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Contract Labour law In India


Contract labour constitutes a large section of the vast multitude of unorganised labour in the country. It is an inevitable economic necessity because the system provides much-needed employment to a large number of workers in various projects and jobs. Moreover, while some jobs are of a purely temporary nature requiring workers on a casual, some others require special skills and workers need to be hired for short periods.

The Contract Labour (Regulation and Abolition) Act, 1970 was passed to prevent the exploitation of contract labour and also to introduce better conditions of work. It provides for the abolition of contract labour wherever possible and practicable and regulation of their employment where it cannot be abolished altogether. In the Gammon India Ltd vs Union of India case, the Supreme Court held that none of the provisions of the Act was unreasonable or excessive in character as to be unconstitutional.

The Object of the Contract Labour ( Regulation and Abolition) Act, 1970 is to prevent exploitation of contract labour and also to introduce better conditions of work. A workman is deemed to be employed as Contract Labour when he is hired in connection with the work of an establishment by or through a Contractor. Contract workmen are indirect employees. Contract Labour differs from Direct Labour in terms of employment relationship with the establishment and method of wage payment. Contract
Labour, by and large is not borne on pay roll nor is paid directly. The Contract Workmen are hired, supervised and remunerated by the Contractor, who in turn, is remunerated by the Establishment hiring the services of the Contractor


Section 1(4) provides that the Act applies to every establishment in which 20 or more workmen are employed or were employed on any day of the preceding 12 months as contract labour and to every contractor who employs or who employed on any day of the pre ceding 12 months 20 or more workmen.

Section 2(1)(e) provides that `establishment’ means any office or department of the government or a local authority or any place where any industry, trade, business, manufacture, or occupation is carried on. It has been held that work site may or may not belong to the principal employer, but that will not stand in the way of application of the Act or in holding that a particular place or work site where industry, trade, business, manufacture or occupation is carried on is not an establishment.

Accordingly, a ship or vessel in which repair work is carried on is a place and an establishment. A ship anchored or berthed in a port would be a work site and the workmen required for loading and unloading of the cargo, security, repairs of the ship would be all in connection with the business or trade.

According to Section 1(5), the Act shall not apply to establishments in which work only of an intermittent or casual nature is performed. The explanation provides that work performed in an establishment shall not be deemed to be of an intermittent nature i) if it was performed for more than 120 days in the preceding 12 months, or ii) if it is of a seasonal character and performed for more than 60 days in a year.

Scope of the term `workman’

Section 2(1)(i) of the Contract Labour (Regulation and Abolition) Act, 1976 defines `workman’ to mean:

Any person employed in or in connection with the work of any establishment to do any skilled, semi-skilled, manual, supervisory, technical or clerical work for hire or reward, whether the terms of employment be express or implied, but does not include an y such person:

a) who is employed mainly in a managerial or administrative capacity; or

b) who, being employed in a supervisory capacity, draws wages exceeding Rs. 500 per men sum or exercises, either by the nature of the duties attached to the office or by reason of the powers vested in him, functions mainly of a managerial nature; or

c) who is an out-worker, that is, a person to whom any articles or materials are given out by or on behalf of the principal employer to be made up, cleaned, washed, altered, ornamented, finished, repaired, adapted or otherwise processed for sale for the purposes of the trade or business of the principal employer and the process is to be carried out either in the home of the outworker or in some of the premises, not being premises under the control and management of the principal employer.

In the National Airport Authority vs Bangalore Airport Services Co-operative, Bangalore (1992 Lab IC 1191) case, the Karnataka High Court held that in order to determine whether the applicants were workmen, it is necessary to consider the relationship of employer and employee between the appellants and the applicants. The court pointed out:

“Mere exercise of control is not sufficient to hold that the authority so exercising the control is principal employer without noticing from where that power of control emerges. So also, the power to suspend or to recommend to remove from service is also not an important factor. Because the test of control in order to establish relationship of master and servant may be a relevant factor, but it in wrong to say that it is the decisive factor in all cases”.

Definition of contract labour

Section 2(1)(b) states that 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

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