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Sounder Rajan V (Advocate)     22 September 2011

Contract labour - industrial adjudication risks

Immediate concern on deploying Contract Labour

Dear All

The Gujarat High Court in the matter of Chemical vs Secretary decided on 26 April, 2011 by HONOURABLE MR.JUSTICE H.K.RATHOD on describing the possibilities of a Contract worker raising an Industrial Dispute before the Industrial Dispute has listed out the following contingencies:

In this connection, it will be necessary to note that even if contract labour is in vogue in a concern, employees employed by the contractor can validly raise the following contentions which may buttress their grievance that even though they are the direct employees of the principal employer, they have wrongly been treated as employees of the contractor who is not a real intermediary. Such types of disputes under the ID Act can legitimately be raised in the following cases which are mentioned by way of illustrations only without suggesting that they are exhaustive;

(1) when it is alleged that the employees were directly employed by the principal employer and subsequently contract system was introduced for the same activities resulting in snapping of relationship of employee-employer between the workmen on the one hand and the main employer on the other, thus, violating sec. 9A of the ID Act.

(2) When there is absence of proper registration of concerned principal employer under the Contract Labour Act.

(3) When there is absence of proper licensing of the concerned contractor who employs contract labour at a given point of time.

(4) Even though principal employer may be registered employer under the Act and the concerned contractor may be licensed contractor under the Act, his licence may not cover the activity which is carried on by the contract labour.

(5) Even though principal employer may be registered employer under the Contract Labour Act and the contractor may be having a valid license to employ contract labour, under the Contract Labour Act, for a given activity, still licence issued to him may not cover exact number of permissible employees employed by him meaning thereby member of permissible employees under the licence may be less than number of employees actually employed and qua such excess number of employees, protective umbrella of licence would not be available to the contractor so far as the activity covered by the licence is concerned.

(6) Even though principal employer may be registered employer and the contractor may be licensed contractor and the workmen employed by him might be covered by the permissible number of employees as recognised by the licence and even though such activities may be covered by licence, in fact and in substance, control including disciplinary control and supervision of the entire activity may be with the principal employer and the wages of the employees may in fact be coming out of coffers of the principal employer, and may be getting paid through the contractor who may operate as a mere conduit pipe. Such type of control, supervision and payments being outside the scope of sec. 10(2) read with secs. 20 and 21 of the Contract Labour Act would give rise to a legitimate contention that the principal employer is in fact and substance the real employer and the so called contract is an eye wash."

Employers need to note the above Industrial adjudication possibilities and steer clear of them.

With Regards

V.Sounder Rajan
VS Rajan Associates,
Advocates & Notaries & Legal Consultants
No.27, Ist Floor, Singapore Plaza,
No.164, Linghi Chetty Street,
Chennai - 600 001.
E-mail : rajanassociates@eth,net,
Off : 044-42620864, 044-65874684,
Mobile : 9840142164-9025792684.


 2 Replies

V. VASUDEVAN (LEGAL COUNSEL)     22 September 2011

Mr. Soundararajan. Thanks very much for this recent judgement and valuable information


Raja Das (Officer)     08 November 2011

Thank you Mr. Sounder Rajan for sharing such valuable information.....

Raja Das

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