular law. So, the statutory right to take maternity leave overrides any agreement between the employer and employee that the employee will not take maternity leave.

Terms and conditions states must be in every contract, for example, the right of an employee to join a trade union.

Collective agreements

Joint Labor Committee Regulations

In addition, custom and practice in a particular workplace may form part of a contract. An example would be a particular level of overtime pay for employees.

In the case of these items instead of giving each employee the details in writing, the employer may refer an employee to other documents, for example, a pension scheme booklet or a collective agreement, provided that the employee has easy access to such documents.

The statement of terms must indicate the reference period being used by the employer for the purposes of the calculation of the employee's entitlements under the Minimum Wage Act, 2000. (Under that Act the employer may calculate the employee's minimum wage entitlement over a reference period that is no less than one week and no greater than one month).

The statement of terms must also inform the employee that he/she has the right to ask the employer for a written statement of his/her average hourly rate of pay for any reference period (except the current reference period) in the 12 months prior to the date of the employee's request.

Note. Specific provisions in contract of employment

In recent times, some employers are adding in specific provisions in contract of employment that limit the ability of employees to work in a certain sector, with certain suppliers, clients, for a period following termination of employment. (For example, it may specifically state that the employee cannot work in a certain sector, with or for suppliers or clients of the former employer, etc.). There is nothing in employment law in that strictly forbids this, but there is no provision in employment law that allows this either.

Essentially, this is an issue of contract law - that is, the contract of employment signed and agreed between the employer and employee. If you have any concerns about this issue, you are strongly advised to seek legal advice from a competent legal professional in advance of signing this contract of employment. However, even if the contract of employment is signed, you are always free to seek such legal advice. Attorney fees can vary widely so shop around and obtain some quotes for legal advice before you proceed.

Note. Probationary period

The contract can include a probationary period and can allow for this period to be extended. The Unfair Dismissals Acts will not apply to the dismissal of an employee during a period at the beginning of employment when he/she is on probation or undergoing training provided that:

* the contract of employment is in writing

* the duration of probation or training is one year or less and is specified in the contract.

The above exclusion from the Acts will not apply if the dismissal results from trade union membership or activity, pregnancy related matters, or entitlements under the maternity protection, parental leave, adoptive leave and career's leave legislation.

Changes to your contract of employment.

Changes to your contract of employment can occur due to a change in the law, but otherwise, changes must be agreed between your employer and yourself. The requirement for both the employer's and the employee's consent to changes in the terms of the contract is part of contract law.

From the above information you will see that the contract of employment is a very important document to have. Whenever you get hired, ensure that your new employer offers you this kind of security. Be cautious of employers who don't give contract of employment.

PF attract for overtime wages?

QUESTION---"Whether this over time wages will attract PF Contribution for both employee and employer"

ANSWER --OT is not wages under EPF &MP Act,1952 ,so pf will not be deducted on OT.ESI contribution is payable on overtime wages but PF contribution is not.

Company secretary to replce labour inspector raj

Indian Express

Vikas Dhoot Tags

Wednesday, Aug 05, 2009 at 0322 hrs New Delhi:

While the Manmohan Singh government’s Left-free second innings is expected to usher in changes to India’s archaic labour laws, the labour ministry is working on a quick-fix solution to help drop the country’s notorious ‘inspector raj’ tag.

If all goes to plan, India Inc would no longer have to deal with labour inspectors turning up at their premises to check compliance with 43 central and myriad state labour legislations. Instead, firms can submit a certificate from a company secretary that validates their compliance with the numerous employment laws.

“Currently, inspectors go on-site to verify compliance with labour laws. We are talking to the Institute of Companies Secretaries of India (ICSI) to permit company secretaries to file compliance reports for labour laws, just like they give compliance reports for other laws. Officials can then selectively pick up firms for inspections. So, the inspector raj per se will go down dramatically,” Union labour secretary Sudha Pillai said. To entrust the responsibility of submitting labour law compliance reports to Companies Secretaries, the ministry is working out the amendments required to the relevant laws. “We have discussed the idea with the Cabinet Secretariat and the government is enthusiastic about it. A Cabinet note to this effect will be submitted very quickly and we hope to get it cleared soon,” she said.

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