Major Issues with Contract Labour (Regulation and Prohibition) Act (1970)

The Contract Labour (Regulation and Abolition) Act 1970 was enacted to regulate the practice of contract labour to avoid exploitation of laborers. Section 10 of this act empowers the government to prohibit contract labour in certain situations at the discretion of the government.
Contract Labour refers to the laborers who do not work directly for a firm but are employed by another firm which has a contract to do particular work. This type of labour allows flexibility for the firm and permits outsourcing the work. The issues with this act are as follows:

  • A Supreme Court Judgement said that if the factory employs contract labour for a work, which also happens to be its main activity, then contract labour should be abolished. This simply means that if you want to do your main activity via contract labour, it’s illegal; and you need to employ regular labour.
  • This further implies that the act requires abolishing of contract labour for all services that are of ‘regular nature’. A further Supreme Court judgement made an employer using contract labour to perform regular services on the factory premises liable to absorb such labour permanently.

Although no firm would like to use contract labour for its regular work but the legal tangle is such that some services which are not related to the core activities but are of regular nature (such as canteen, gardening, loading-unloading etc.) may be treated as contract labour and firms may be forced to keep such labourers on permanent roll. Due to these issues, the industry expresses disappointment with this act because its provision defeats the purpose of employing contract labour. The implications are as follows:

  • Employers are always apprehensive about contract labour
  • They frequently change the personnel / services of contract labour so that nobody claims for permanent absorption
  • Companies use the outside labour to do core/ regular work but don’t do any paper work to avoid hassle of their getting a contract worker status. Such workers are low-paid and get no benefits of employment in organized sector.

What is needed?

There is a need to amend the contract labour act. The act needs to allow employers to outsource all peripheral activities to specialized companies, even if it means these employees work on their premises. The legitimate interests of workers engaged in these activities can be easily protected by defining minimum responsibilities for health, safety and remuneration.


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