Staffing and recruiting industry -legal updates

Dear All

CLRA Emerging Trends II


In continuation of the Summary Record of Discussion of the 44th Session of the Standing Labour Committee held on 17th October, 2011 at New Delhi under the Chairmanship of Shri Mallikarjun Kharge, Union Minister of Labour and Employment, Government of India. The national level tripartite meeting was attended by senior level functionaries of Central Trade Union Organizations, Employers‟ Organizations, State Governments and Central Ministries and Departments.This part has many important issues relevant to CLRA which were discussed.

Shri Sudarshan Sareen, Vice president, All India Manufacturers‟ Organization raised an important question regarding the permanency of workers in seasonal industries and pointed out the fact that it is difficult to make such workers permanent due to the seasonal nature of their occupation. Another issue addressed by him was the equal pay for regular and contract workers. In this context, he opined that the increase in quality of production would ultimately lead to increase in wages in case of some regular workers and such a situation would lead to discrepancy in the wages of both regular and contract labourers.

Shri Chandrashekhar Sahu, Labour Minister, Govt. of Chhattisgarh, in his address, highlighted efforts of the State Government to bring improvement in the conditions of contract labour. He informed the house that the state government has already started giving wages to the contract labourers through banking institutions. He further informed that approximately 60 percent of contract labourers in industry have started receiving their wages through banks and the government is planning to link the remaining 40 per cent workers with the banking system in near future. He further pointed out that Chhattisgarh government is also working towards registration of contract labour by issuing them with identity cards etc., where details of their nature of work and working hours would be mentioned.

Shri B. N. Bachegowda, Labour Minister, Govt. of Karnataka highlighted the following points:

(i) A circular has been issued to all Officers, Senior Labour Inspectors to implement the Contract Labour (regulation & Abolition) Act, 1970 and (Karnataka) Rules, 1974 in letter and spirit.

(ii) A notification has been issued specifying wage rates, holidays, hours of work and other conditions of service in case of workmen employed by a contractor and perform same or similar kind of work as the workmen directly employed by the principal employer.

(iii) Karnataka State Contract Labour Advisory Board has been constituted, and is functioning since 1991.

(iv) To make payments to contract workers through bank is an issue which needs amendment to above said Act/Rules.

..To be continued>>>

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: ,
Off : 044-42620864, 044-65874684,
Mobile : 9840142164

Patriotism is your conviction that this country is superior to all others because you were born in it.

George Bernard Shaw

Dear Friends

CLRA Changing Trends

In continuation of the Summary Record of Discussion of the 44th Session of the Standing Labour Committee held on 17th October, 2011 at New Delhi under the Chairmanship of Shri Mallikarjun Kharge, Union Minister of Labour and Employment, Government of India. The national level tripartite meeting was attended by senior level functionaries of Central Trade Union Organizations, Employers‟ Organizations, State Governments and Central Ministries and Departments.This part also has many important issues relevant to CLRA which were discussed.

The thrust for changes to Contract Labour Act, was discussed in the context of equal pay and other benefits to contract labour as given to direct regular employees.If implemented it will have a cascading effect on the Staffing Industry.The Principal Employers will chose not to entrust the work to Contractors.

Dr. Kavita Gupta, Principal Secretary, Govt. of Maharashtra stated that the State Government had taken necessary action regarding the payment of wages to the contract labours through cheques. She also pointed out that the state has introduced the Labour Management System.

Shri Mihir. R. Chandra, United Trades Union Congress while reflecting on the needs of the informal sector suggested steps to reduce the gap between training capacities and training needs, setting up of vocational training at school level and reemployment for retrenched employees. He mentioned that since the term “Rationalization of Labour Laws” is very vague, focus should be on the implementation of labour laws. Some of the other suggestions that he gave included equal pay and other benefits to contract labour as given to direct regular employees.

Shri Govind Rao Adik, General Secretary, National Front of Indian Trade Unions (DHN) stated that globalization has brought about many challenges for labour force and outsourcing has also impacted stable employment situation adversely. He expressed his concern over non- implementation of policy decisions taken in the 42nd and 43rd national Conference. Moreover, global downturn had resulted in job losses and he urged that subsequent steps should be taken by the government to provide job opportunities to people who have lost their jobs in the downturn. Inspite of innumerable laws made in the country, he reported, some laws are still not implemented. Therefore, he called for an urgent implementation of laws and policies pertaining to the benefit of workers

...To be continued>>>

With Regards

V.Sounder Rajan
Labour-HR and Consumer Law Consultant
No.27, Ist Floor, Singapore Plaza,
No.164, Linghi Chetty Street,
Chennai - 600 001.
E-mail: ,
Off : 044-42620864, 044-65874684,
Mobile : 9840142164


The talent for being happy is appreciating and liking what you have, instead of what you don't have.

Woody Allen

Dear All

We are concluding the Summary Record of Discussion of the 44th Session of the Standing Labour Committee held on 17th October, 2011 at New Delhi under the Chairmanship of Shri Mallikarjun Kharge, Union Minister of Labour and Employment, Government of India and its relevance to CLRA .

As already indicated the Summary Record of Discussion of the 44th Session of the Standing Labour Committee held on 17th October, 2011 at New Delhi the major stress has been on the need to overhaul the CLRA .

Shri Indranil Sengupta, Additional Secretary, Govt. of West Bengal emphasised the following points:-

(i) The evils of retrenchment, lock-out, wage-cut, evasion of statutory contribution and dues are continuing to affect the industrial relations. There is no universal coverage of social security in a fruitful and effective manner. Minimum wages and other essential terms of employment are violated more often than not.

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(iv) There is no single document declaring a Labour Policy of the Government of India. A labour Policy at the national level may set the right direction for bringing parity in approaches of the States as well as different stakeholders like Government, employers and the workers.

(v) There is a need for legal support to the workers.

(vi) National floor level Minimum wages should also be made enforceable as the bottomline throughout the country.

In his concluding remarks, Dr. Mrutyunjay Sarangi, Secretary, Ministry of Labour and Employment, congratulated the participants for their constructive suggestions in the area of skill development, employment generation, contract labour, minimum wages and other issues related to the world of work. He highlighted that the work of Ministry of Labour and Employment is vast in nature, which not only deals with the development aspects but also the regulatory aspects of the labour force. Finally, he stated that the success of various schemes of the Ministry depends heavily on the active participation of not only the social partners but also all the State Governments.

Shri Mallikarjun Kharge, Union Minister of Labour and Employment, in his concluding remarks congratulated all the delegates for their active participation and valuable suggestions. He mentioned that the views of the stakeholders play a very important role in the decision making of the Ministry and the inputs received from the speakers would definitely play a crucial role. He further stated that every year a sizeable number of workers gets added to the labour force and if the Government does not take the challenge of imparting relevant skills to them then the country might face a very difficult situation. Therefore, he reiterated that involvement of trade unions and public private partnership models will play a very crucial role. He also welcomed State Governments participation for effective implementation of various schemes. He further highlighted on sustainability of enterprises for achieving inclusive growth.

Shri Kharge informed the house that based on the general consensus, the three agenda items have been selected for discussion in the forthcoming 44th ILC are:

(i) Minimum Wages,
(ii) Social Security and
(iii) Employability and Employment.

On account of the positive indications given by the 44th Session of the Standing Labour Committee let all of us optimistically await the changes to the CLRA in 2012.


With Regards

V.Sounder Rajan

Advocate

 Dear All

Sub: EPF authority to refund Contribution to PE if contribution is paid by Contractor for the same Employee.

The Rajasthan High Court in the matter of D.C.M. Shriram Consolidated vs Regional Provident Fund decided on 29 July, 2003 had held that EPF authorities are liable to refund EPF Contribution when paid by the Principal Employer if contribution is paid by Contractor for the same Employee subject to the PE providing proof that they have deposited the contribution of the provident fund in respect of the employees who were working on contract with the establishment firm and the documentary evidence to establishment firm the deposit of the amount is provided .The operative part of the Judgment is as follows:

”......it is suffice to say that it is a matter of accounts for which it is always open to the establishment firm to bring the fact to the notice of the respondent-Commissioner. In case the respondent- Commissioner is satisfied on the basis of the record produced by the establishment firm that for the contractor employees the establishment firm is made liable for the payment of the contribution, the contractor is covered and paid contribution certainly he has no option except to refund that amount to that extent to the establishment firm. For this the establishment has to provide that the contractor was covered under the Act, 1952, he has deposited the contribution of the provident fund in respect of the employees who were working on contract with the establishment firm and the documentary evidence to establishment firm the deposit of the amount. In case the establishment firm has produced such material, before the respondent-Commissioner, he will consider the same and pass appropriate order.”

Therefore the corollary of the ruling can be applied that wherever/whenever the Contractor deposits the contribution for the Contract Employee then the necessity for the Principal Employer to deposit the contributions for the same Contract Employee may not arise.

But the  provision in the Act points out deposit of the Contribution by the PE and recovery from Contractor. Unfortunately there is no provision in the Act which says wherever there is deposit by the Contractor for the Contract worker the PE need not deposit.But the factum of coverage is a question of fact and appreciation by the Department.

With Regards

 V.Sounder Rajan

Advocate -Labour & HR Law Consultant -Chennai

 Mobile : 98401 42164.

Dear All

Section 9 C was introduced in the Industrial Disputes Act Industrial Disputes (Amendment) Act, 2010 (No. 24 of 2010) a Grievance Redressal Machinery has been introduced by insertion of Section 9 C. We are being inquired whether the Section 9 C comes into effect after issue of a Notification the Section 9 C comes into effect .

We find that the wordings used in Section 9 C is self operative as is seen below and a further Notification may become superfluous as the very provision is clear :

Setting up of Grievance Redressal Machinery

9C. (1) Every industrial establishment employing twenty or more workmen shall have one or more Grievance Redressal Committee for the resolution of disputes arising out of individual grievances.

(2) The Grievance Redressal Committee shall consist of equal number of members from the employer and the workmen.

(3) The chairperson of the Grievance Redressal Committee shall be selected from the employer and from among the workmen alternatively on rotation basis every year.

(4) The total number of members of the Grievance Redressal Committee shall not exceed more than six:
Provided that there shall be, as far as practicable one woman member if the Grievance Redressal Committee has two members and in case the number of members are more than two, the number of women members may be increased proportionately.

(5) Notwithstanding anything contained in this section, the setting up of Grievance Redressal Committee shall not affect the right of the workman to raise industrial dispute on the same matter under the provisions of this Act.

(6) The Grievance Redressal Committee may complete its proceedings within thirty days on receipt of a written application by or on behalf of the aggrieved party.

(7) The workman who is aggrieved of the decision of the Grievance Redressal Committee may prefer an appeal to the employer against the decision of Grievance Redressal Committee and the employer shall, within one month from the date of receipt of such appeal, dispose off the same and send a copy of his decision to the workman concerned.

Further Section 9 C has already been Notified.

rajanassociates

Subject: Need for Indian Labour Contract Law

Dear All

The topic ‘Does India require faster Labour Law Reforms ” is a much debated topic at every Global and Indian Contract Staffing Forum.

Recently in the October 2012 in the Annual conference of the Indian staffing Federation in their Indian Staffing Industry Research Paper 2012 the items where specific reforms are required has been outlined .In fact the need for adopting the The Private Employment Agency Convention of International Labour Organisation (Convention No. 181 of 1997) was raised in the same document. By adopting the The Private Employment Agency Convention of International Labour Organisation (Convention No. 181 of 1997) it will be a step forward in giving Statutory recognition to the Contract Staffing Industry .


Adapting and adopting Indian Laws to International Conventions has been an ongoing process .It is a simple legislative process .But adopting The Private Employment Agency Convention of International Labour Organisation (Convention No. 181 of 1997) will have serious resistance from the Trade Unions.

Everyone echoes that India should follow the China example in Economic reforms and the path of globalization .Then without waiting for the adoption of The Private Employment Agency Convention of International Labour Organisation (Convention No. 181 of 1997) we can just replicate the Labor Contract Law (LCL) which was enacted by the Chinese Parliament during 2008.The Chinese Political system modeled on the socialist pattern has enacted a Labor Contract Law (LCL) and adopting a similar one in India may not be difficult for the Government to convince the Trade Unions . The Trade Unions will support the move as it contains many pro-labour provisions and provides better bargaining strength for the Unions .

The further reason for the delay for India to implement the reforms in the Labour Law sphere is due to the fact that changes in Laws are to be brought about by the Centre for the Central acts and the respective State Governments for the State laws.This is a time consuming process. Before making any change the stake holders have to be consulted. It is a long drawn process .It would be better to start the process by enacting a similar law as done in China .For enacting this law the Contract Labour (Regulation & Abolition ) Act has to be either amended suitably or a New law enacted on the Chinese model .

Who can be the movers for enacting the Indian Labor Contract Law (ILCL).Definitely it will be the Business Associations and each of the Indian Staffing companies in India need to move the Government to enact a special law. The Association and Federations of Employers can take up this cause as they are the ultimate Principal Employers who will employ the Contract Labour.

To narrate the history when the Chinese Law was enacted the Chinese legislature during March 2006 launched the public consultation process for its draft Labor Contract Law. By April the legislators received 191,849 responses, a majority of them from workers. Meanwhile, foreign investors and commercial groups also studied the draft law and submitted their comments. The process included recommendations from the following bodies:

European Union Chamber of Commerce in China (EUCCC)
American Chamber of Commerce in Shanghai (ACCS)
U.S China Business Council

The first two largest foreign investors’ organizations in China and both of them submitted recommendations and opinion papers on the Draft Labour Contract Law to the Legal Affairs Committee of the Standing Committee of the National People's Congress.ACCS is said to represent over 1,300 corporations, including 150 Fortune 500 companies and the big names include Dell, Ford, General Electric, Microsoft and Nike. EUCCC in China represents more than 860 members. The U.S.-China Business Council represents 250 U.S. companies doing business across all sectors in China.

In India the Trade Unions have more stakes in Labour Law legislative process more than the Industry or its Association and Forum. Therefore the whole legislative process hinges on Trade Union acceptance /consent. The Association Federation would need invite the Top Trade Union Leaders of the Country for a dialogue on a Draft Labour Contract Law to be drafted by the Federation .This needs to be done on an emergent basis

Until the reforms are implemented Staffing business in India have to operate within the existing parameters of labour laws. The Business and legal team of every Staffing Company would need to tune operations to the existing provisions and help the business team to operate in an optimum manner within the prevalent labour law frame work without incurring additional cost till the reforms are implemented. This is where the success of any Staffing entity is.

With Regards

V.Sounder Rajan
Advocate -Labour & HR & Consumer Law Consultant -Chennai
Legal Consultant for Indian Staffing & Recruiting Industry

Dear Friends

We are starting this multi - part over view of Contract Staffing law in the light of judicial precedents and the Contract Labour (Abolition and Regulation Act 1970) sure it will be informative for the Indian Contract Staffing Industry players .

Many Staffing Industry players are not aware of the earliest Case Law in Outsourcing as decided by the Indian Supreme Court.

Earliest Apex Court decision on Out-sourcing-

Way back in 1968 the case law was laid down by the Hon’ble Supreme Court in the matter of GHATGE & PATIL CONCERN'S EMPLOYEES' UNION Vs. GHATGE & PATIL (TRANSPORTS) PRIVATE LTD. & ANR.It is a very interesting case .

The facts are like this:-

GHATGE & PATIL (TRANSPORTS) PRIVATE LTD the Company carried on the business of transport and removal of goods by road. It owned a fleet of trucks and employed drivers and cleaners to run them. In 1963, finding difficulty in observing the provisions of the Motor Transport Workers Act 1961 GHATGE & PATIL (TRANSPORTS) introduced a scheme whereby the trucks, instead of being run by the them were hired out to contractors at a fixed rate per mile. It is the first reported case of organized Out-sourcing in India.To aid the process of out-sourcing employees of the company who were engaged in running the trucks resigned their jobs and most of them who had been erst-while drivers became contractors under the scheme. This Out-sourcing move was resisted by the Union GHATGE & PATIL CONCERN'S EMPLOYEES' UNION.The Union raised a dispute asking for the reinstatement of the ex-employees who had been given work on contract basis. The matter was agitated in the Tribunal .The Tribunal held that the contract system could not be said to be an unfair labour practice, for the ex-employees were never coerced or forced to resign their jobs, and they got more benefits from the contract system than from their original contract of employment.

In appeal to the Apex Court the GHATGE & PATIL CONCERN'S EMPLOYEES' UNION contended that the ex-employees of the company continued to be workmen notwithstanding that they were posed as independent contractors and the beneficent legislation conceived in the interests of transport workers was being set at naught by the Management and that the setting up of the contract system amounted to unfair labour practice.

In our next part we will deal with the manner in which the Hon'ble Bench of the Apex Court steered the matter for a landmark resolution when the very word "out-sourcing" was unknown.

With Regards

V.Sounder Rajan
Advocate -Labour & HR & Consumer Law Consultant -Chennai
Legal Consultant for Indian Staffing & Recruiting Industry

“An investment in knowledge pays the best interest.” – Benjamin Franklin

Dear All

In this part, we are continuing with the first reported case of outsourcing in India in the matter of GHATGE & PATIL CONCERN'S EMPLOYEES' UNION Vs. GHATGE & PATIL (TRANSPORTS) PRIVATE LTD. & ANR and it has been decided by the Hon’ble Supreme Court of India way back in 1968.

The most striking portion of the Judgment which is an eye opener and a biblical pronouncement .If  an abridged version is provided  the  reader  will not get the impetus  of the actual words spoken by the Hon’ble Apex Court. Therefore, we extract the following relevant portion for your own comprehension:-

“ The apprehension of the Company is- that some of the regulatory provisions of the Act are incapable of being observed properly in the case of drivers and cleaners going on long journeys because there is no means of enforcing them. For example, the provisions about hours of work, hours of rest etc. are not easy to enforce enroute or at far off places. Therefore, rather than run the risk of losing the permit for want of compliance with the Motor Transport Workers Act, the Company has decided not to run transport trucks itself but to let them be run by independent hirers. There does not appear to be any bar in law to such action. Section 59 of the Motor Vehicles Act contemplates the transfer of permits with the permission of the Transport Authorities and this enables any person to whom a vehicle covered by the permit is transferred to get the right to use the vehicle in the manner authorized by the permit. Here the vehicle is not transferred but is only let out on hire and hence there is prima facie no need for permission. The Union made no attempt before us to establish that the inauguration of the contract system offended the Motor Vehicles Act or was prohibited under it. No objection to the system by the Authorities under the Motor Vehicles Act was proved in the case. The operators also seem to be happy because no operator appeared to complain and the only dissatisfaction has been registered by the Union, which apparently lost the allegiance of some of its former members and even office bearers. In view of the findings of the Tribunal, which we see no reason to disapprove, it must be held that the drivers voluntarily resigned and entered into the agreements since they apparently considered them to be more favourable than the terms of their former employment. In this view of the matter it is difficult to hold that the Tribunal was wrong in its conclusion that there was no ex- ploitation of the drivers. It is also equally true that there is no bar in law to the introduction of the system. The Union, however, contends that on the analogy of some cases of this Court in which contract labour was put down as unfair labour practice because it involved exploitation of labour, we should declare this system also to be harmful to the interests of labour. Contract labour was declared in this Court to be an unfair labour practice because the intention was to introduce a middle man to avoid observance of laws and to deny to labour the advantages it had acquired by bargaining or as a result of awards. Such is hardly the case here. The two systems were there for the drivers to choose. It is reasonable to think that the drivers must have chosen a system which was considered by them to be more beneficial to themselves. There was no compulsion for the drivers to resign their jobs and they did so voluntarily obviously thinking that the new system was more profitable to them. We cannot lose sight of the fact that some of the office-bearers of the Union were among the first to resign. Many of the drivers resigned the jobs and entered into agreements even after the dispute was taken up by the Union. The present case is, therefore, not analogous to the case of  contract labour where employment of labour through a contractor or middleman put the labour at a disadvantage in collective bargaining and thus robbed labour of an important weapon in its armoury.

The matter of dispute no doubt referred in the second part to ex-drivers but it referred generally to the new system in the first. The Tribunal was wrong in thinking that the first part also referred to the ex-drivers (now operators). On the whole, however, it is clear that the Company has not done anything illegal. A person must be considered free to so arrange his business that he avoids a regulatory law and its penal consequences which he has, without the arrangement, no proper means of obeying. This, of course, he can do only so long as he does not break that or any other law. The Company has declared before us that it is quite prepared, if it was not already doing so, to apply and observe the provisions of the Motor Transport Workers Act in respect of its employees proper where such provisions can be made applicable. In view of this declaration we see no reason to interfere, because Parliament has not chosen to say that transport trucks will be run only through paid employees and not independent operators. The appeal fails but in the circumstances of the case we make no order as to costs.

In our next part in a nut-shell  we will deal with questions that arose for consideration in the above case and the decision rendered .

With Regards

V.Sounder Rajan
Advocate -Labour & HR & Consumer Law Consultant -Chennai
Legal Consultant for Indian Staffing & Recruiting Industry

Dear All

In our earlier part we had captured the verbatim operative portion of the land mark Judgment of the Bench of Hon’ble Justices Mr HIDAYATULLAH, Mr M. BHARGAVA, Mr VASHISHTHA in the matter of GHATGE & PATIL CONCERN\'S EMPLOYEES\' UNION Vs. GHATGE & PATIL (TRANSPORTS) PRIVATE LTD. & ANR which is the first recorded case on outsourcing .In continuation of our earlier part we capture the following questions which arose for consideration in the case by the Hon’ble Court and the gist of the decision :

1) Whether an Independent contractor can be considered to be the workers of the Undertaking?

For this the Hon’ble Apex Court held that on account of the drivers resigning their jobs it cannot be concluded that they are employed in the Motor Transport Undertaking. If one sees the definition of word ‘employed’ term worker is used in the padagrim to keep the person in an employer’s service. Substantially, the Apex Court concluded that the outsourced individuals are independent as they hired the vehicle of the company for their own operation for which the company pays them on the basis of fixed hire per mile.

2) Whether there was any prohibition in introduction of the Contract system ?

For this the Apex Court came to the conclusion that there was no bar in law to the introduction of the contract system. A person must be considered free to so arrange his business that he avoids a regulatory law and its penal consequences which he has without the arrangement, no proper means of obeying. This, of course, he can do only so long as he does not break that or any other law.

3) The last and important question is as to whether the new system is an Unfair Labour Practice.

The Apex Court categorically held there was no exploitation of ex-employees and should resign had done so voluntarily and they get substantial benefit under the new system.

In our opinion the laissez –faire approach of the Hon’ble Supreme Court as early as 1968 is sonorous in the following words:

…. “On the whole, however, it is clear that the Company has not done anything illegal. A person must be considered free to so arrange his business that he avoids a regulatory law and its penal consequences which he has, without the arrangement, no proper means of obeying. This, of course, he can do only so long as he does not break that or any other law.”……..

In our next part we will deal with the post 1968 scenario and the evolution of the first ever Contract Labour Law in India .

Overview of Indian Contract Staffing (Labour) Law –Part IV

In continuation of our Fourth Part it is noticed that somehow, the deployment of Contract Labour in India has been looked upon with an eye of distrust ,suspicion and a tool for exploitation of labour . Therefore, the abolition of the Contract Labour system had been under the consideration of the Government of India prior to 1970. In the second Five Year Plan, the Planning Commission had made certain recommendations to find out the problems of Contract Labour with progressive abolition of the system and wherever the abolition was not possible improvement of the service conditions of such Contract Labour. It must be borne in mind that the concept of “Welfare State” was edifice of the economic system until 1992 when the focus shifted to slow and steady Globalization. Under the concept of a Welfare State as enunciated in the Directive Principle of State Policy in the Constitution of India, it is the duty of the State to ensure a living wage and proper working conditions for the workers with full enjoyment of leisure ,social and cultural activities .Also it became the duty of the State to take steps to promote the participation of Labour in Management of Industrial Undertakings.

To trace the history prior to the enactment of the Contract Labour (Abolition and Regulation) Act 1970 leading to its enactment the following developments are note worthy:-

The 20th session of the Indian Labour Conference (1962) recommended legislative action to abolish the Contract labour system.

The Contract Labour (Regulations) Bill, 1964, was drafted and considered by the 22nd and 23rd sessions of the Standing Labour Committee (1964and 1965).

Keeping in view the opinions expressed by the interests concerned, the bill was suitably modified and was approved by the Cabinet on 22 June 1966.

The Bill was passed by Parliament on 19 August 1970 and received the assent of the President on 5 th September 1970

The preamble of the Act states that it was passed as an Act to regulate the employment of contract labour in certain establishments and to provide for its abolition in certain circumstances and for matters connected therewith.

From the preamble of the act, it can be gathered that the object of the act is twin-fold. One being to regulate employment of Contract Labour in certain Establishment and secondly to provide for its abolition under special circumstances. In short, the Act permitted the deployment of Contract Labour for causal, temporary, and intermittent jobs and at the same time regulate it and also empowered the Government to abolish such Contract Labour in a specified industry wherever it deems fit necessary by issue of a notification. Therefore, the act by itself is permissive, regulatory and a prohibitory all put in one piece of legislation. It is self balancing in nature and a remarkable piece of legislation which has worked well for nearly 43 years since .In our next part we will go through the salutary features of the Contract Labour (Abolition and Regulation) Act 1970.

With Regards

V.Sounder Rajan
Advocate -Labour & HR & Consumer Law Consultant -Chennai

In our previous part we had highlighted the surrounding reasons and the chronology of the events that took place leading to the passing of the Contract Labour (Abolition and Regulation) Act 1970.

Post 1968 ,the legal scenario had changed .When in 1970 the Contract Labour (Abolition & Regulation Act was passed by Parliament all Outsourcing activities can be brought within the realm of the Act .For example the definition of

(i) “workman” means, any person employed, in or in connection with the work of any establishment to do any skilled, semi-skilled or un-skilled manual, supervisory, technical or clerical work for hire or reward, whether the terms of employment be express or implied but does not include any such person – (A) who is employed mainly in a managerial or administrative capacity;

The definition is so wide that it will include any contract employee or Temp employed in connection with the work of any establishment to do any skilled, semi-skilled or un-skilled manual, supervisory, technical or clerical work for hire or reward.

Additionally the following explanatory definition is also included :

(b) a workman shall be deemed to be employed as "contract labour" in or in connection with the work-of:-an establishment when he is hired in or in connection with such work by or through a contractor, with or without the knowledge of the principal employer;

This is where the catch is .In case a Temp is employed as "contract labour" in or in connection with the work-of:-an establishment and when he is hired in or in connection with such work by or through a contractor, with or without the knowledge of the principal employer. Even it be termed as a Service Level Agreement where the PE will feign ignorance of the Temp the Temp will be reckoned as a Contract worker.

The other definitions are also wide:-

(c) “contractor”, in relation to an establishment, means 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 and includes a sub-contractor;

Again here too the definition is wide .Whatever name you may call the Agreement the term "Contractor "in relation to an establishment, means 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.

Similarly the definition of Principal Employer is also wide and linked to the head of that office or department :-

(g) “principal employer” means – (i) in relation to any office or department of the Government or a local authority, the head of that office or department or such other officer as the Government or the local authority, as the case may be, may specify in this behalf,

(ii) in a factory, the owner or occupier of the factory and where a person has been named as the manager of the factory under the Factories Act, 1948 (63 of 1948), the person so named,

(iii) in a mine, the owner or agent of the mine and where a person has been named as the manager of the mine, the person so named,

(iv) in any other establishment, any person responsible for the supervision and control of the establishment.

Since the PE is linked to the term “establishment” one needs to see its definition :-

(e) “establishment” means – (i) any office or department of the Government or a local authority, or

(ii) any place where any industry, trade, business, manufacture or occupation is carried on;


Strikingly the definition of "establishment " is also all inclusive and means any place where any industry, trade, business, manufacture or occupation is carried on.


In our next part we shall explain the most important provision of the Act being Section 10 which is the prohibition of Contract Labour.

With Regards

V.Sounder Rajan
Advocate -Labour & HR & Consumer Law Consultant -Chennai
Legal Consultant for Indian Staffing & Recruiting Industry

Sub: Inclusion of Arbitration Clause in Flexi Staffing and Recruiting Agreements.



Is your Credit Control Department facing the problem of chasing unpaid Invoices ?

The Flexi Staffing & Recruiting Industry is burdened with the problem of following up payments from Clients who do not pay or forget to pay Invoices.Of course this has become a perennial issue for the Flexi Staffing & Recruiting Industry.

An avid follower of our posts has posed the simple question.How do we get over this problem?

Well there needs to be a solution for this as the very reward for the effort which each and every Recruitment Professional puts in getting the Business of recruitment, searching a competent person , selecting the person and on-boarding for the Client on their perm rolls .For the Staffing Industry it will be the same process with the additional job of pay-rolling month after month . In the Staffing Industry it will involve funding for the Temps CTC.

Therefore settlement of invoice/s being the fruits of the labour will be taken away if these unpaid Invoices may become Bad debts .

Perhaps this problem cropping up could be on account of the absence of protective clauses in the Staffing & Recruiting Agreement. Maybe you need to have a re-look at your Standard Templates.

One of the solution for this is to include an Arbitration clause in terms of the Indian Arbitration and Conciliation Act 1996.This will help the Industry to have some hold on the Client in recovering the dues.Well this is a first step in the right direction.

By including an Arbitration Clause in every Template you are indirectly protecting the Invoice in its settlement by the process of recovery by way of legal action .

The next logical question posed by any Professional in the Flexi Staffing & Recruiting Industry is to specify its advantages.

They can be crystallized like this:

1. It a Method of Alternate Dispute Redressal without the intervention of Courts .

2. It is fast ,quick and time Bound.

3. When there is default settlement of Invoice/s the Staffing or Recruiting Industry Entity without incurring heavy costs of Court Fee in the Normal process of recovery just needs to invoke the Clause and start the process of pursuing the claim before the Arbitrator.

4. As an interim measure even pending appointment of the Arbitrator the Recruiting and Staffing Professional can seek the Arbitration Courts help by requesting the Court to issue a direction to the Non –paying Client to provide security for the unpaid Invoice/s pending the Arbitration proceedings. This will ultimately protect the recovery process of outstanding Invoices.

The Recruiting and Staffing Industry should make a beginning to include this Arbitration Clause in every Contract,Agreement,MOU or in their Offer and acceptance letters if the clause is already not there in their Template.

This is critical for Business and reduces the risk and will aid in timely collection and recovery of dues.Of course the pitfalls of Arbitration process also looms large but the advantages outnumber them.


With Regards

V.Sounder Rajan

Advocate -Labour & HR & Consumer Law Consultant -Chennai
Legal Consultant for Indian Staffing & Recruiting Industry
 

Sub: Inclusion of Arbitration Clause in Flexi Staffing and Recruiting Agreements.



Is  the  Credit Control Department of the Industry facing the problem of chasing unpaid Invoices ?

The Flexi Staffing & Recruiting Industry is burdened with the problem of following up payments from Clients who do not pay or forget to pay Invoices.Of course this has become a perennial issue for the Flexi Staffing & Recruiting Industry.

An avid follower of our posts has posed the simple question.How do we get over this problem?

Well there needs to be a solution for this as the very reward for the effort which each and every Recruitment Professional puts in getting the Business of recruitment, searching a competent person , selecting the person and on-boarding for the Client on their perm rolls .For the Staffing Industry it will be the same process with the additional job of pay-rolling month after month . In the Staffing Industry it will involve funding for the Temps CTC.

Therefore settlement of invoice/s being the fruits of the labour will be taken away if these unpaid Invoices may become Bad debts .

Perhaps this problem cropping up could be on account of the absence of protective clauses in the Staffing & Recruiting Agreement. Maybe you need to have a re-look at your Standard Templates.

One of the solution for this is to include an Arbitration clause in terms of the Indian Arbitration and Conciliation Act 1996.This will help the Industry to have some hold on the Client in recovering the dues.Well this is a first step in the right direction.

By including an Arbitration Clause in every Template you are indirectly protecting the Invoice in its settlement by the process of recovery by way of legal action .

The next logical question posed by any Professional in the Flexi Staffing & Recruiting Industry is to specify its advantages.

They can be crystallized like this:

1. It a Method of Alternate Dispute Redressal without the intervention of Courts .

2. It is fast ,quick and time Bound.

3. When there is default settlement of Invoice/s the Staffing or Recruiting Industry Entity without incurring heavy costs of Court Fee in the Normal process of recovery just needs to invoke the Clause and start the process of pursuing the claim before the Arbitrator.

4. As an interim measure even pending appointment of the Arbitrator the Recruiting and Staffing Professional can seek the Arbitration Courts help by requesting the Court to issue a direction to the Non –paying Client to provide security for the unpaid Invoice/s pending the Arbitration proceedings. This will ultimately protect the recovery process of outstanding Invoices.

The Recruiting and Staffing Industry should make a beginning to include this Arbitration Clause in every Contract,Agreement,MOU or in their Offer and acceptance letters if the clause is already not there in their Template.

This is critical for Business and reduces the risk and will aid in timely collection and recovery of dues.Of course the pitfalls of Arbitration process also looms large but the advantages outnumber them.


With Regards

V.Sounder Rajan

Advocate -Labour & HR & Consumer Law Consultant -Chennai
Legal Consultant for Indian Staffing & Recruiting Industry

Dear Staffing Industry Friends

This is the first part of the write up on the need to record " Contract Staff Misconduct."

Being part of the Temp Staffing Industry from December 2005 onwards and being a specialized pioneer for Legal Consultation to the Contract Staffing and Recruiting Industry players we have been noticing that many of the Staffing Industry  clients want to terminate Contract Staff on disciplinary and performance related issue/s.

For the Contract Staffing Company the relationship stems out of the Fixed Term Contract .

Many Staffing Professionals have initiated a debate on this issue, and we had many difficult questions from each of them.

We thought some innovation for this controversial topic is required as we find substance in many of the legitimate questions raised by the Staffing Professionals pan India .

The concept of Temporary Employment has to be understood by the Contract Staffing Professional. Being a Fixed Term Contract with a provision for Notice and Notice Pay the Staffing Professional has to understand that Misconduct or Performance related situation/s situations of the Contract Staff can be handled easily and either of the following can be done without referring to the Misconduct :-

(i) Issue a Notice of termination by simply providing the Notice Period;
(ii) Issue a Termination letter by providing Notice Pay without any hesitation.

But in all cases of misconduct or performance related situation the Clients i.e the Principal Employer will not agree either for Notice Period or Notice Pay. They will just tell : Fire this guy !

 Wherever the Client is considering termination of the Contract Staff on misconduct/ performance-related issue. The issue has to be viewed from two stand points:

(i) As per the conditions of Appointment letter
(ii) From the stand point of the shops and Establishments Act.

From the stand point of the Appointment letter Termination is possible only under the relevant clause provided in the Appointment letter .Such termination is a Termination simpliciter without attributing any performance on discipline related issue on the Contract Staff and this ensures a smooth exit for the Contract Staff as touching upon the Contract Staff conduct or discipline may amount to a stigma and the Contract Staff chances of future employment is spoiled. Also the  risk of litigation or retaliation will loom large in the face of the Agency.

..To be continued .

V.Sounder Rajan

Advocate -Labour & HR & Consumer Law Consultant -Chennai
Legal Consultant for Indian Contract Staffing & Recruiting Industry
 

Sub:- " Contract Staff Misconduct." –Part II

Being part of the Contract Staffing Industry  from December 2005 onwards and being a specialized pioneer for Legal Consultation to the Contract Staffing and Recruiting Industry players we have been noticing that many of the Contract Staffing Industry  clients want to terminate Contract Staff on disciplinary and performance related issue/s.

This is a  continuation of the write up (Part I )  on the need to record " Contract Staff Misconduct."

In our earlier part we had  pointed out the situations   when the Contract Staffing Industry Clients wish to  terminate Contract Staff on disciplinary and performance related issue.

For the Client  they will  just inform the SPOC  of the Contract Staffing Industry Professional  that this Contract Staff needs to be fired immediately .

 Now  for Contract Staffing Industry Professional he or she has   to see  it  from the Legal perspective:-

For illustrative purposes from the Shops and Establishments Act under Section 30 of the Delhi Shops and Establishments Act, there are only two types of Termination.

 The first type of Termination is termination with notice of 30 days and the other one is termination for misconduct wherein an opportunity is to be given to the Temp to explain his conduct.

 What do Courts say on this !

 But on this, Courts of Law have interpreted that “Termination for Misconduct on Performance related issue” can be done only after conducting a Domestic  Enquiry. During the period of the enquiry Contract Staffing Industry  entity has  to pay the Contract Staff salary, 50% to 75% salary and continue the Contract Staff employment during the period of Enquiry as a via-media. For the Contract Staffing Industry Professional all this may look complicated.

  How does the Contract Staffing Industry Professional take this !

 The  Branches of the Contract Staffing Entities  have  to adhere to proper maintenance of Contract Staff  files  as it will serve as the basic record  to compare performance and productivity of the Contract Staff  well ahead and take the steps of collecting resignation letters  or issuing termination letters with  the  correct period of notice.

Open a Tracker ?

 Yes for every Contract Staff open a Tracker on his/her Conduct.

  Therefore this need to document Contract Staff  misconduct and their  discipline in a “Tracker” is paramount. Documenting these issues should not be considered as  an unpleasant experience for most of Supervisors and Managers of the Contract Staffing Industry.

 Down the line and time  the documentation is definitely going to help the of the Contract Staffing Industry Professional to clearly tell the Contract Staff that a typical type of performance or behavior is not acceptable and  this  interaction can help Contract Staff improve  their performance or their conduct to avoid termination.

 ..To be continued ....

With Regards

V.Sounder Rajan
Advocate -Labour & HR & Consumer Law Consultant -Chennai
First dedicated Legal Consultant for Indian Contract Staffing & Recruiting Industry