In an establishment where twenty or more (fifty or more in Goa, Bihar, Gujarat, Himachal Pradesh, Tripura and Karnataka) workmen are employed on any day in the preceding year as contract labour, the provisions of the Contract Labour (Regulation and Abolition) Act, 1970 [CLRA Act] become applicable. A workman is deemed to be employed as ‘contract labour’ in or in relation to work of the establishment, if he is hired for such work by or through a contractor, with or without the knowledge of the principal employer. The Act also becomes applicable to every contractor who employs twenty or more (fifty or more in Goa, Bihar, Gujarat, Himachal Pradesh and Tripura*) workmen on any day in the preceding year.
The law lays down specific registration and license requirements in such a scenario. In accordance with the provisions of CLRA Act, the principal employer must obtain a registration certificate in respect of contract labour employed. The certificate should include the names of the contractors who have deployed 20 (or 50, as the case may be) or more contract laborers in in the establishment. Similarly, the contractor who has deployed 20 (or 50, as the case may be) or more contact laborers in the establishment should also obtain license in accordance provisions of the Act. Further, neither the company can engage more number of contract labourers than specified in the Registration Certificate nor the contractor may deploy contract laborers more than the number specified in the License.
In case of non-registration of establishment which should have been registered, the employment of contract labour is prohibited. Likewise, the Act mandates that a contractor to whom the Act applies shall not undertake or execute any work through contract labour except under and in accordance with the license issued under the Act.
If the event the contract labourers engaged without registration by the principal employer and without a valid license obtained by the contractor, there is high probability of principal employer and contractor facing multiple risks, including prosecution under the law.