Labour Ministry’s new rule to ensure employer hiring contract labour

• In order to improve the ease of doing business in the country, the labour ministry has notified draft rule that would allow principal employer or contractor hiring contract labour to file a unified annual return under the Contract Labour (Regulation & Abolition) Act, 1970.

About new rules:

• Under the rules, to be called as the Contract Labour (Regulation & Abolition) Central (Amendment) Rules, 2017, every contractor or principal employer shall upload a unified annual return in the Form XXIV specified in these rules on or before the February 1 following the close of the year to which it relates.
• Besides, the employer or the principal contractor also have the option of filing the return manually or online.
• The principal employer or contractor shall also file a Unified Annual Return to the concerned authorities manually.
• In case, if, an employer maintains registers or records or reports in electronic form, such registers or records or reports shall also be taken into consideration.

About Contract Labour (Regulation & Abolition) Act, 1970:

• The Contract Labour (Regulation & Abolition) Act, 1970 defines the responsibilities of a Contractor and Principal Employers towards the Contract Labour.
• Principal Employer needs to ensure its representative is present to oversee when contractor distributes payments to the contract labour. In case the contractor defaults on the payment, the principal employer needs to step in and cover the shortfall.
• So in an event of default of the contractor, it the principal employer who is eventually responsible and hence must understand the nature its duty and be prepared to take necessary action to prevent any default.
• Contractor needs to provide canteen facilities, rest-rooms and first aid facilities. In case the Contractor is unable to provide these facilities the onus automatically is shifted on Principal Employer to provide these facilities to the contract labour.
• While Principal Employer has all the necessary legal recourse available to get these expenses recovered from Contractor, it is Principal Employer’s ultimate responsibility to ensure that the contract labour gets the desired benefits under the Act.
• Principal Employer therefore should carefully investigate whether the Contractor has in the past been diligent in complying with the provisions of the Act. This is in the best interest of the Principal Employer to check if the contractor has a valid license/registration under the act and whether the contractor has in past defaulted the payment to the contract labour while under contract of any previous Principal Employer.
• While there are provision for fines on the corporates, additional penalties are imposed on directors of companies. The penalty for non-compliance with provisions of the Act while employing contract labour is 3 months jail time or fine or both. Though the quantum of fine is not that high, merely the threat of a criminal proceeding is sufficient thrust to ensure compliance with this Act.

By: Vishal