LEGAL POSITION ON ENGAGEMENT OF CONTRACT LABOUR & CURRENT
SCENARIO OF IR & IMPACT OF ID ACT S.Ravindran Partner,
T.S.Gopalan & Co., Advocates & Notary Public
Slide 2
Whatever the merits of the system in primitive times, it is now
desirable, if the management is to discharge completely the complex
responsibility laid upon it by law and by equity, that the Manager
should have full control over the selection, hours of work and
payment of the workers. OBSERVATION OF ROYAL COMMISSION ON
LABOUR
Slide 3
LEGAL POSITION BEFORE THE ADVENT OF CLRA ACT
Slide 4
1960 STANDARD VACCUUM REFINING CO. OF INDIA LTD (1960 (2) LLJ
233 @ 238 [SC]) Cleaning of the Refinery was carried out by
engagement of contract labour. Tribunal directed the Company to
engage regular workmen for this work and in doing so, it was to
give preference to the workmen employed by Contractor. Wage scale
and other benefits for these workmen were left to the Company to be
determined by it.
Slide 5
1968 GHATGE AND PATIL CONCERNS EMPLOYEES UNION Vs. GHATGE
TRANSPORT PVT LTD (1968 (1) LLJ 566 [SC]) The Management terminated
the services of all its drivers. Later they were engaged as
independent contractors to drive the company vehicle. The Supreme
Court ruled that a person must be considered free to so arrange his
business and he avoids a regulatory law and its penal consequences
which he has, without the arrangement, no proper means of obeying.
This he is entitled to do so long as he does not break any law.
There is no law which compels an employer to engage only direct
workmen for attending to all work connected with the establishment.
It is not sinister for any entrepreneur to strive to carry on any
operation in the most economical manner by availing the service of
the labour at minimum cost.
Slide 6
1971 VEGITABLE OIL PVT LTD Vs. ITS WORKMEN (1971 (2) LLJ 567
[SC]) Engagement of contract labour in canteen was not questioned
by the union. Engagement of contract labour in godown and plant in
production work was abolished by order of the Court. Engagement of
contract labour in loading and unloading was upheld.
Slide 7
1978 HUSSAIN BHAI Vs. ALATH FACTORY (1978 (S) LLN 276 [SC]) The
contract workmen working in the factory of the principal employer
were using the material supplied by the management and finished
products were exclusively used by the principal employer for its
trade. HELD THAT Where a worker or group of workers labours to
produce goods or services and these goods or services are for the
business of another, that another, is in fact, the employer. He has
economic control over the workers subsistence, skill and continued
employment if he, for any reason, chokes off, the worker is,
virtually laid off. The presence of intermediatory contractors with
whom alone, the workers have immediate or direct relationship as
contractors is of no consequence when, of lifting veil or looking
at the conspectus of factors governing employment, we discern the
naked truth, though trapped in different perfect paper arrangement,
that the real employer is the management, not the immediate
contractor.
Slide 8
1978 HUSSAIN BHAI Vs. ALATH FACTORY (1978 (S) LLN 276 [SC])
FURTHER HELD THAT If the livelihood of workmen substantially
depends on labour rendered to produce goods and services for the
benefit and satisfactory of enterprise, the absence of direct
relationship or the presence of dubious intermediatories or the
make believe trappings of detachment from the management cannot
snap real life bond.
Slide 9
1970 CLRA Act came into force Act applies to establishment
employment 20 or more contract labour principal employer should
obtain certificate of registration Act applies to contractor
engaging 20 or more workmen contractor should obtain a
licence.
Slide 10
1970 CLRA Act came into force Abolition of contract labour in
any process, operation or any work in any establishment, Work is
incidental to manufacture; Work is perennial in nature; Work is
done ordinarily through regular workmen in the said establishment
or similar establishment; Work is sufficient to employ whole time
workmen.
Slide 11
RESPONSIBILITIES OF PRINCIPAL EMPLOYER TOWARDS CONTRACT LABOUR
To provide canteen if 100 or more contract labour are engaged To
provide rest room fortnight stay for contract labour To provide
clean drinking water To provide sufficient latrines/urinals
Slide 12
RESPONSIBILITIES OF PRINCIPAL EMPLOYER TOWARDS CONTRACT LABOUR
To provide First Aid facility To ensure payment of due wages To
ensure compliance of ESI Act, EPF Act, Payment of Gratuity Act and
any monetary liability under WC Act if establishment is not covered
under ESI Act. Contract workmens wages should not be less than the
minimum rate of wages fixed for the industry. If contract labour
performing same work performed by the employees of principal
employer, wages, hours of work and service condition should be the
same.
Slide 13
VIEW OF THE COURTS AFTER CLRA ACT
Slide 14
2001 STEEL AUTHORITY OF INDIA LTD Vs. NATIONAL UNION
WATERFRIEND WORKERS (2001 (2) LLJ 1087 [SC]) If Government
abolishes contract labour, it does not result in contract labour
automatically becoming employees of the principal employer.
However, contract labour should be preferred in case of direct
recruitment made by the principal employer in such abolished posts.
If the contract system is sham, the contract labour are to be
declared to be the employees of the principal employer.
Slide 15
2008 HINDALCO INDUSTRIES LTD (2008 (2) LLJ 697 [SC])
Ingredients of sham contract Same contract labour engaged for long
years, despite change of contractors Infrastructure provided by the
principal employer Wages of contract labour is reimbursed by the
principal employer Supervision and control of contract labour being
exercised by the principal employer Contractor is merely an
agent
Slide 16
2011 BHILWARA DUGDH UTPADAK SAHAKARI S LTD (2011 (4) LLJ 292
[SC]) Labour statutes were meant to protect the employees/workmen
because it was realized that the employers and the employees are
not on an equal bargaining position. Hence, protection of employees
was required so that they may not be exploited. However, this new
technique of subterfuge has been adopted by some employers in
recent years in order to deny the rights of the workmen under
various labour statutes by showing that the concerned workmen are
not their employees but are the employees/workmen of a contractor,
or that they are merely daily wage or short term or casual
employees when in fact they are doing the work of regular
employees.
Slide 17
PRESENT VIEW OF THE GOVERNEMNT The Labour Minister has observed
that huge difference in wages between regular and contract workmen
was leading to unrest. It is proposed to suitably amend the
Contract Labour Act in respect of the various issues.
Slide 18
CURRENT SCENARIO OF IR & IMPACT OF ID ACT
Slide 19
INTRODUCTION Industrial Disputes Act is a procedural
legislation for investigation and settlement of Industrial Disputes
It is an enactment providing machinery for redressal of grievance
of individual workman and body of workmen through conciliation
& adjudication It also safeguards the rights of the workmen and
protects the interest of the management in certain areas.
Slide 20
INDUSTRY Industry means any business, trade, undertaking,
manufacture or calling of employers and includes any calling,
service, employment, handicraft or industrial occupation or
avocation of workmen . However, as per the decision of the Supreme
Court where (a) systematic activities carried on, (b) to satisfy
the human needs and wants, (c) through employment of workmen, it is
an industry. The decision of the Supreme Court has given wider
interpretation than what is provided under the Industrial Disputes
Act. Therefore the Educational Institutions, Hospitals, Clubs,
Philanthropic Organisations, Research Institutions, etc., etc. are
all within the meaning of industries
Slide 21
Interestingly, in 1982, an amendment was brought to the
definition virtually accepting the above interpretation profounded
by the Supreme Court. But in the said amended definition,
agricultural operations, hospitals, educational institutions owned
by charitable organizations, domestic service, activities carried
out by co-operative society, clubs, activities carried out by
professionals were to be excluded from the definition of industry
Strangely till date the amendment is not notified and therefore the
Supreme Court decision hold good even today
Slide 22
WORKMAN The term workman under the ID Act has led to lot of
legal debate. The definition includes Apprentices, trainees,
casuals, temporaries, badlies, and probationers. Contract workmen
can also seek their absorption in the principal employers roll by
invoking the provisions of the ID Act. In the recent past, the most
important reason for industrial unrest, apart from non recognition
of genuine trade union, is the large number of workmen employed in
an establishment, consisting of non permanent workmen, namely,
casuals, temporaries, trainees, contract workmen, badlies, etc.
This type of workmen constitutes roughly about 75% of the enter
workforce in an establishment. Their services conditions are far
less favourable than the permanent workmen
Slide 23
TRADE UNION Trade union is the spokesman for body of workmen or
it is the collective agent representing their voices. Recognition
of trade unions is not codified so far in Tamil Nadu thus leaving
it to the pleasure of the management. However times are changing
and non recognition of the union which commands membership of
substantial percentage of workmen is one of the important reasons
for industrial unrest in the country. Trade Union movement in the
country date backs to pre independence period. Trade union has
strong presence in Industries like the textile, banking, insurance,
mines, steel, cement, sugar, etc
Slide 24
Is the trade union is a friend or a foe to the employer? This
is a debatable issue The trade union can be represented by an
outsider rendering advice to the workmen There can be more than one
trade union in an establishment Verification of membership of a
trade union is also a debatable issue namely whether it should be
through secret ballot or through check off system Multinationals
putting up industry in India has shown a distinct aversion to
formation of trade union in their establishment
Slide 25
Time has shown that it is not a desirable attitude. Refusal to
recognize genuine trade union movement has resulted in formation of
trade unions with a destructive motive. Recent instances of
violence in Maruti factory is a big eye opener for the entire
industry in the country, as its root cause was non recognition of
Trade Union for non permanent workmen
Slide 26
SETTLEMENT Body of workmen and the management can enter into a
settlement providing for wages and service conditions. Bipartite
settlement binds the management and the members of the trade union
which has signed the settlement. Tripartite settlement brought
about Conciliation Officer binds the entire workmen including the
future workmen in an establishment. Tripartite settlement is always
deemed to be fair and reasonable and that is why it even binds the
workmen or the union which is not party to the settlement. This is
an exception to general principle of enforcement of contract
between the parties. A settlement is always for a prescribed
period. However, after its expiry also it continues to govern the
parties until it is replaced by another settlement.
Slide 27
STRIKE The Industrial Disputes Act provides the workmen a
potent weapon in their armory namely right to strike. In the public
utility service, the workmen can go on strike only after giving 14
days notice. Immediately after issue of notice by the union,
conciliation proceedings is deemed to have commenced by the
Conciliation Officer. Here again during the pendency of the
conciliation proceedings, the workmen cannot go on strike.
Therefore the workmen of public utility service are not legally
permitted to go on strike. In other words, strike in the public
utility service is always illegal In a non public utility service,
there is no such stringent condition
Slide 28
LOCK OUT Lock out means temporary closing of a place of
employment by refusing to employ any number of persons. Lock out
should be preceded by 14 days notice in the case of public utility
service; otherwise the lock out would become illegal. Similarly
during the pendency of the Conciliation proceedings, declaration of
lock out would be illegal. However in the case of non public
utility services, there is no such stringency condition.
Irrespective of strength of the workmen there is no need to seek
permission from the Government to declare a lock out. Lock out is a
potent weapon in the armory of Management. It is anti thesis to
strike.
Slide 29
LAY OFF Lay Off means failure, refusal or inability of an
employer on account of shortage of coal, power or raw material or
accumulation of stock or breakdown of machinery or natural calamity
or for any other connected reasons to give employment to workmen In
the above circumstances, the employer can lay off its workmen if he
is running an establishment employing not less than 50 workmen by
paying 50% of his basic wages and DA during the period of lay off
However, an employer running an establishment in which not less
than 100 workmen are employed only after getting prior permission
from the Government lay off can be declared
Slide 30
RETRENCHMENT An employer can retrench the workmen for any
reason whatsoever but subject to condition such reason should be a
valid one. The workmen should be given one months notice indicating
the reasons for retrenchment (or notice pay in lieu thereof) and 15
days wages for each year of service completed by them. Here again
if an employer is having an establishment engaging not less than
100 workmen, only after getting prior permission from the
Government retrenchment can be enforced. Voluntary retirement,
retirement on reaching the age of superannuation, termination of
service at the end of contract period, termination due to continued
ill-health would not amount to retrenchment
Slide 31
CLOSURE Under the Act, closure of an industry or establishment
means permanent closing down place of employment or part thereof.
In case of an establishment employing not less than 50 workmen, 60
days notice should be given to the Government stating clearly the
reasons for the intended closure of the establishment. The workmen
who lose employment due to closure are entitled to compensation of
15 days wages for each completed year of service When an
establishment is closed due to unavoidable circumstances beyond the
control of the employer, the maximum compensation would not exceed
3 months average wage of the employee. However financial
difficulties, accumulation of stock or expiry of period of lease or
license would not amount to unavoidable circumstances
Slide 32
In an establishment wherein not less than 100 workmen are
employed, closure cannot be declared unilaterally. The employer
having such establishment should apply to the Government seeking
permission to close the industrial establishment. Only on such
permission being granted the employer can close the establishment.
The closure of an establishment should be genuine and real and not
a sham or bogus one. Workmen do not have right to question the
bonafides of the closure
Slide 33
POWERS OF THE LABOUR COURT In respect of individual workman,
Labour Court can set aside the said order of termination and grant
relief of reinstatement under certain circumstances including on
the ground of illegality and punishment being shocking
disproportionate to the misconduct committed by the workmen. In
respect of collective dispute the court can grant the workmen wages
for the period of lay off or lock out It can also grant increase in
salary and create better service conditions to the workmen, when
issues regarding Charter of Demands are referred for
adjudication.
Slide 34
UNFAIR LABOUR PRACTICE It has been codified under Schedule V of
the Act, restraining the employer from- 1.interfering with the
formation of trade union movement by the workmen and discouraging
employers sponsored trade unions 2.discharging workmen by way of
victimization by putting up false case, 3.conduct of the management
in breaking strike by engaging contract workmen, 4.indulging in
malafide transfer, 5.employing badlies, casuals, temporaries for
long years, etc.,
Slide 35
UNFAIR LABOUR PRACTICE The trade unions have been restrained
from- 1.indulging in illegal strike, 2.coercing workmen to join a
particular trade union, 3.indulging in go-slow, ghaero,
demonstrating at residence of the employer 4.causing damage of the
property of the employer and indulging in violence.
Slide 36
CONCLUSION Resolution of industrial disputes through collective
bargaining settlement is ideal as it puts finality to a dispute and
gives lasting peace in the industry The workmen are also satisfied
that they have bargained and succeeded in their demands and the
Management can look forward to lasting peace. It is a Win Win
situation for both. However, the resolution of the dispute through
judicial process never reaches finality, as it moves from one court
to another court and it leads one party to score victory over the
other
Slide 37
If the workmen lose faith in collective bargaining or
adjudication process, it would be disastrous for the industry as it
would result in violence by the workmen with a view to settle
scores and claim their rights. It is better for the employers to
settle their affairs with the workmen, without whom no industry or
a civilized country could progress. A contended workforce is an
invaluable asset to an organization.
