Licensing of Contractors

In one line

A contractor covered by this Part may not supply or engage contract labour without a licence, which states how many workers he may supply and what security he must deposit, lasts five years, and may be revoked after a show cause notice.

In exam wording: section 47 of the Occupational Safety, Health and Working Conditions Code 2020 forbids a contractor to whom Part I applies from supplying or engaging contract labour, or executing work through contract labour, except under a licence issued by the authority under section 119(1); section 48 makes the licence valid for five years; section 49 forbids the contractor to charge any fee or commission from the contract labour; section 50 requires intimation of each work order; section 51 provides for revocation, suspension and amendment; and section 52 gives an appeal within thirty days.

Why the law has this at all

A licence is a permission that can be taken away, and that is the whole reason for licensing a contractor rather than merely punishing him.

Prosecuting a contractor who underpays fifty workers takes years and ends in a fine he can treat as a cost of doing business. Suspending his licence stops him trading tomorrow. So the Code puts the enforcement weight on the licence, and the sections that follow are about the conditions attached to it, the events that put it at risk, and the appeal against losing it.

Three features of the design are worth naming at the start.

The licence carries a number and a deposit. Section 47(1) requires the licence to specify the number of contract labour who can be supplied or engaged and the amount of security to be deposited. That deposit is not decorative. Under section 55(4), if the contractor does not pay wages, the appropriate Government orders payment out of it.

There are two kinds of licence. The ordinary licence under section 47(1) presupposes that the contractor meets qualifications or criteria prescribed by the Central Government. A contractor who does not meet them is not simply refused; section 47(2) allows a work specific licence for the one work order. That is a deliberate compromise between shutting small contractors out and letting anybody trade.

Licensing is now electronic and can be national. The application is made electronically under section 48(1); the first proviso to section 47(3) allows a contractor operating in more than one State or the whole of India to take a single licence from the Central Government's designated authority; and the second proviso requires that authority to consult the State authorities electronically first.

Some words this chapter uses

Licence here is the permission to supply or engage contract labour. Security deposit is money lodged with the authority which can be applied to unpaid wages. Work specific licence is the section 47(2) licence tied to one work order. Work order is the instruction from an establishment to the contractor to supply labour or execute work. Misrepresentation is a false statement; suppression of a material fact is silence about something that mattered. Show cause is the opportunity to answer before an adverse order. Appellate authority is the officer prescribed under section 119(6) who hears appeals. Sufficient cause is a reason a court or authority accepts for lateness.