Hiring Contract Labour: Changes Under the OSHWC Code

Introduction

The Contract Labour (Regulation and Abolition) Act, 1970 is one of thirteen enactments being subsumed under the Occupational Safety, Health and Working Conditions Code, 2020. It regulates registration of establishments, licensing of contractors, ensures that suitable working conditions are provided and incur penalties where any of these provisions are contravened. Section-10 of the Contract Labour (Regulation and Abolition) Act, 1970 contains prohibitions on the employment of contract labour.

It empowers the appropriate Government to prohibit, by notification in the Official Gazette, employment of contract labour in any process, operation, or other work in an establishment. Sub-section (2) of the provision states that before issuing any notification as mentioned above, the appropriate Government shall have regard to the conditions of work and benefits provided to the contract labour employed in that establishment and other relevant factors such as:

1. Whether the process, operation, or other work is incidental to or necessary for the trade, business, manufacturing, or occupation carried out in the establishment

2. Whether the process is of perennial nature, meaning that it must be of sufficient duration having regard to the work being carried out

3. Whether it is ordinarily done through regular workmen in that establishment or an establishment similar thereto

4. Whether it is sufficient to employ considerable number of full-time workmen

This provision empowering the appropriate Government to regulate the employment of contract labour can be compared to the scheme under the Occupational Safety, Health Working Conditions Code, 2020.

Definition of Core Activity

Section-2(p) of the Code defines “core activity of an establishment” as any activity for which the establishment is set up and includes any activity which is essential or necessary to such activity. While this definition may seem general at first, it is only when we refer to its proviso can we understand its full import. The proviso lists a set of activities that shall not be considered essential or necessary if the establishment is not set up for such activity.

In other words, in all other cases except where an establishment’s primary business is one of the activities in the list, they shall be considered incidental or non-core activities. The list of activities is as follows:

(a) Sanitation work

(b) Watch and ward services including security services

(c) Canteen and catering services

(d) Loading and unloading operations

(e) Running hospitals, educational and training institutions, guest houses and clubs which are support services establishment in nature

(f) Courier services which are in nature of support services

(g) Civil and other constructional work

(h) Gardening and maintenance of lawns

(i) Housekeeping and laundry services which are in nature of support services

(j) Transport services including ambulance services

(k) Any activity of intermittent nature even if that constitutes a core activity of an establishment

Prohibition of Employment of Contract Labour

Section-57 of the OSHWC Code employs the above definition to state that employment of contract labour in core activities of any establishment is prohibited. Here, it is important to note that this prohibition is applicable to the principal employer only, contractors are not covered by this provision.

There is a proviso under Section-57 that allows for the engagement of contract labour through a contactor in respect of a core activity if –

(a) The normal functioning of the establishment is such that they do not require full time workers for the major portion of the working hours in a day or for longer periods.

(b) The activities are such that they do not require full-time workers for the major portion of the working hours or longer periods.

(c) There is a sudden increase in volume of work in the core activity which needs to be accomplished in a specified time.

Here the text of the Code clearly provides for certain exceptions to the general prohibition on engagement of contract labour in core activities.

Furthermore, the appropriate Government is empowered to establish a designated authority to advise the Government on which of the activities of an establishment are core activities or not. Questions that arise relating to the same can be put forth before the authority in the prescribed form by the aggrieved party. The appropriate Government may refer any such question suo motu to the designated authority which shall submit a report to the former on the basis of an enquiry.

Some Commonly Asked Questions

Based on our interactions with various clients and readers on the blog, we decided to address some common doubts relating to the above scheme under the OSHWC Code, listed below:

My principal business is providing contract labour to other establishments, how will I be affected by the above changes?

A. In case your establishment is engaged in providing staffing solutions or contractor labour towards a particular service such as security, housekeeping, gardening etc. you will not be affected by the above provisions because they apply only to the principal employer. Therefore, the operation of your business will not be affected by the above change. However, you may have to do your due diligence with respect to principal employers hiring your contract labour. This is to ascertain whether they are engaging your workers in an activity that is their core activity and whether they have the requisite permission for the same.

My principal business activity falls under the list of non-core activities in the proviso, will this affect my establishment?

A.  If your establishment is engaged in any of the activities under the incidental or non-core activities list as its primary business, it will not be affected by the proviso. The language of the proviso makes it clear that it applies only if the services under the list are incidental or in the nature of support services. Therefore, an establishment whose primary business is providing sanitation services or courier services or any of the other services as mentioned under the proviso, is not covered by it. 

Conclusion

Some of the changes brought in by the Occupational Safety, Health and Working Conditions Code, 2020 are similar to certain provisions under the Contract Labour (Regulation and Abolition) Act, 1970, for example the clause allowing for engagement of contract labour in core activities if the normal functioning of the establishment is such that they do not require full time workers for the major portion of the working hours in a day or for longer periods. The slight difference between the two, however, is that under the old enactment the same was a condition to be considered by the appropriate Government whereas under the new scheme under the Code, it is an exception to a general prohibition on hiring contract workers in core activities.

The other changes brought in are reasonable, provide principal employers with a reasonable amount of flexibility in hiring contract workers in core activities and ensure that the other provisions under the Chapter on contract workers operate effectively. The object behind bringing in the distinction between core and incidental/non-core activities is to ensure that workers performing work that is fundamental to the operation of the establishment are given permanent status. However, that object is not sought to be achieved without giving reasonable scope to differing modes of business and flexibility in the form of exceptions.

Therefore, in the authors’ opinion this is a positive and reasonable change brought in by the legislature that balances the interests of both the employers and the workers.

Do you believe this distinction is necessary? What other changes need to be brought in to supplement this initiative of the legislature? Does this framework unreasonably constrain the principal employer?

Drop your thoughts in the comments below.

Disclaimer: This blog is meant for informational purposes and discussion only. It contains only general information about legal matters. The information provided is not legal advice and should not be acted upon without seeking proper legal advice from a practicing attorney. Simpliance makes no representations or warranties in relation to the information on this article.