Contract Labour in Core Activity under Labour Codes

Introduction

The engagement of contract labour has observed a significant rise in number across various establishments. The ratio of contract workers to regular employees in IT companies is shifting at a fast rate. The Government of Andhra Pradesh has amended the provisions of the Contract Labour Act (‘CLRA Act’) stipulating the core and non-core activities. As per the State amendment, employment of contract labour in core activities is prohibited in Andhra Pradesh and Telangana. However, there is no such prohibition in Karnataka for engaging the contract labour in the core activities as in the case of Andhra Pradesh. With the introduction of the new labour codes, the CLRA Act will be subsumed by the Code on Occupational Safety, Health and Working Conditions, 2020 (‘OSH Code’) bringing in major changes relating to the engagement of contract labour. One such change is the prohibition of contract labour employment in core activities of the establishment.

What is Core Activity?

As per Section 2(p) of the OSH Code, 2020, ‘Core Activity’ refers to any activity for which the establishment is set up and includes any activity which is essential to such activity. There are certain activities excluded from the purview of core activities such as sanitation works, catering and canteen services, laundry and housekeeping services, watch and ward services, etc. provided that such activities shall not be considered as an essential or necessary activity, if the establishment is not set up for such activity.

Given the above definition of Core Activity, there are certain exceptions. The principal employer can engage contract labour in core activities in the following circumstances:

  1. Where the normal functioning of the establishment is such that the activity is done through contractors.
  2. When there is a sudden increase in the volume of work to be completed within a specified period.

Engaging Contract Labour in Core Activity of an Establishment – The Right Way

Usually, companies engage contract labour in their core activities in the manufacturing sector. Many global MNC’s in India whose primary nature of work is IT/ITES are engaging IT vendors as contract labour to carry out their core work or the same or similar kind of work to that of their permanent employees. Such companies engaging vendors in their core activity exposes them with risk of non-compliance with the laws and may attract imposition of penalties under the New Codes.

To mitigate the risk, companies should examine and consider a few aspects before engaging contract labour;

  1. Determine the primary nature of work of the contractor’s establishment
  2. Determine the nature of the agreement between the company and the contractor
  3. Understand if the contract labour is engaged on a project basis or hourly basis

If the contract labour is engaged on a project basis, then the contract will come to an end at the completion of the project. If the contract labour is engaged based on business needs (or hourly basis), it might be to meet the contingency of sudden increase of volume of work in the core activity which needs to be accomplished within a specified time. The same may be justified from the perspective of requirements of the Code and benefits of exceptions as mentioned above may be taken. 

Given the above, companies will have to gear up to justify their position regarding engagement of contract labour in the core activity within their organizations after the Labour Codes come into force.

Conclusion

Companies would be required to identify and understand their core activity, as defined under the proposed OSH Code. This would help them streamline the process of engaging contract labour. In case organizations opt to deploy contract labour in their core activity, it must be noted that the same should be done in compliance with the requirements of the Code.

– Gayatri Manjunath, Advocate and Associate

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1 thought on “Contract Labour in Core Activity under Labour Codes”

  1. B.Chandrashekara Shetty

    Article deserves complements for the good attempts made under the new Code. CLRA is one of the mischievous peace of labor law legislation in India and that status appears to have been continued under the Code too.
    In my view, using the phrase ‘engaging contract labor’ may not correct, according to me it shall be always ’employing contract labor’ will be appropriate as per the definition. As I remember, the most confusing factor under the new code is availing the services of the workers who are from the role of the service provider., i.e., contractor which will be outside the purview.. The provisions of the contract labor do not apply to these workers nor the principal employer need to comply with the provisions applicable to CLs. Even on careful study of the CLRA existing Act, the contract. laborers are the workers’ who have employed for the purposes of to do work at the principal employers’ establishment/premises’ with the prescribed number. This view has also as I read, upheld in some of the judgments. Hence, obviously, the position of contract laborers will take shade and shelter as ‘deputed employees’ of their provider who are also full pledged employees of such providers.
    In law, there are flaws too to interpret. The phrases like ‘Equal wage for equal work, or ‘ same and similar nature of work’ etc. is a difficult task to argue as there are so many aspects needs to be examine and not mere designation or discharging of work between the two. Good number of judgments of Supreme Court and High courts are available turning down such arguments with identifying certain parameters for deriving the benefit.

    -B.Chandrashekhar Shetty,
    Auditor.

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B. Chandrashekar Shetty - Advocate

Mr. Chandrashekar Shetty is a Senior Labour Law Compliance Auditor at BCP Associates and has audited multiple client companies across India. He is also a member of our senior legal advisory practice. Previously he has worked as Deputy Controller, Manager-Industrial Relations and Industrial Relations Officer in KPTCL, Bangalore for more than 30 years. Prior to this, he has dealt with Legal, Personnel and IR matters including Wage Settlements, Grievance Machinery, Manpower Study and Social Security Compliances for about 10 years. He is a Faculty member of Labour Law, HRD Centre, KPTCL Bangalore.

Mr. Shetty holds a B.Com. and L.L.B. degree, Post-Graduate Diploma in Business Administration, Diploma in Public Relations from Bangalore University and PG Diploma in Industrial Relations & Personnel Management from Bharatiya Vidya Bhawan. He is enrolled as Advocate in Karnataka Bar Council and is a Govt. Arbitrator of Chit Funds in Karnataka.

S Venugopal Rao

S Venugopal Rao is an experienced labour law and service matters expert and is a member of the senior advisory team at BCP Associates. Having joined the chambers of Mr. B C Prabhakar in 2012, he is knowledgeable and well versed in multiple employment and labour law topics. S Venugopal Rao holds a Bachelor’s degree in Science from Karnataka University, Dharwar and Bachelor of Law from Bangalore University. He enrolled as advocate in Karantaka State Bar Council in 1976. He joined the chamber of Sri. Kolachalam Srinivasa Rao a leading civil advocate. After practicing for 6 years at Ballari, he joined Orient Paper Mills, Orissa (of G P Birla Group). He was designated as Manager (Law) under the Factories Act in 1995. In 1999, he joined Andhra Pradesh Paper Mills Rajahmundry as Manager Legal and was subsequently elevated as Dy. General Manager (Legal). As Factory Manager & Legal Head, he oversaw compliance of Factories Act and Rules there under towards safety, health and welfare, including compliance under Pollutions and Environmental laws and Explosives Act, etc. Additionally, he is well acquainted with Environment Management System ISO 14001: 2004, Occupations, Health and Safety Series 18000:1999. As Legal head in APPM he has briefed and appeared along with Senior Advocate before Appellate Authority constituted under Water (Prevention & Control of Pollution) Act. He retired from the services of Andhra Pradesh Paper Mills in 2011. As legal head he has handled important cases both in Labour and Civil and has experience in drafting and vetting Contracts, Agreements, Lease Agreement, Conveyance Deeds, , Affidavits and scrutiny of several legal and other documents, Preparing and settling Petitions, Appeals, Plaints, Written Statements, Rejoinders, Affidavits and Written Arguments etc. for submission/pleadings for various legal proceedings.

C K Devappa Gowda - Advocate

C.K. Devappa Gowda (CKD) is an Advocate and Labour Law expert. He holds a Bachelor’s Degree in Science from the University of Mysore and a Degree in Bachelor of Law from Bengaluru respectively. He also holds a Diploma in Social Service Administration from the National Institute of Social Science, Bengaluru. After completing his studies, he had enrolled as a Advocate and initially practiced in the Civil Code attached to the office of BCP. He then worked as Personnel Officer in Chemicals and Textile Manufacturing Industries for 5 years. Thereafter took up employment in one of the largest Public Sector Bank. He has worked in different parts of the country and has extensive experience in the cross country IR domain. The significant part of his service was at corporate level overseeing and implementing HR policies and practices and management of IR. He has been a member of personnel committee of Indian Bank Association. After retirement from service, Mr. Gowda has been working with Mr. BC Prabhakar’s firm for the last 12 years. He has expertise in all areas of people management, drafting of documents relating to service matter including the settlements under the ID Act. He has dealt with all employment laws including appearance before the Courts, Tribunal and Authorities under the different Labour Laws. Mr. Gowda is one of the senior Labour Law experts at BCP Associates.

Srijatha Ghosh - POSH Specialist & Advocate

Srijata Ghosh serves as external member on the Internal Committee of several Companies across various sectors. She handles all kinds of POSH related matters including investigations and inquiries. She provides Training on Sexual Harassment across all verticals for Managers and Senior Management, General Awareness for all employees and Internal Committee members on the legislation (The Sexual Harassment of Women at Workplace Prevention, Prohibition and Redressal Act, 2013). She also formulates Policies for Prevention of Sexual Harassment at Workplace (“POSH”) and advises Companies on setting up of their Internal Committees. Srijata is involved in providing Legal Advisory services on POSH and other labour law matters for various clients.

In her previous experience, she has extensively dealt with End-to-End Contract Management, Due Diligence, POSH Compliances, Legal Advisory, etc. Srijata worked with Companies like Accenture India Private Limited, Quess Corp., Capgemini Business Services (India) Limited and Pramata Knowledge Solutions Private Limited. Srijata has handled varied legal issues including drafting, vetting and negotiation of contracts, drafting policies of various organizations. She has resolved issues relating to employment laws and has worked closely with the HR teams. She has provided legal advisory services to senior management. She was also associated with Kolkata High Court in counselling clients with legal matters such as Property, Due Diligence etc. Srijata has worked in an LPO Service Firm, Manthan Legal Services Private Limited for Legal Research, depositions, medical summaries, demand drafting etc.

Srijata completed her B.A.LL.B from M. S. Ramaiah College of Law, Bangalore University in 2009. Srijata is a member of the Karnataka Bar Council since 2010. She is also a member of the Gender Sensitivity Sub Committee of Karnataka Employer Association (KEA).

Caroline Lobo - POSH Specialist & Advocate

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She has also handled matters relating to employer-employee related Enquiries, wherein she has reviewed and conducted hearings and enquired into the matters and has guided the Internal Committee and provided guidance in providing recommendations to the management. She is also a Member of the Gender Sensitivity Sub-committee of Karnataka Employer Association (KEA).

Prior to joining BCP Associates, Caroline has has a wide range of experience in corporate, commercial and contract law, mergers and acquisition and has undertaken drafting, vetting, negotiating and finalizing legal and commercial transactions. She started her career in litigation then moved onto the Corporate sector. In the span of 13 years, she has worked at Chambers of Advocate Jayashree Murali, Krishnamurthy and Co. Legal Consultants, Colt Technology Services and Oracle India Pvt. Ltd. She always had a keen interest in Women and Child related issues. She has worked with Child Welfare Committee and NGOS’s. In addition, she has worked with Swasthi Health Resource and Centre, where she was the External member to the Internal Committee (IC). She worked closely with the committee in strategizing, planning, reviewing and implementing the assigned tasks, which included building material to raise awareness against sexual harassment at workplace. Further, she has been involved in conducting inquiries into matters related to sexual harassment at workplace.

Caroline earned her Law degree from University Law College, Bangalore, from where she graduated in the year 2005.

Manoj Kumar – Senior Associate

At BCP Associates, Manoj Kumar is involved in managing and conducting labour law compliance audits of principal employer and contractors. He is also involved in client co-ordination and conducting labour law training programs for vendors. He has conducted on-ground labour law audit for factories. Manoj also provides support in advising vendor clients on labour law queries. He completed B.A., LL.B. from BMS College of Law, Bangalore in 2016

Rashmitha Venkatachalam Das - POSH Specialist & Advocate

Rashmitha Venkatachalam Das is the External Member of the Internal Committee of several reputed Organizations across various sectors. Handling complex inquiries has been her forte and she is extremely passionate about it. She is actively involved in providing Training on Sexual Harassment (Prevention, Prohibition and Redressal) Act, 2013 across all verticals for Managers and Senior Management, General Awareness for all employees and Internal Committee members. Rashmitha possesses capabilities in delivering sessions in Hindi and Kannada, in addition to English. She has formulated Policies for Prevention of Sexual Harassment at Workplace (“POSH”), advised companies on setting up of their Committee. Rashmitha is involved in providing Legal Advisory services on POSH for various clients spread across diverse sectors. She has also been handling domestic enquiries for various clients. 

Rashmitha possesses experience both at Law Firms and Corporates in various capacities. She started her career at Krishnamurthy and Co, Legal Consultants and then moved on to work as an In- House Legal Counsel with Companies such as Biocon Limited, Columbia Asia Hospitals Private Limited, Adecco India Private Limited. With a long stint in the Corporate side, Rashmitha decided to pursue further education in Law with a specialization in Labour and Employment Laws. She has rich experience in drafting, vetting and negotiation of various types of contracts, providing legal opinions and has driven the team in formulating process and procedures and their implementation. She has drafted several employment related policies in Corporates. Rashmitha has been a part of various key committees in Organizations and assisted committees in scrutiny of documents pertaining to human organ transplant as well as clinical trials.

Rashmitha holds an LL.M. in Labour and Employment Laws from University Law College, Bangalore, which she completed in the year 2018 with Two Gold Medals. She is also a Rank Holder at the University. She has completed BA, LL.B. from Bangalore Institute of Legal Studies, Bangalore University in the year 2009. Rashmitha is a member of the Karnataka Bar Council since 2009 and also a member of the Gender Sensitivity Sub Committee of Karnataka Employer Association (KEA).

Manisha Vidyadhar – Senior Associate

At BCP Associates, Manisha Vidyadhar is involved in managing and conducting labour law compliance audits of principal employer and contractors. She is also involved in client co-ordination and conducting labour law training programs for vendors. She has conducted on-ground labour law audit for factories. Manisha also provides support in advising vendor clients on labour law queries.  She completed B.A., LL.B. from BMS College of Law, Bangalore in 2016.

Amrutha Ananth – Senior Associate

At BCP Associates, Amrutha Ananth is involved in managing and conducting labour law compliance audits of principal employer and contractors. She is also involved in client co-ordination and conducting labour law training programs for vendors. She has conducted on-ground labour law audit for factories. She also provides support in advising vendor clients on labour law queries.

Amrutha is also part of the labour law advisory and HR Policy practice and is actively involved in drafting opinions on various aspects of labour laws and formulate and review employment policies and procedure.

Amrutha completed B.A., LL.B. from Christ University, Bangalore in 2015. She is also a semi-qualified Company Secretary.

Sunil Arya – Principle Associate

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Prior to joining BCP Associates, Sunil has 10 years of post-qualification experience in diversified portfolios of advisory, drafting, policy analysis and dispute in the domains of contracts, general civil matters, employment law, competition law and construction arbitration matters. Sunil started his career as a Law Researcher in Delhi High Court. He moved on to be part of regulatory analysis team of CIRC, a unit of CUTS International. In addition, Sunil has been part of legal team of Jindal India Thermal Power Limited. He has also taught competition law, tax law and investment law at VIPS, Delhi.

Sunil holds LL.M. from The Indian Law Institute, Delhi. He is First Rank Holder in his thesis. He completed B.A, L.L.B. (Hons.) from I.P. University, Delhi. He also holds First Rank in P.G. Diploma in Competition Policy and Laws from The National Law University, Delhi.

Chandrakala K A – Principle Associate

At BCP Associates, Chandrakala has 12+ years of experience in conducting and managing labour law compliance audits of principal employer and contractors. She is also involved in co-ordination with many clients. She has conducted on-ground labour law audit for factories. She also provides support in advising vendors on labour law queries. Chandrakala is actively involved in research and providing valuable inputs to the firm pertaining to updation in labour law audit function.

Chandrakala started her career in litigation in chamber of Sri. Ashok where she was involved in drafting, pleading and appearance before Karnataka High Courts and lower courts on the criminal side.

Chandrakala completed B.A in Arts from Kuvempu University, Shimoga in 2003 and LL.B. from Mangalore University in 2006.

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