Labour Laws Q/A

No Automatic Absorption of Contract Labour

Will the workers of contractor be automatically absorbed on prohibition of contract labour system?

There is no specific provision under section 10 of the Contract Labour (Regulation and Abolition) Act, that the contract labour will become employees of the principal employer. The Constitution Bench has clarified that on issue of Notification the contract labour working in the concerned establishment at the time of issuance of Notification will cease to function; (2) the contract of principal employer with the contractor in regard to the contract labour comes to an end; (3) no contract labour can be employed by the principal employer in any process, operation or other work in the establishment to which the Notification relates at any time thereafter; (4) the contract labour is not rendered unemployed as is generally assumed but continues in the employment of the contractor as the Notification does not severe the relationship of master and servant between the contractor and the contract labour; (5) the contractor can utilise the services of the contract labour in any other establishment in respect of which no Notification under section 10(1) has been issued where all the benefits under the Contract Labour (Regulation and Abolition) Act which were being enjoyed by it will be available; (6) if a contractor intends to retrench his contract labour he can do so only in conformity with the provisions of the Industrial Disputes Act.1 However, when contract labour system is held as sham, the contract labour is to be automatically absorbed.2

An Industrial Adjudicator can grant the relief sought by the workman if it finds that the contract between the principal employer and the contractor is sham, nominal and merely a camouflage to deny employment benefit to the employee and there is, in fact, a direct employment.3 Labour Court has rightly awarded reinstatement with full back-wages to a workman who was allegedly appointed through the contractor whereas the principal employer, though registered under the Contract Labour (Regulation & Abolition) Act, has been paying wages and exercising control over the workman hence the High Court, in writ petition, would not interfere in the Award.4

1. Steel Authority of India Ltd. v. National Union Water Front Workers, 2001 (II) LLJ 1087: 2001 LLR 961: (2001) 4 LLN 135 (SC).
2. International Airports Authority of India v. International Air Cargo Workers’ Union, 2009 LLR 923 (SC).
3. Workmen, United Coal Worker’s Union v. Employers, Management of Kuju Area of M/s. C.C. Ltd., 2015 LLR (SN) 212: 2014 (143) FLR 666 (Jhar HC).
4. Indian Farmers Fertiliser Co-op. Ltd. v. Presiding Officer Labour Court, 2015 LLR 505 (All HC).

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