The Principal Employer's Liability

Welfare facilities here means what sections 23 and 24 provide for: cleanliness, ventilation, drinking water, lighting, latrines, washing and bathing places, locker rooms, canteens, creches, first aid and the rest.

Short payment is paying less than what is due, as distinct from paying nothing.

Security deposit is the sum the contractor lodges under his licence, whose amount section 47(1) requires the licence to specify.

Experience certificate is a written record of the work a person has done, which is how a worker with no employer of record proves what he can do.

Deemed means treated by the statute as being so, whether or not it would be so on ordinary principles.

Section 53: welfare is the principal employer's own duty

Welfare facilities specified under section 23 and section 24 shall be provided by the principal employer of the establishment to the contract labour who are employed in such establishment.

One sentence, and it reverses the previous law. It should be learnt with the comparison, because the comparison is the answer to any question on it.

Under the Contract Labour (Regulation and Abolition) Act 1970, canteens (section 16), rest rooms (section 17), other facilities, namely wholesome drinking water, latrines and urinals and washing facilities (section 18), and first aid (section 19) were the duty of the contractor. Section 20 was headed liability of principal employer in certain cases, and those cases were cases of default: if an amenity was not provided by the contractor within the prescribed time, it shall be provided by the principal employer. And section 20(2) gave the principal employer a right to recover all expenses so incurred from the contractor, by deduction from money payable to him or as a debt.

Under section 53 of this Code, three things change at once.

The duty is primary, not secondary. No default by the contractor is needed. From the first day the contract labour work in the establishment, the facilities are the principal employer's to provide.

There is no right of recovery. The 1970 Act gave one in terms. Section 53 gives none, so the cost lies where it falls.

The content is the establishment's own standard. The facilities are those specified under sections 23 and 24, which are the same sections that govern the establishment's own employees. So the Code is saying, in effect, that contract labour get the same latrines, the same drinking water and the same canteen as everybody else in the building, and that the person who owns the building provides them.

That is a genuine improvement and it should be stated as one. It is also the provision most likely to be got backwards in an answer, because the pattern of the 1970 Act, contractor first and principal employer on default, is the pattern section 55 still follows for wages.

Section 54: using an unlicensed contractor

Where any principal employer of an establishment is employing contract labour through a contractor who is required to obtain a licence under this Part, but he has not obtained such licence, then, such employment shall be deemed to be in contravention of the provision of this Code.

Read the section slowly, because its structure is unusual.

It creates no separate offence and names no punishment. It works by a deeming: the employment itself is deemed to be in contravention of the Code. What follows from a contravention is then found in Chapter XII, and in particular in the general penalty in section 94.

It bites on the principal employer, not the contractor. The contractor's own failure to be licensed is a breach of section 47(1). Section 54 adds the principal employer to the picture, so that using an unlicensed contractor is his contravention too.

It is not conditional on knowledge. The section asks only whether the contractor is required to obtain a licence and has not obtained it. So the practical duty it imposes is a duty to check the licence before engaging anyone, and to check that the licence covers the number of workers being supplied.

Section 55: responsibility for payment of wages

Section 55(1), the primary liability. A contractor shall be responsible for payment of wages to each contract labour employed by him, and such wages shall be paid before the expiry of such period as may be prescribed by the appropriate Government.

Section 55(2), how they must be paid. This is new and it is examinable. Every contractor shall make the disbursement through bank transfer or electronic mode, and shall inform the principal employer electronically of the amount so paid.

The proviso. Where it is not practicable to disburse in that mode, payment shall be made in such manner as the appropriate Government prescribes.

The 1970 Act did this by a different method, and the contrast is worth an answer's space. Under section 21(2) and (3) of that Act, every principal employer had to nominate a representative to be present at the disbursement of wages, that representative had to certify the amounts paid, and it was the contractor's duty to disburse in his presence. The Code abolishes the witness and replaces him with a bank record plus an electronic intimation. The purpose is the same, that the principal employer should know what was actually paid, but the proof has moved from a man standing at the table to a transfer entry.

Section 55(3), the principal employer's liability. In case the contractor fails to make payment within the prescribed period or makes short payment, the principal employer shall be liable to make payment of the wages in full, or of the unpaid balance due, to the concerned contract labour employed by the contractor, and recover the amount so paid from the contractor, either by deduction from any amount payable to the contractor under any contract or as a debt payable by the contractor.

Note both halves. The liability covers short payment as well as non payment, and the recovery is by the same two routes the 1970 Act used for welfare expenses.

Section 55(4), the security deposit. In the event the contractor does not pay the wages, the appropriate Government shall pass orders for making payment of those wages out of the amount deposited by the contractor as security deposit under his licence, in such manner as that Government prescribes.

This is why section 47(1) requires the licence to state the amount of the security. Sub-sections (3) and (4) give the worker two independent routes to his money: the principal employer's pocket, and the deposit lying with the licensing authority.

Section 56: the experience certificate

Every concerned contractor shall issue, on demand, an experience certificate, in such form as the appropriate Government prescribes, to the contract labour, giving details of the work performed by such contract labour.

A short section that answers a real problem. A worker who has spent nine years on contract has no employer of record, no service book and nothing to show a new employer. The certificate is his record of employment.

Three limits are on the face of it. It is issued on demand, so the worker must ask. It is issued by the contractor, not by the principal employer whose premises he worked on. And the section attaches no time limit and no consequence for refusing.

A worked example

Vishal Textiles engages contract labour through Bright Manpower to run its packing line and to clean its premises. On an ordinary day one hundred and ten contract workers are on site.

The latrines used by the contract workers are broken and there is no drinking water at the packing line. Whose duty is it? Vishal Textiles'. Under section 53 the welfare facilities specified under sections 23 and 24 shall be provided by the principal employer to the contract labour employed in the establishment. It is not an obligation that arises only if Bright Manpower fails.

Vishal Textiles says its contract with Bright Manpower puts housekeeping on the contractor. That allocates the cost between them; it does not answer the Code. Section 53 places the duty on the principal employer, and unlike section 20(2) of the repealed 1970 Act it gives no statutory right of recovery of the expense.

Bright Manpower's licence lapsed four months ago. Then under section 54 Vishal Textiles' employment of contract labour through it is deemed to be in contravention of the Code, and the contravention is the principal employer's. Whether Vishal Textiles knew is not part of the section.

Bright Manpower pays only sixty per cent of March wages. That is short payment. Under section 55(3) Vishal Textiles is liable to pay the unpaid balance to the workers concerned, and may recover it from Bright Manpower by deducting it from sums payable under the contract or by suing for it as a debt.

Bright Manpower pays nothing at all in April and disappears. Two routes run at once. Vishal Textiles is liable under section 55(3) for the wages in full. And under section 55(4) the appropriate Government shall pass orders for payment of those wages out of the security deposit lodged under Bright Manpower's licence.

Bright Manpower paid March wages in cash and kept no record. Section 55(2) required disbursement through bank transfer or electronic mode, and required it to inform the principal employer electronically of the amount paid. Cash is permissible only under the proviso, where the electronic mode is not practicable, and then only in the manner the appropriate Government prescribes.

A worker who spent six years on the packing line wants proof of his experience. Under section 56 he may demand an experience certificate from the contractor, in the prescribed form, giving details of the work he performed.

He asks Vishal Textiles for it instead. Section 56 places the duty on the concerned contractor. The principal employer is not the person the section names.

What this does NOT mean

Section 53 is not a default liability. The welfare facilities are the principal employer's to provide from the start, not only when the contractor fails.

Section 53 gives no right of recovery. The repealed 1970 Act did, in section 20(2). This Code does not.

Section 54 does not create a new offence with its own punishment. It deems the employment to be a contravention of the Code, and the consequences are those in Chapter XII.

Section 54 does not turn on the principal employer's knowledge. The test is whether the contractor was required to be licensed and was not.

Section 55 does not make the principal employer the primary paymaster. The contractor is responsible under section 55(1); the principal employer is liable under section 55(3) on failure or short payment, with recovery.

Section 55(2) does not permit cash as a matter of choice. Cash is available only where the electronic mode is not practicable, and then in the prescribed manner.

Section 56 does not require the certificate to be given unasked. It is issued on demand, by the contractor.

Limits and criticism

Section 53 leaves the principal employer with a duty and no remedy. He must provide facilities for workers who are not his employees and cannot recover the cost under the Code, so the term will be negotiated into the commercial contract, where the smaller party is usually the contractor and the cost will find its way back into the price of labour.

Section 54 says what the employment is deemed to be and not what follows. The reader must go to Chapter XII to find the consequence, and no penalty is written against the deeming itself.

Section 55 keeps the worker one step from his money. He is paid by a contractor who may vanish, and his statutory routes are a claim against the principal employer and an application to the appropriate Government against a deposit whose size the Code does not fix.

The abolition of the witness at the pay table is a real loss where the electronic mode is not used. Under the proviso, cash payments in the field are still possible, and for those the 1970 Act's certified disbursement in the presence of the principal employer's representative was a stronger safeguard than an intimation the contractor writes himself.

Section 56 has no teeth. No time limit, no form of enforcement, and no duty on the establishment where the work was actually done, which is the place with the records.

Quick revision

• Section 53: welfare facilities under sections 23 and 24 shall be provided by the principal employer to the contract labour employed in the establishment. Primary duty; no right of recovery. Contrast the 1970 Act, where they were the contractor's under sections 16 to 19 and the principal employer's only on default under section 20, with recovery under section 20(2).
• Section 54: employing contract labour through a contractor required to be licensed who is not, is deemed to be in contravention of the Code.
• Section 55(1): the contractor is responsible for wages, paid within the prescribed period.
• Section 55(2): disbursement by bank transfer or electronic mode, and the principal employer informed electronically of the amount; proviso, another prescribed manner where that is not practicable.
• Section 55(3): on failure or short payment, the principal employer pays in full or the unpaid balance, and recovers it by deduction from sums payable or as a debt.
• Section 55(4): where the contractor does not pay, the appropriate Government shall order payment out of the security deposit under his licence.
• Section 56: the contractor shall issue an experience certificate on demand, in the prescribed form, giving details of the work performed.

Test yourself

1. Who must provide welfare facilities to contract labour, and from when? The principal employer of the establishment, under section 53, and from the start. The facilities are those specified under sections 23 and 24, and the duty does not depend on any default by the contractor.

2. How did the position differ under the Contract Labour (Regulation and Abolition) Act 1970? Canteens, rest rooms, drinking water, latrines and urinals, washing facilities and first aid were the contractor's duty under sections 16 to 19. Section 20 made the principal employer provide the amenity only if the contractor had not provided it within the prescribed time, and section 20(2) allowed him to recover all expenses so incurred from the contractor by deduction or as a debt. Section 53 of the Code makes the duty primary and provides no recovery.

3. What is the effect of engaging an unlicensed contractor? Under section 54 the employment of contract labour through a contractor who is required to obtain a licence but has not obtained one is deemed to be in contravention of the provisions of the Code, and the contravention is the principal employer's.

4. In what mode must a contractor pay wages, and what must he tell the principal employer? By bank transfer or electronic mode under section 55(2), and he must inform the principal employer electronically of the amount so paid. Another manner may be prescribed where the electronic mode is not practicable.

5. A contractor pays half the wages due and then defaults. State the worker's two statutory routes. The principal employer is liable under section 55(3) to pay the unpaid balance due, and may recover it from the contractor by deduction from any amount payable under the contract or as a debt. Separately, under section 55(4) the appropriate Government shall pass orders for payment of the wages out of the security deposit made by the contractor under his licence.

6. What must a contractor give a contract worker on demand, and what must it contain? An experience certificate under section 56, in the form prescribed by the appropriate Government, giving details of the work performed by that contract labour.

7. Welfare and wages travel differently up the chain. Explain. Welfare under section 53 is the principal employer's own primary duty, owed from the outset and with no statutory recovery. Wages under section 55 are the contractor's primary responsibility, and reach the principal employer only on failure or short payment, and then with an express right of recovery by deduction or as a debt.