Objective and Applicability of the Contract Labour (Regulation & Abolition) Act, 1970 – The main purpose of the CLRA Act, 1970 is to regulate the employment of contract labours. It is applicable to an establishment also known as the principal employer that engages 20 or more contract labours and also to the contractor through whom such 20 or more contract labours are engaged.

Registration and Revocation of Licence – The principal employer or the contractor must obtain the necessary licence for the purpose of registration after payment of prescribed fees. The licence is valid for a particular period and can be revoked when it is obtained through misrepresentation or suppression of material facts.

Prohibition on Contract Labours’ Employment – Only the “Appropriate Government” by way of issuing a notification can prohibit employment of contract labours.

Responsibilities of The Contractors – If a contractor engages 100 or more contract labours, then he must provide facilities like canteens, first aids, latrines, drinking water, rest rooms etc.

Payment of Wages – The contractor should pay wages as fixed or prevailing to the contract labours in timely manner in presence of a representative of the principal employer.

Liability of the Principal Employer – The principal employer shall ensure the provisions of toilets, rest rooms, drinking water, canteen etc. to the contract labours. However, the principal employer is also entitled to recover the cost of such provisions provided by him while making payment to the contractor.

The Contract Labour (Regulation & Abolition) Act The Contract Labour (Regulation & Abolition) Act

The Object of the Contract Labour Regulation and Abolition) Act, 1970 is to prevent exploitation of contract labour and also to introduce better conditions of work. A workman is deemed to be employed as Contract Labour when he is hired in connection with the work of an establishment by or through a Contractor. Contract workmen are indirect employees. Contract Labour differs from Direct Labour in terms of employment relationship with the establishment and method of wage payment. Contract Labour, by and large is not borne on pay roll nor is paid directly. The Contract Workmen are hired, supervised and remunerated by the Contractor, who in turn, is remunerated by the Establishment hiring the services of the Contractor.

Registration And Licensing

The Act applies to the Principal Employer of an Establishment and the Contractor where in 20 or more workmen are employed or were employed even for one day during preceding 12 months as Contract Labour. For the purpose of calculating the number, contract labour employed for different purposes through different contractor has to be taken into consideration. This Act does not apply to the Establishments where work performed is of intermittent or seasonal nature. If a Principal Employer or the Contractor falls within the vicinity of this Act then, such Principal Employer and the Contractor have to apply for Registration of the Establishment and License respectively. The contractor The Act also provides for Temporary Registration in case the Contract Labour is hired for a period not more than 15 days. Any change occurring in the particulars specified in the Registration or Licensing Certificate needs to be informed to the concerned Registering Officer within 30 days of such change. From combined reading of Section 7 and Rules 17 & 18 of the Contract Labour (Regulation and Abolition) Central Rules, 1971, it appears that the Principal Employer has to apply for registration in respect of each establishment. Other important point to note is that a License issued for One Contract cannot be used for entirely different Contract work even though there is no change in the Establishment.

Penal Provisions

Section 9 of the Act provides that the Principal Employer, to whom this Act is applicable, fails to get registered under the Act, then such Principal Employer cannot employ contract labour. It also appears that if the Establishment is not registered or if the Contractor is not licensed then the contract labour shall be deemed to be the direct workmen and the Principal Employer or the Establishment shall be liable for the wages, services and facilities of the contract labour etc. For contravention of the provisions of the Act or any rules made thereunder, the punishment is imprisonment for a maximum term upto 3 months and a
fine upto a maximum of Rs.1000/-.


The Act enjoins Joint and Several responsibity on the Principal Employer and the Contractor. The Principal Employer should ensure that the Contractor does the following:
a) Pays the wages as determined by the Government, if any, or;
b) Pays the wages as may be fixed by the Commissioner of Labour.
c) In their absence pays fair wages to contract labourer.
d) Provides the following facilities:
i. Canteen (if employing 100 or more workmen in one place) and if the work is likely to last for 6 months or more.
ii. Rest rooms where the workmen are required to halt at night and the work is likely to last for 3 months or more.
iii. Requisite number of latrines and urinals – separate for men and women.
iv. Drinking water.
v. Washing.
vi. First Aid.
vii. Crche
e) Maintains various registers and records, displays notices, abstracts of the Acts, Rules etc.
f) Issues employment card to his workmen, etc.

Significant judgments of the Supreme Court in the matter are:

  1. Steel Authority of India Ltd. vs. National Union of Waterfront Workers & Ors. The Sail judgment stated that the contract workers would have no right to automatic absorption upon abolition. They would only have a right to a preference in employment if permanent workers were to be employed to fill in the vacancies created by the removal of the contract workers
    upon abolition. The Bench further added that on issuance of notification by the appropriate Government under S 1 0(1) prohibiting employment of contract labour in a given establishment, it is for the contractor to provide work to his labour in other establishments, where the contract labour system is not prohibited. This decision reversed the Supreme Courts decision in Air Indias Case (contract labour of the erstwhile contractor stand absorbed on the rolls of the Principal employer on abolition of contract labour system by appropriate Government under section 10 of the Act).
    2. Maharashtra General Kamgar Union vs. Cipla Ltd. Gist of this judgment is that, if contract workers filed a complaint of
    any unfair labour practices against any principal employer alleging that he was, in fact, their employer and that the contractor was a mere name-lender interposed in the relationship merely to shield the principal employer, this complaint would become non-maintainable.

Checklist For Principal Employer

  1. Registration of the Establishment.
    2. Display of the following notices rate of wages, hours of work, wage
    period, date of payment of wages, date of payment of unpaid wages and name and address of the inspector having jurisdiction.
    3. Maintenance and Preservation of Register of Contractor.
    4. Filing of Return of Commencement and Completion of the Contract.
    5. Filing of Annual Return.
    6. Supervising the responsibilities of Contractor to avoid enjoining of the liabilities.
    7. Ensure provision that facilities of Canteen, Drinking Water, Washing, Rest Room, Latrines and Urinals, First Aid, Crche are provided by the Contractor.

Checklist For Contractor

  1. Licensing.
    2. Renewal of the License.
    3. Maintenance and Preservation of Register of Persons employed, Muster Roll, Register of wages, Register of Fines, Register of Deductions for damages or loss, Register of advances, Register of overtime.
    4. Display of Notice rate of wages, hours of work, wage period, date of payment of wages, date of payment of unpaid wages and name and address of the inspector having jurisdiction.
    5. Provide facilities of Canteen, Drinking Water, Washing, Rest Room, Latrines and Urinals, First Aid, Crche.
    6. Employment card.
    7. Service Certificates.
    8. Half yearly return.

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