CONTRACT WORKERS RIGHT OF AUTOMATIC ABSORPTION

CONTRACT WORKERS RIGHT OF AUTOMATIC ABSORPTION Arthya 1 INTRODUCTION A workman employed in connection with work of an establishment, who is hired through a third person for example a contractor with or without the knowledge of the principle employer is a contract labourer. 2 Employers prefer contract labour as they work for longer hours, are cheaper, easily positioned in hazardous work and in case of accidents employer incurs low cost. This system provides more flexible setup, they are easily fired or terminating of the contract is easier then retrenching own worker. Establishment also saves money in this type of set up, as they are not supposed to pay social welfare benefits such as leave wages, insurance or bonus etc. Contract labour forms a basic system of industrial growth in India, and the number of contract labourers is growing every minute. In a scenario where almost one fourth of workers belong to informal sector it becomes important to protect them. 3 The paper explains Section 10 of Contract labour (Prohibition and Abolition) Act, and how its implication by abolishing the contract labour system in an establishment affects the workers. The paper aims to analyze what happens once system is abolished, and what role the judiciary has played in interpreting section 10 in lieu of workers with SAIL 4 and Air India 5 case. The paper critically scrutinizes both the judgments, and aims to point out how and where the judgment has gone incorrect. Towards the end, the paper discusses about Second National Committee Report, the recommendations given by the Committee, and ones own recommendations after reviewing the same. 1 4 th Year BA LLB Student, O.P. Jindal Global Law School, O.P. Jindal Global University 2 Available at http://homepages.iprolink.ch/~fitbb/ifbww_campaigns/ilo_contract_labour_conv.html, (last visited on 12 th October 2015) 3 Available at http://www.legalservicesindia.com/article/article/regulation-of-contract-labour-616-1.html, (last visited on 11 th October 2015). 4 Steel Authority Of India Ltd. v National Union Water Front, AIR 2006 SC 3229. 5 Air India Statutory Corporation v United Labour Union & Ors, AIR 1997 SC 645. 1 P a g e Journal On Contemporary Issues of Law (JCIL) Vol. 2 Issue 5

THE CONTRACT LABOUR (REGULATION AND ABOLITION) ACT, 1970 6 The Contract Labour (Regulation and Abolition) Act came into enforcement in 1970. The Act as its preamble states was passed to prevent the exploitation of contract labour and also to introduce better conditions of work. The Act provides for regulation and abolition of contract labour. The policy of the Act is to abolish contract labour, wherever possible and attainable, and where it cannot be abolished altogether, the working conditions of the workers should be regulated as to ensure payment of wages and provision of essential amenities. The Act provides for regulated conditions of work and contemplates progressive abolition to the extent anticipated by Section 10 7. Section 10 8 of the Act deals with abolition while the rest of the Act deals mainly with regulation. The main idea of the section is to find out whether contract labour is necessary for the industry, trade, business, manufacture or occupation, which is carried on in the establishment. 9 Section 10(1) is a non-obstante clause, which powers it to prevail over any other provision of the Act. Section 10 authorizes the government to prohibit employment of contract labour in any process, operation or other work of establishment in any establishment. The appropriate government is duly bound under this section to consult with central board 10 or state board 11 as the case may be, before prohibiting employment of contract labour in any process, operation or other work in any establishment. It is not necessary that the appropriate government be bound to accept the advice given by the board. The appropriate government has to consider the conditions of work and benefits provided for contract labour engaged in 6 The Contract Labour (Regulation and Abolition) Act, 1970, ACT NO. 37 OF 1970. 7 The Contract Labour (Regulation and Abolition) Act, 1970, ACT NO. 37 OF 1970, section10. Prohibition of employment of contract labour.- (1) 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. (2) Before issuing any notification under sub-section (1) in relation to an establishment, the appropriate Government shall have regard to the conditions of work and benefits provided for the contract labour in that establishment and other relevant factors, such as-- (a) whether the process, operation or other work is incidental to, or necessary for the industry, trade, business, manufacture or occupation that is carried on in the establishment: (b) whether it is of perennial nature, that is to say, it is of sufficient duration having regard to the nature of industry, trade, business, manufacture or occupation carried on in that establishment; (c) whether it is done ordinarily through regular workmen in that establishment or an establishment similar thereto; (d) whether it is sufficient to employ considerable number of whole-time workmen. Explanation. If a question arises whether any process or operation or other work is of perennial nature, the decision of the appropriate Government thereon shall be final. 8 The Contract Labour (Regulation and Abolition) Act, 1970, ACT NO. 37 OF 1970, section10. 9 Gammon India Ltd v Union of India, AIR 1974 SC 960. 10 The Contract Labour (Regulation and Abolition) Act, 1970, ACT NO. 37 OF 1970, section 3. 11 The Contract Labour (Regulation and Abolition) Act, 1970, ACT NO. 37 OF 1970, section 4. 2 P a g e Journal On Contemporary Issues of Law (JCIL) Vol. 2 Issue 5

that establishment before prohibiting the employment of contract labour along with other relevant factors mentioned in the section. The section or the Act does not expressly talks about the fate of workers working in these establishments under contract. The question here arises is will the workers be absorbed under the principle employers or will they be left jobless? Though the section expressly does not mention about the workers after, put it clearly put the responsibility over the appropriate government to that the work in the favor of the labour. According to ones view by mentioning that the main purpose of the Act is to abolish contract labour, the legislation did not intend to leave workers jobless once there is an exercise of section 10, and also section expressly mention about working in favor of the workers. The question here arises is that whether abolition of contract labour in an establishment under section 10 would result in an automatic absorption of the workers in the establishment as permanent workers or no? This question was answered in different cases, but it was expressly dealt with in Air India 12 case were court decided in the favor of the workers but later it was overruled by SAIL 13 case that went completely in the different direction from Air India. JUDICIAL INTERPRETATION The question of permanency of labourers was first raised in the case of Workmen of Best and Crompton Industries Ltd v The Management of Best and Crompton Engineering Ltd 14, where it was held that if a contractor or the principle employer did not obtain license or registration certificate under the Act, in that case the workmen would become the direct and permanent employees of principle employer. It was overruled with the judgment of Dena Nath v National Fertilizers Limited 15 and Gujarat Electricity Board Ukai v HMS 16, it was held that section 10 does not expressly lay down any right of contract workers to be absorbed as permanent employees in case of abolition. This clearly implied that they were not provided any protection under this section and that after abolition they have to start all over again. 12 Air India Statutory Corporation v United Labour Union & Ors, AIR 1997 SC 645. 13 Steel Authority Of India Ltd. v National Union Water Front, AIR 2006 SC 3229. 14 Workmen of Best and Crompton Industries Ltd v The Management of Best and Crompton Engineering Ltd, (1985) ILLJ 492 Mad. 15 Dena Nath v National Fertilizers Limited, 1992 AIR 457. 16 Gujarat Electricity Board Ukai v HMS, 1995 AIR 1893. 3 P a g e Journal On Contemporary Issues of Law (JCIL) Vol. 2 Issue 5

Relief was given to the contract labourers for a short span through the judgment of Air India Statutory Corporation v United Labour Union 17. In this case court held that on the abolition of contract labour system under section 10 the contract workers automatically would become the workmen of the principle employer. The court here emphasized on the purposive interpretation of the act rather then literal and went ahead and said that the act was to protect contract labourers. Court said that though there is no express mention of right of permanency, but the concept of abolition of contract labour system under section 10 was to improve the condition of the workmen and not to worsen it and by literal interpretation the workers would be left with no jobs, which in no way helps to improve the condition of the workers. 18 The relief was short lived as this judgment was overruled in Steel Authority Of India Ltd. v National Union Water Front. 19 In this case it was held that contact workers had no automatic right of absorption in case of abolition of the contract labour system. In Air India 20 case, court was of the view that there was no express provision of automatic absorption because there was no need of it, whole purpose of the Act implied that there would be automatic absorption. 21 Whereas in SAIL 22 case it was said that the failure to provide such right, meant that no such right could be inferred, and that it was left deliberately. This was based on the cost, which would be inferred by the management to employ permanent workers, but failed to consider the employment of the workers. 23 The court also said that the real intend of section 10 was not a temporary solution but a permanent one. 24 Court went furthers and said that by departmentalizing the existing workers who may, by a fortuitous circumstance, be in an establishment for very short time while abolition or absorption. 25 It could as well be that a contractor and her contract labour that were with an establishment for number of years were changed just before the insurance of a prohibition notification. 26 In such a case there could be no justification to prefer the contract labour engaged on the relevant date over the contract labour employed for a long period earlier. 27 The court here did not analyze that in such a 17 Air India Statutory Corporation v United Labour Union & Ors, AIR 1997 SC 645. 18 19 Steel Authority Of India Ltd. v National Union Water Front, AIR 2006 SC 3229. 20 Air India Statutory Corporation v United Labour Union & Ors, AIR 1997 SC 645. 21 22 Steel Authority Of India Ltd. v National Union Water Front, AIR 2006 SC 3229. 23 24 25 26 27 4 P a g e Journal On Contemporary Issues of Law (JCIL) Vol. 2 Issue 5

situation the worker who has been there for number of years earlier should be absorbed, as she has no social security and time to start all over again. ANALYSIS In the SAIL 28 case the court held that after the contract labour system is abolished the only thing workers could do, is to raise a demand for absorption under the industrial disputes Act and litigate the matter before the tribunal. After reaching the industrial court, the workers are only entitled to preference with respect to permanent employment, which is if only the principle employer intends to employ regular workmen. 29 Only if the workers are otherwise found suitable and they poses the necessary technical qualification. Technical qualifications were not of a concern earlier when they were paid less, this case took a step backwards, from the security that Air India case provided to the workers. 30 According to one s understanding, the court took a very narrow interpretation of the Act and did not justify the provisions completely. The act regulates contract labour system to prevent exploitation of the contract labourers. The Act not only regulates workers in an establishments and its abolition in certain circumstances but also mentions about matters connected therewith 31. This phase shows that legislature while drafting the act did not only intend the appropriate government to consider the fact if is the current establishment suitable for carrying out work or not but also the fact that after abolition of the system what would be the mode of workers sustenance. 32 Different provisions of Act mention how principal employer is responsible for a safe and clean environment of the labour, which ensures the protection of their basic fundamental rights. The question that surfaces here is that; does abolition of the system result in the abolition of their right? For example under section 16 33 formation of canteen, which provides right to food; under section 17 34 provision of a rest room which is right to leisure; under section 18 35 to provide drinking water, washrooms etc., which ensures basic right to health. These provisions clearly shows that the intention of the 28 29 30 Sundar K.R., 2012, Contract Labour in India, page 113. 31 The Contract Labour (Regulation and Abolition) Act, 1970, ACT NO. 37 OF 1970, section 10. 32 Sundar K.R., 2012, Contract Labour in India, page 110. 33 The Contract Labour (Regulation and Abolition) Act, 1970, ACT NO. 37 OF 1970, section 16. 34 The Contract Labour (Regulation and Abolition) Act, 1970, ACT NO. 37 OF 1970, section 17. 35 The Contract Labour (Regulation and Abolition) Act, 1970, ACT NO. 37 OF 1970, section 18. 5 P a g e Journal On Contemporary Issues of Law (JCIL) Vol. 2 Issue 5

legislature was not bring the workers back from where they started but to provide them with basic human rights. By abolishing the system of contract labour and not absorbing the worker under principle employer, basic human rights provided by the Act under the employment by the principle employer and right to lively hood under article 21 ends, which clearly violates the purpose of the Act. Report V Contract Labour fifth item on the agenda, article 6 puts a duty on the state that both permanent works and contract labour would receive the same protection. 36 By applying section 10 in its literal interpretation the equal protection that article 6 talks about is taken away as the government with the help of section 10 can take their living at any time. But by insuring absorption the labourers are brought at an equal footing to that of permanent employee. REMEDIES Commission 37 mentioned in its report that it is important for the economic growth of the countries that the organizations are flexible to adjust the number of the number of the work power in an establishment based on economic efficiency. It is essential to focus on core competencies if an enterprise wants to remain competitive, therefor contract workers should not be engaged in core working activities, except in case of seasonal demands. The commission further recommended. We are aware that off-loading perennial non-core services like canteen, watch and ward, cleaning, etc. to other employing agencies has to take care of three aspects (1) there have to be provisions that ensure that perennial core services are not transferred to other agencies or establishments; (2) where such services are being performed by employees on the pay rolls of the enterprises, no transfer to other agencies should be done without consulting, bargaining (negotiating) agents; and (3) where the transfer of such services do not involve any employee who is currently in service, the management will be free to entrust the service to outside agencies. 38 36 Available at www.ilo.org/public/english/standards/relm/ilc/ilc86/rep-v2b.htm, (last visited on 21 st October 2015) 37 Available at www.prsindia.org/uploads/media/1237548159/nlcii-report.pdf, (last visited on 12 th October 2015) 38 6 P a g e Journal On Contemporary Issues of Law (JCIL) Vol. 2 Issue 5

The contract labour will, however, be remunerated at the rate of a regular worker engaged in the same organization doing work of a comparable nature or if such worker does not exist in the organization, at the lowest salary of a worker in a comparable grade, i.e. unskilled, semiskilled or skilled. 39 This clearly mentions that protection of worker is the upmost purpose of the Act; this talks about protection and power that should be given to the workers in an establishment who would be affected by the implementation of section 10. The commission also recommended that the burden of proof in case of; that the principle employer is paying sufficient amount to workers who shifted from contract labour should be on the principle employer. The principle employer will ensure that the prescribed social security and other benefits are extended to the contract workers. 40 CONCLUSION Though I agree that abolition and automatic absorption of contract labour would discourage investments and expansion of labour intensive areas in highly competitive market but it is important to strike a balance. We cannot leave people jobless in the name of economic growth. Therefor as also recommended by the committee I am of the view that the abolition of the contract labour system should not be a decision of executive body based on the recommendations made by the judicial body but should also be in power of judicial body. As judicial body is more qualified to analyze the situation and evidences. The abolishing the system there should be reasonable number of contract workers who should be absorbed in the permanent employment, this would stick a balance between both Air India case and Sail case. Every contract worker who has been a worker for more then three years against a permanent worker should be converted into a permanent worker or any contract worker who has been on the same job for an continuous period of five years may not be against permanent worker should be converted to permanent worker. There needs to be an amendment in the Act, which according to me should remove the intermediary, which would result in better wages for the workers and would put them in a better place to negotiate. The workers should be empowered to raise industrial disputes without the help of direct employees. Contract workers should be able to exercise their right to freedom of association including the right to form or join trade 39 Available at www.prsindia.org/uploads/media/1237548159/nlcii-report.pdf, (last visited on 12 th October 2015) 40 7 P a g e Journal On Contemporary Issues of Law (JCIL) Vol. 2 Issue 5

union or to form a similar body for the protection of their interest and collective bargaining, equality at work etc. should be given. 8 P a g e Journal On Contemporary Issues of Law (JCIL) Vol. 2 Issue 5