Contract Labour: Application and the Designated Authority

Some words this chapter uses

Contract labour, defined in section 2(1)(m), is a worker hired in or in connection with the work of an establishment by or through a contractor, with or without the knowledge of the principal employer. It includes an inter-State migrant worker. It excludes a worker, other than a part time employee, who is regularly employed by the contractor for an activity of the contractor's own establishment on mutually accepted terms including permanency, with periodical increments, social security coverage and other welfare benefits.

Contractor, section 2(1)(n), is a person who either undertakes to produce a given result for the establishment through contract labour, otherwise than by merely supplying goods or articles of manufacture, or supplies contract labour as mere human resource; and it includes a sub-contractor.

Manpower supply contractor is the second of those two, the agency that supplies people rather than a result.

Principal employer, section 2(1)(zz), is the head of the office or Department for the Government or a local authority, the owner or occupier of a factory or its named manager, the owner or agent of a mine, and for any other establishment the person responsible for its supervision and control.

Intermittent means occurring at intervals rather than continuously. Casual means occasional and irregular. Gazetted officer is an officer whose appointment is notified in the Official Gazette. Preceding twelve months is counted backwards from the day in question, not from the start of a financial year.

Section 45(1): the two doors into the Part

This Part shall apply to:

• (i) every establishment in which fifty or more contract labour are employed, or were employed on any day of the preceding twelve months, through contract;
• (ii) every manpower supply contractor who has employed, on any day of the preceding twelve months, fifty or more contract labour.

Four points, and each of them decides cases.

"Fifty or more". Not more than fifty. An establishment with exactly fifty contract labour is inside.

"Or were employed on any day of the preceding twelve months". This is a high water mark test, not a snapshot. An establishment that took on sixty contract workers for a fortnight in September is within the Part for the following twelve months even if it employs none today. The drafter chose this form because a snapshot test can be defeated by sending the workers home on the day the Inspector-cum-Facilitator is expected.

"Through contract". The fifty must be contract labour as defined. Workers on the establishment's own rolls are not counted towards the fifty, however many there are.

Clause (ii) counts the contractor's own book. A manpower supply contractor supplying ten workers each to eight different establishments has employed eighty contract labour and is inside the Part, although not one of those establishments crosses the fifty mark on its own.

Section 45(2): intermittent or casual work

This Part shall not apply to the establishment in which work only of an intermittent or casual nature is performed.

Note "only". The exclusion is for an establishment whose work is wholly of that character. An establishment doing continuous work with some casual work alongside is not excluded.

The proviso, and this is where the question goes. If a question arises whether work performed in an establishment is of an intermittent or casual nature, the appropriate Government shall decide it after consultation with the National Board or a State Advisory Board, and its decision shall be final.

So the question is not for the employer, and in the first instance not for a court. It goes to the appropriate Government, which must consult the National Occupational Safety and Health Advisory Board constituted under section 16 or the State Board under section 17, and its decision is final.

The Explanation, and this is the part to memorise. Work performed in an establishment shall not be deemed to be of an intermittent nature:

• (i) if it was performed for more than one hundred and twenty days in the preceding twelve months; or
• (ii) if it is of seasonal character and is performed for more than sixty days in a year.

Two different counts for two different kinds of work. One hundred and twenty days for ordinary work; sixty days for seasonal work, because seasonal work is by its nature confined to part of the year and a one hundred and twenty day test would exclude all of it.

Note also what the Explanation does not do. It defines when work is not intermittent. It says nothing about casual, which is left to its ordinary meaning, and it does not say that work falling below those day counts is intermittent. Below the counts the question is simply open, and the proviso decides it.

Section 46: the designated authority

The appropriate Government may, by an order, appoint such persons, being Gazetted officers of the Government, as it thinks fit to be designated as authority under sub-section (1) of section 119, specify the limits of their jurisdiction, and vest them with such powers and duties, including dealing with issuance and revocation of licences electronically, as may be specified in the order.

Three features are worth naming.

The office is reserved to Gazetted officers. Licensing a contractor is not delegated to a clerk.

The appointment is territorial. The order specifies the limits of their jurisdiction, so a contractor deals with the authority for the area.

The Code contemplates the work being done electronically. The words issuance and revocation of licences electronically are in the section itself, which is consistent with the Code's general design: registration under section 3 is electronic, and the common licence in section 119 is granted by this same designated authority.

Section 46 also tells you where to look next. The authority is designated under section 119(1), which sits in Chapter XIV and provides for a common licence covering more than one activity. So the licensing power in this Part and the common licence power at the end of the Code are exercised by the same officer.

A worked example

Meera runs a bottling plant. She employs two hundred workers on her own rolls. Housekeeping and loading are done by contract labour supplied by an agency, forty five workers on an ordinary day. For six weeks last October, during the festival season, the agency supplied a further twenty, making sixty five.

Does Part I of Chapter XI apply to the bottling plant? Yes. Section 45(1)(i) applies to an establishment in which fifty or more contract labour were employed on any day of the preceding twelve months. Sixty five were employed in October, so the plant is inside the Part for the following twelve months, even though only forty five are employed today.

Do her two hundred permanent workers count towards the fifty? No. The clause counts contract labour employed through contract. Her own workmen are counted for other purposes, such as the definition of a factory in section 2(1)(w), but not for this threshold.

The agency supplies workers to eleven other clients as well, twelve workers each. Then quite apart from Meera's plant, the agency is a manpower supply contractor who has employed far more than fifty contract labour on a day of the preceding twelve months, and section 45(1)(ii) brings it within the Part on its own account.

Meera says her plant only runs seasonally, so section 45(2) excludes her. Two answers. First, the exclusion is for an establishment where work only of an intermittent or casual nature is performed, and a plant with two hundred permanent workers is not such an establishment. Second, even if the work were seasonal, the Explanation provides that seasonal work performed for more than sixty days in a year is not to be deemed intermittent.

She wants a ruling. She cannot decide it herself. Under the proviso to section 45(2) the question goes to the appropriate Government, which must decide it after consultation with the National Board or a State Advisory Board, and that decision is final.

Who deals with the agency's licence? The designated authority appointed by the appropriate Government under section 46, being a Gazetted officer, within the limits of jurisdiction specified in the order appointing him, and the order may provide for issuing and revoking licences electronically.

A worker supplied by the agency has been on its permanent rolls for nine years, with annual increments, provident fund and gratuity, and is sent to whichever client needs him. He may well fall outside contract labour altogether. Section 2(1)(m) excludes a worker, other than a part time employee, who is regularly employed by the contractor for an activity of the contractor's own establishment, on mutually accepted standards including permanency, with periodical increments, social security coverage and other welfare benefits. If the exclusion applies he is the contractor's own employee and is not counted in the fifty.

What this does NOT mean

The threshold is not twenty. It was twenty under the Contract Labour (Regulation and Abolition) Act 1970. Under section 45 it is fifty.

It is not a head count taken today. Employment of fifty or more on any day of the preceding twelve months brings the establishment in.

It is not confined to the establishment where the work is done. Section 45(1)(ii) applies the Part to a manpower supply contractor on his own numbers.

Section 45(2) does not exclude an establishment that does some casual work. The work performed must be only of an intermittent or casual nature.

The Explanation does not define intermittent. It provides when work shall not be deemed intermittent, at more than one hundred and twenty days, or more than sixty days for seasonal work.

The employer does not decide the question. The proviso gives it to the appropriate Government after consulting the National Board or a State Advisory Board, and makes the decision final.

Section 46 does not create the licensing scheme. It appoints the officer; the licence is section 47 and the powers are section 119(1).

Limits and criticism

Raising the threshold from twenty to fifty removes the smaller users of contract labour from the scheme entirely. It is precisely the small and unorganised workplace where contract labour is least protected, and it is now outside registration, licensing and the principal employer's statutory liability under sections 53 to 56.

The high water mark test is a good rule with a weak remedy. Nothing in the Part requires the establishment to keep a record proving how many contract labour it engaged eleven months ago, other than the general registers under section 33, so proving the day on which fifty were employed falls on the person alleging it.

"Intermittent or casual" is still undefined. The Explanation is a partial and negative test, and the residue is decided by the appropriate Government, whose decision the proviso makes final, which limits any challenge to the narrow grounds on which finality clauses are reviewed.

Consultation is with a Board on which workers are one interest among many. The National Board under section 16 has a large official membership, so the body consulted on whether an establishment escapes the Part is not a body of the workers affected.

Section 46 confers a power, not a duty. The appropriate Government may appoint the designated authority. Until it does, there is nobody to grant a licence, and a contractor cannot comply with section 47 by his own effort.

Quick revision

• Section 45(1): the Part applies to (i) every establishment in which fifty or more contract labour are or were employed on any day of the preceding twelve months through contract, and (ii) every manpower supply contractor who has employed fifty or more on any such day.
• Section 45(2): the Part does not apply where work only of an intermittent or casual nature is performed.
• Proviso: a question whether work is intermittent or casual is decided by the appropriate Government after consulting the National Board or a State Advisory Board, and the decision is final.
• Explanation: work is not deemed intermittent if performed for more than one hundred and twenty days in the preceding twelve months, or, being seasonal, for more than sixty days in a year.
• Section 46: the appropriate Government may appoint Gazetted officers as the designated authority under section 119(1), specifying jurisdiction, powers and duties, including issuing and revoking licences electronically.
• The 1970 Act's threshold was twenty and it did not reach the supplier. Both changed.

Test yourself

1. State the two classes to which Part I of Chapter XI applies. Every establishment in which fifty or more contract labour are employed, or were employed on any day of the preceding twelve months, through contract; and every manpower supply contractor who has employed, on any day of the preceding twelve months, fifty or more contract labour.

2. An establishment employs forty contract labour today but employed fifty five for one week eight months ago. Is it within the Part? Yes. Section 45(1)(i) is satisfied by employment of fifty or more on any day of the preceding twelve months, so the Part applies.

3. Who decides whether work in an establishment is of an intermittent or casual nature? The appropriate Government, after consultation with the National Board or a State Advisory Board, and its decision is final: the proviso to section 45(2).

4. State the two limbs of the Explanation to section 45(2). Work is not deemed to be of an intermittent nature if it was performed for more than one hundred and twenty days in the preceding twelve months, or if it is of seasonal character and is performed for more than sixty days in a year.

5. Who may be appointed the designated authority, and under which section is he designated? Persons who are Gazetted officers of the Government, appointed by order of the appropriate Government, designated as authority under section 119(1), with specified limits of jurisdiction and specified powers and duties including electronic issue and revocation of licences: section 46.

6. Name two changes section 45 makes to the position under the Contract Labour (Regulation and Abolition) Act 1970. The threshold is raised from twenty contract labour to fifty; and the Part is extended to the manpower supply contractor himself under section 45(1)(ii), so a staffing agency is regulated on its own numbers rather than only through the establishments it supplies.