05 Mar Contract labour system – loopholes and achievements
Contract labour system – loopholes and achievements – Today Current Affairs
In India, contract labourers are protected by the Contract Labour Regulation and Abolition Act, 1970. A contract labourer is defined in the Act as one who is hired in connection with the work of an establishment by a principal employer through a contractor. Contract labour forms a large chunk of employment in industries in India. Their presence is not only there in the informal sector but also in the formal sector. As per the Annual Survey of Industries, from 2008–09 to 2017–18, the number of persons employed through contractors increased from 2.7 million to 4.4 million. In formal establishments, this workforce is supposed to be deployed in peripheral and seasonal jobs; however, this is often violated with establishments deploying them in core1 and perennial activities and thereby violating the principle of “equal pay for equal work.” This segment of workers has also gained traction because it provides flexibility to organisations, making it easier to focus on its core activities. The integrity of this argument is, however, under contention. In a neo-liberal, competitive market, the contract labour system is seen as a cost-cutting strategy by organisations whereby the contract labourers are employed without the traditional rights and support systems available to their regular employed counterparts.
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Contract Labour in Mines
In the iron ore mines, data shows that as of 1 August 2021, there were 618 contract labourers employed apart from the 566 regular employees in the mines. The total labour force includes both executives and non-executives employed directly in the mines. These contract labourers were employed through a total of 32 contractors registered with the mines. The CLRA mentions that the contract of employment for contract labour should be for a specific period. This fixed duration ensures non-continuity of services, which has bearing for regularisation of the workers and attracts payment of gratuity. We observed, the contractors maintain long standing relations with the establishment owing to the renewable nature of contracts. Most contract labourers, if not all, remain engaged with the company for years in this system.
Further, due to the region’s geographical nature, weak connectivity with other places, distance to the nearest labour office, and absence of other employment opportunities, workers remain bound with the company. There also exists the problem of awareness of their rights among the contract labourers. It is also important to note that there are no trade unions for the contract labourers to raise their issues; however, specific issues like timely payment of wages, safety aspects of labourers, etc, are taken up by some of the trade unions as mentioned in their respective by-laws. The contractors, however, have an association to raise their issues with the principal employer.
Contractor and Contract Labour : The Hindu Analysis
Here, we discuss the specific issues that have emerged in the interactions between the contractors and the human resource managers of the iron ore mine. These interactions were noted during formal meetings in the mine and through field notes that were collected in informal settings. These issues relate to the functioning of the contract labour system in the mines. Importantly, these issues have been flagged a few times in consecutive meetings, however, they remain structural and need a much deeper deliberation.
Profit margins: In the case of the iron ore mine of Jharkhand, when a tender is floated for any work or activity, the contractors usually quote a profit margin of 2%–4% while knowing fully well that the establishment can allow for a profit margin of up to 10%. This profit margin, which is over and beyond the work order, allows for the sustenance of the contractors themselves to stay in business. It is also seen that some contractors go to as low as negative profit margins in their quotation. Going by the diktats of open competition and a cost-cutting strategy, the establishment must choose contractors for work orders who quote the lowest amount. As mentioned earlier, these contractors have a deep understanding of the prevailing trend in the unit so as not to know what and how exactly to bag the work order. After the contract is given to any contractor, some “bad faith” contractors maintain their usual profit margin (and sometimes beyond that as well) by squeezing pay from the contract labourers.
Death and injury at workplace: The contract labourers are also governed by the Employees’ Compensation Act (ECA), 1923, which puts the onus of responsibility of either death or injury directly or indirectly on the contractor. While Section 12(1) of the ECA maintains the liability of the principal employer in the event of any compensation to be provided in certain events, Section 12(2) entitles the principal employer to be indemnified by the contractor for such a liability. In cases where the contract does not explicitly mention the clause of compensation, the labour commissioner would decide on the matter. As it turns out, such legislation also put the contractors in a position whereby they will want a buffer stock of resources to cater to such needs if they arise.
It is to be noted that the law looks at contractors as “petty” employers who would be able to tide over such difficulties at workplace. Often, either the contractor has limited resources available at their disposal as compared to the principal employer, or it may directly be owing to the non-willingness of the contractors that puts the burden solely on the contract labourers themselves. This is not to mention that based on the type of accident/disablement or death, the resources provided to the contract labour or their family sometimes remain inadequate.
The Damages Clause : The Hindu Analysis
In mid-2021, the trade unions across the company’s production and mining activities called for a strike to push for their wage revision demand. As part of the worker solidarity and show of strength, the contract labourers were also coerced into joining the strike. The contract labourers also joined the strike without being permanent employees of the establishment or members of the trade union. Therefore, on account of work not being done for that day, contractors faced penalisation owing to the liquidated damages (LD) clause set up in the contract for not providing labour for that day. The contractors maintain that although the contract labourers were ready to work that day, they were not allowed to do so owing to the strike; hence, the LD clause should not be applied in such cases. This again presents a scenario wherein the contractors find such clauses not in their best interests. Rectification of such clauses for the future also goes beyond the scope of the management.
Additionally, such strikes that although take the form of a pan-worker solidarity across different locations and grades of the establishment, nevertheless have had little to contribute to the cause of the contract laborers themselves.
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Conclusions
It is clear from these excerpts that the onus of the employment of contract labourer falls to a large extent on the contractor. The contractors face the brunt of not having enough resources as the principal employer or not having the inclination to better the condition of contract labour. Hence, such rent-seeking behaviour from the contractor is witnessed. Therefore, while social-security provisions for contract labourers are desirable, the employment and employer–employee relationship also play a crucial role in providing contract labourers the necessary rights at the workplace. Given the avenue of employment picking up fast in the economy, it is time to address these loopholes.
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