Deployed Professionals & The Contract Labour Act
The employer company/ies (especially in the IT/ITES sector) often deploy their professionals, on a project, in another organization. The question that arises is whether the provisions of the Contract Labour (Regulation and Abolition) Act, 1970 (the “Contract Labour Act”) would be applicable to a professional who is being temporarily deployed (“Deployed Professional”) on a project, in another organization, by the employer company. In light thereof, this article seeks to examine whether the provisions of the Contract Labour Act would be applicable to a Deployed Professional.
Relevant Provisions of The Contract Labour Act
The Contract Labour Act applies to (i) every ‘establishment’[1] in which twenty or more workmen are employed or were employed on any day of the preceding twelve months as contract labour and (ii) to every ‘contractor’[2], who employs or who employed on any day of the preceding month twenty or more workmen[3]. If the number of workmen (as defined under the Contract Labour Act) employed as contract labour by the company equal or exceed twenty, the Contract Labour Act will apply in respect of the company.
Further, section 10 of the Contract Labour Act prohibits employment of contract labour in "core activities of an establishment", provided however, a principal employer may engage contract labour or a contractor in any core activity, if:
i) the normal functioning of the establishments is such that the activity is ordinarily done through contractors; or
ii) the activities are such that they do not require full time workers for the major portion of the working hours in a day or for longer periods, as the case may be; or
iii) any sudden increase of volume of work in the core activity which needs to be accomplished in a specified time.
For the states of Andhra Pradesh and Telangana, “core activity of an establishment” is defined to mean any activity for which the establishment is set up and includes any activity which is essential or necessary to the core activity, but does not include the following (provided the same by themselves are not "core activities" of such establishment):
i) sanitation works, including sweeping, cleaning, dusting and collection and disposal of all kinds of waste;
ii) watch and ward services including security service;
iii) canteen and catering services;
iv) loading and unloading operations;
v) running of hospitals, education and training institutions, guest houses, clubs and the like where they are in the nature of support services of an establishment;
vi) courier services which are in the nature of support services of an establishment;
vii) civil and other constructional works, including maintenance;
viii) gardening and maintenance of lawns, etc;
ix) housekeeping and laundry services etc., where they are in nature of support services of an establishment;
x) transport services including ambulance services;
xi) any activity of intermittent in nature even if that constitutes a core activity of an establishment; and
xii) any other activity which is incidental to the core activity.[4]
Applicability of Contract Labour Act to Deployed Professional
The Contract Labour Act will apply in respect of a Deployed Professional, except in the following circumstances:
- The Deployed Professional does not come within the purview of the definition of a ‘Workman’
Section 2(1)(i) of the Contract Labour Act defines the term ‘workman’ as under:
"Workman' means any person employed in or in connection with the work of any establishment to do any skilled, semi-skilled or un- skilled manual, supervisory, technical or clerical work for hire or reward, whether the terms of employment be express or implied, but does not include any such person-
(a) who is employed mainly in a managerial or administrative capacity; or
(b) who, being employed in a supervisory capacity, draws wages exceeding five hundred rupees per mensem or exercises, either by the nature of the duties attached to the office or by reason of the powers vested in him, functions mainly of a managerial nature; or
(c) who is an out-worker, that is to say, a person to whom any articles or materials are given out by or on behalf of the principal employer to be made up, cleaned, washed, altered, ornamented, finished, repaired, adapted or otherwise processed for sale for the purpose of the trade or business of the principal employer and the process is to be carried out either in the home of the outworker or in some other premises not being premises under the control and management of the principal employer.”
The Supreme Court of India, in Steel Authority of India Ltd vs National Union Water Front Workers[5], has interpreted the above definition as under: “The definition is quite lucid. It has two limbs. The first limb indicates the meaning of the term as any person employed in or in connection with the work of any establishment to do any skilled, semi-skilled or un-skilled, supervisory, technical or clerical work for hire or reward. It is immaterial that the terms of employment are express or implied. The second limb contains three exclusionary classes - (A) managerial or administrative staff; (B) supervisory staff drawing salary exceeding Rs.500/-(p.m.) and (C) an outworker. ……….”
Therefore, in the event the conditions of work of a Deployed Professional attract any of the exceptions specified herein above, such Deployed Professional would not come within the purview of the definition of the term ‘workman’.
- The Deployed Professional, if within the purview of the definition of ‘workman’, is not employed as ‘contract labour’
The Contract Labour Act does not apply if the workman is not employed as ‘contract labour’. As per Section 2(1)(b) of the Contract Labour Act, “a workman shall be deemed to be employed as “contract labour” in or in connection with the work of an establishment, when he is hired in or in connection with such work by or through a contractor, with or without the knowledge of the principal employer.”
The High Court of Orissa, in its interpretation of the above provision[6], held as under:
“The determinative factor, therefore, is whether a workman was hired in or in connection with work of an establishment. A permanent employee who during his employment can be placed at different establishments at the choice of the contractor cannot be called to be a contract labour because he is not hired in or in connection with the work of any particular establishment. The logic behind this conclusion is that where employment of a person is unrelated with any specific work of any establishment, he is not a contract labour, because his employment has no nexus with any particular work of any establishment.”
Therefore, unless the Deployed Professional is hired specifically in or in connection with a specific work of the company, he/she cannot be said to be employed as ‘contract labour’.
3. The Deployed Professional provides services under a ‘services contract’ entered into by the company with the organization where the Deployed Professional is to be deployed
The Principal Bench of the Central Administrative Tribunal, New Delhi, in Sh. Krishan Lal Srivastava vs. I.C.A.R[7], has held as under:
“The basic idea is that the contractor who supplies the labour as contract labour makes profit out of supplying human beings for service. There has been exploitation in the process. The contractor made his own profit out of what ought to have been paid to the contract labour. This should not be identified with or confused with the supply of service. Supplying expertise is different from supplying contract labour. A security guard for instance requires years of intensive training before he is drafted for security in a bank or in an establishment. Somebody who has undertaken to train such people and offering their services, cannot be equated with a contractor supplying contract labour just as a computer firm supplying software assistants, programmers, system assistants, data entry operators, networking operators cannot also be equated with a contractor supplying labour. They should not be identified with or confused with supplying contract labour. If we apply the Contract Labour Act into such areas, it will result in devastating consequences. The service sector will be obliterated because all those persons whom the suppliers of such services has drafted, will be treated as a workman and in course of time, if there is perennial work, he being the contractor, will be asked to disappear and the workmen will compel direct employment as a permanent member of the establishment. This is to say the least not what is intended in the Contract Labour Act. It is a perversion of what is thought of as a measure of social welfare legislation for the workmen who are seen to be exploited by the contractor himself and by the principal employer, later. They constitute the weaker section of the society. Most of them are unskilled and ignorant. They consider themselves to be lucky if they can keep their body and soul together for which they were required to put long hours of strenuous physical work. It is to protect such people and to prevent their exploitation that the Contract Labour Act of 1970 was passed. If three decades later, all highly skilled professionals arc to be treated as just workmen and any establishment is treated as an industry, this piece of legislation will end up as not a progressive legislation for the welfare of the downtrodden but as an anachronism.”
Therefore, the Contract Labour Act will not apply in respect of services provided by the Deployed Professional under a services contract.
Conclusion
Therefore, while the Contract Labour Act does apply to Deployed Professionals, there are circumstances, as analysed above, wherein the applicability of the Contract Labour Act to Deployed Professionals ceases. It is, therefore, pertinent that employer companies are mindful of the designation and manner of employment of Deployed Professionals, in order to prevent non-compliance with any provisions of the Contract Labour Act.
The views and opinions expressed in this article belong solely to the author and do not reflect the position of Tatva Legal, Hyderabad.
[1] ‘Establishment’ means any place where any industry, trade, business, manufacture or occupation is carried on.
[2] ‘Contractor’ means a person who undertakes to produce a given result for the establishment other than a mere supply of goods or articles of manufacture to such establishment, through contract labour or who supplies contract labour for nay work of the establishment and includes a sub contractor.
[3] The states of Andhra Pradesh, Maharashtra, Rajasthan, Haryana and Uttar Pradesh have increased this threshold to 50 (fifty) or more workmen
[4] Section 2(dd) of the Contract Labour Act, as inserted by Contract Labour (Regulation and Abolition) (Andhra Pradesh) (Amendment) Act, 2003.
[5] AIR 2001 SC 3527
[6] Basanta Kumar Mohanty vs State of Orissa, (1992) 2 LLJ 190
[7] O.A. No. 414 of 1999