Contract labour

In the name of contract

Print edition : November 14, 2014

Delhi Transport Corporation drivers and conductors, working on contract, during a protest outside the Millennium Bus Depot in New Delhi. A file photograph. Photo: S. Subramanium

There is an urgent need to introduce labour reforms to halt the mindless employment of contract labour in establishments having jobs of a perennial nature and regularise contract labour to safeguard their socio-economic and constitutional rights.

ONCE AGAIN a debate has started on the possible reforms in the labour sector encompassing labour laws and labour relations. On the one hand, industry is demanding dilution of industrial laws so that profit can be maximised at the cost of the quality of life of the workers and their families. On the other hand, Prime Minister Narendra Modi has gone on record saying that labour laws should be viewed from workers’ point of view. The country is at the crossroads to make a crucial choice between the demands of industry for labour reforms and the legitimate democratic demands for labour laws that are in consonance with the constitutional mandate for a welfare state. There is an urgent need to introduce labour reforms to protect millions of contract labour who are engaged in nation-building through their dedicated service but are working in pitiable conditions in various industrial and government establishments. They need to be rescued from apathy and exploitation. The ground reality is that human exploitation is at its extreme. International recognition in the form of the award of the Nobel Peace Prize to Kailash Satyarthi for his relentless struggle for the abolition and rehabilitation of child labour emphasises the need for a relook at laws so as to ensure the dignity of the labour force and a decent living for marginalised workers. Industry’s demand for treating contract labour as a cheap source for the manufacturing sector and government institutions should be rejected.

The labour unrest in Maruti Suzuki India Limited’s Manesar plant (for two years from 2012) for equal pay for equal work and regularisation of contract labour brought to the fore the serious economic and social injustice prevailing in the country following neoliberal economic reforms. With the advent of liberalisation and globalisation on the dictates of world capitalism in the 1990s, the country has witnessed the marginalisation of a substantial section of the working class whereby jobs of a perennial nature in government and industrial establishments are managed by contract labour. On the pretext of following the new economic policies, political parties of various hues have gone for substitution of regular workforce with contract labour. In the country’s premier health institution, the All India Institute of Medical Sciences (AIIMS), thousands of contract labourers are employed in place of workers who are required on a permanent basis. Contract labourers have no security of tenure and are paid only the minimum wage payable to unskilled labour for doing the work of regular employees, who are paid higher wages.

Workmen’s right to “equal pay for equal work” and regularisation of temporary or daily-wage workers on fulfilling their service conditions have been part of labour jurisprudence. After the revocation of the internal emergency in 1977, the Supreme Court has been playing a proactive role in protecting the rights of the common man, including workers, by interpreting the fundamental rights and the Directive Principles of State Policy Chapters in the Constitution and has created new rights for the common man.

In the early 1980s, several workmen approached the Supreme Court demanding equal pay for equal work and for regularisation of their temporary/daily-wage services. In response, the court directed their regularisation in service and payment of wages on a par with regular employees similarly situated by enunciating constitutional principles under Articles 14, 21 and 39(d). (References: Randhir Singh vs Union of India (1982) 1 SCC 618; State of U.P. vs J.P. Chaurasia (1989) 1 SCC 121; The Dharwad District PWD Literate Daily Wage Employees’ Association vs State of Karnataka (1990) 2 SCC 396; and Griha Kalyan Kendra Workers’ Union vs Union of India AIR 1991 SC 1173.) However, this judicial trend of interpreting constitutional provisions to create new rights for workers took a downturn with the adoption of neoliberal economic policies.

Since the engagement of contract labour in jobs of a permanent nature involves issues concerning constitutional and economic principles, a closer look at the provisions of the Contract Labour (Regulation and Abolition) Act, 1970, or CL (R&A) Act, and the judgments of the apex court covering the field would be necessary. Notwithstanding the statutory provisions, contract labour is exposed to severe exploitation, which is marked by a lack of stability and durability of employment; insecurity of tenure; denial of overtime wage; absence of facilities and amenities; absence of safety devices giving rise to accidents; and denial of employment compensation payable to regular employees in the event of their death or disability. Although contract labour is not to be engaged for posts of a perennial nature, the government as well as private industries have engaged contract labour in such posts in defiance of the constitutional provisions under Articles 14, 21 and 39(d). This has pushed a substantial segment of the marginalised working class to penury and abuse of their human rights while private industries have reaped huge profits and unjust enrichment.

The introduction to the CL(R&A) Act begins with a reference to the following ground reality:

“Employment of contract labour has been a cause of various problems. The question of its abolition has been under consideration of government.”

Further, the Statement of Objects and Reasons to the Act reflects the same reality with the following words:

“The system of employment of contract labour lends itself to various abuses.”

These words indicate the legislative intent that contract labour is to be engaged under special circumstances only and for a temporary period.

Section 10(1) of the Act provides for prohibition of employment of contract labour. It states:

“Notwithstanding anything contained in this Act, the appropriate government may, after consultation with the Central Board or, as the case may be, a State Board, prohibit, by notification in the official gazette, employment of contract labour in any process, operation or other work in any establishment.”

Serious lacunae

A closer look at the provisions of the Act indicates that these are marked by serious lacunae, since the statute is silent on the question whether abolition of a post by the appropriate government will automatically lead to regularisation of the post by the existing contract labour.

This aspect was considered by the Supreme Court in Air India Statutory Corporation vs. United Labour Union (1997) 9 SCC 377 when it ruled, inter alia, that the Central government would be the appropriate government in all undertakings in which it has a deep and pervasive interest and in such cases where contract labour has been prohibited, such contract labour would automatically become employees of the principal employers. In a subsequent judgment, Samatha vs State of A.P. (1997) 8 SCC 191, the court cited the Air India judgments with approval stating:

“The question was whether the word ‘regulation’ would include regularisation of the contract labour in the establishment in which contract labour system was abolished, though it was not expressly provided. A Bench of three judges had held that the words ‘regulation’ in the absence of restrictive words must be regarded as plenary in the larger public interest. By necessary implication, it includes everything which is indispensable for the purpose of carrying out the purposes in view. Accordingly, it was held that though an express provision was not made in the Act to regularise the services of contract labour working in an establishment after the abolition of contract labour, by necessary implication, the word ‘regulation’ includes the powers to regularise their services as permanent employees in the establishment.”

Subsequently, a five-judge Constitution Bench of the Supreme Court in Steel Authority of India Ltd. vs National Union Water Front Workers & Ors. (2001) 7 SCC1, diluted the law declared in the Air India judgment and held that on abolition of the contract labour system by the appropriate government, contract labour do not automatically become employees of the principal employer. Thus, the efforts of the marginalised contract labour to obtain the relief of abolition of contract labour and simultaneous regularisation of contract labour to those posts have suffered a serious setback. The problems of contract labour have been compounded by the absence of a positive political will on the part of the Central and State governments.

In view of the anomalies prevailing because of the serious lacunae in the CL(R&A) Act, an all-India Convention against Contract Labour System was organised by the sponsoring committee of trade unions on November 19, 2007. The convention expressed deep concern over the fast-spreading phenomenon of large-scale contractualisation in public and private sectors and adopted the following recommendations for amending the existing laws and enforcement thereof, inter alia:

  • Section 10(1) of the Act be amended to negate the impact of the Supreme Court judgment in the Steel Authority of India Limited [SAIL] case, in particular on the rights of contract workers;
  • Provision with regard to equal pay for same and similar work both for regular and contract/temporary workers should be incorporated in the main body of legislation (at present there is a similar provision in the rules framed under the present statute);
  • Payment of minimum wages prevalent for regular workers in the company/establishment must be ensured for contract workers;
  • In case of death owing to accident or otherwise in course of employment, contract workers should be paid the same compensation as regular workers;
  • The deceased contract worker’s dependants must be provided employment and it should be the statutory obligation of the principal employers to ensure such compassionate employment.

Call for amendments

Amendments to the Act were considered at the 43rd session of the Standing Labour Committee (New Delhi) held on February 20-21, 2009, under the chairmanship of the Union Minister of State for Labour and Employment. The workers’ group at the meeting unanimously called for amendments to provide for:

  • Absorption of contract employees on a regular basis after prohibition under Section 10(1);
  • Insertion of a provision in the main Act for paying same wages and benefits to contract employees for the same and similar nature of work done by regular employees.

In response to the above, the Standing Labour Committee unanimously made, inter alia, the following recommendations:

  • In cases where contract labour perform the same or similar kind of work as workmen directly appointed by the principal employer, the wage rates, holidays, hours of work, and other conditions of service of contract labour shall be the same as are available to workmen on the rolls of the principal employer;
  • No workman should be kept continuously as a casual or temporary worker for more than two years unless he is employed for a specific period (as recommended by the Second National Labour Committee).

Pursuant to the recommendations of the Working Group constituted in the 42nd International Labour Conference (ILC), a tripartite group was constituted vide the Minister of Labour and Employment’s order dated June 30, 2009, to examine the provisions in the CL(R&A) Act, with a view to facilitating greater social protection to contract workers and suggesting amendments to the Act. The third meeting of the workers’ group held on August 10, 2009, discussed the provisions of Section 10 of the Act to see whether it would be feasible to replace the word “abolition” with “regularisation”, since abolition of contract labour in certain establishments does not ensure the protection of the workers’ interests. The group considered that the essence of the judgment in the SAIL case did not envisage the automatic absorption of the workmen on a regular basis after prohibition of contract labour by the appropriate government under Section 10, but while recruiting employees on a regular basis preference should be given to the service of contract labour. In the light of the above, the following recommendations were made:

  • The Act should be suitably amended to provide for speedy verification of the nature of jobs, whether they are perennial or not, and to absorb contract labour.
  • Contract workers should not be terminated from work without any justifiable reason.
  • A provision should be inserted in the main Act providing 100 per cent absorption of contract labour on the job after the same has been notified under Section 10(2) of the Act.

It is significant to note that even after these recommendations by the statutory bodies of the Central government, no action has been taken to bring about suitable changes in the main statute to address the genuine concerns of contract labour.

It is high time enlightened citizens and the working class movement came forward to protect the basic human rights of contract labour and propose appropriate amendments to the statute in order to ensure regularisation of contract labour in establishments having jobs of a permanent nature.

Against this background, it is fair to make the following observations:

  • The Act envisages engagement of contract labour as a temporary phenomenon and it needs to be abolished under Section 10(1) of the statute on fulfilling the conditions set out under Section 10(2). Section 10(1) enables the appropriate government, after consultation with the Central Board, or as the case may be, with the State Board, prohibit by notification in the official gazette, employment of contract labour in any process, work or establishment.
  • The scheme of the Act suggests that the interaction between the appropriate government and the Central/State Board is to be a continuing process for prohibition of contract labour in a particular establishment.

However, the experience and conduct of the appropriate government and the boards in this regard is just the opposite. Ordinarily, a notification for prohibition by the appropriate government after consultation with the board is an exception rather than the rule. As a result, contract labour continues to suffer for an indefinite period, which is contrary to the scheme of the statute.

The experience, after the introduction of the liberal economic policies in the country, runs counter to the scheme and the statements and reasons of the Act. The Central and State governments decided to abolish a number of posts in various establishments and manage the vacant jobs with contract labour on the basis of the so-called economic consideration, that is, as a cost-cutting measure.

The consequences of these decisions, in terms of exponential human cost, were never considered by the authorities nor did the consequences deter them from pursuing this path. The fact that hundreds and thousands of workmen are denied their basic human right to personal dignity is never considered at any stage by the appropriate governments.

Likewise, private industries, emulating the example set by the government authorities, also resorted to the same policy of substituting permanent workers with contract workers in the name of sustaining competitiveness. The only objective of these policies is to ensure super profits to private industries. As a consequence, instead of protecting a workforce with the constitutional rights to security of tenure and fair wages, among other things, a massive force of contract labour is created, leading to industrial and social unrest. The struggle of contract labourers at Maruti Suzuki’s Manesar plant for equal pay for equal work and regularisation is an appropriate example.

Working class consolidation

Working class consolidation is imperative to ensure that the amendments are made by the Central government without any loss of time. Alternatively, the State governments, including the Government of Delhi, may bring about the State amendments.

Assertion of the constitutional rights of the contract labour finds support from international covenants such as Article 7 of the International Covenant on Economic, Social and Cultural Rights and Article 4 of the European Social Charter, and Article 15 of the African Charter on Human and People’s Rights which ensures “equal pay for equal work”. The Constitution of the ILO proclaims “the principle of equal remuneration for equal value”.

Ashok Kumar Panda is Senior Advocate, Supreme Court of India.

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