The Maharashtra Government has amended the Contract Labour Act, presumably as a part of labour law reforms. But it appears to have outsourced thinking to Rajasthan Government.

Let me explain, although some facts are well known.

The Contract Labour Act is a central act. It can be amended by a State amendment. The original Act applied to all establishments which employed twenty or more workmen. It also applied to contractors who employed twenty or more workmen.

Such Employers had to register their establishments and such contractors had to obtain license. So very barring small players this act applied to all. The trouble was that thoughtless political leaders who indulged in populist acts without thinking of implications of their actions. For example, in Andhra Pradesh a contractor was required to take a license if he employed just five persons. In many states they reduced the limit to ten. Even this may not be so bad an act, but the problem was that it was done to extract money, it wasn’t done in the interests of workers.

Then came a stage when the Government officers made good money by refusing to grant licenses to renew them. Some states said that they will not renew licenses for a certain kind of work. You know what happened thereafter, right. Yes, you made one right guess. It added to corruption. But there was another effect. Employers engaged contractor on one stated purpose, say ‘maintenance work’ and actually employed them on any activity of their choice.

The point I am making is that once you play with the purpose of the Act, focus on corrupt practices instead of implementing law in spirit and letter, the situation becomes irretrievable. Added to this was the fact that contract labour got banned through State Advisory Boards selectively. Employing contract labour in canteen in a Mahindra and Mahindra was banned, but the Government stayed away from making a similar rule governing comparable establishments. This arbitrariness, though permissible by law, only foments further corruption and makes labour laws an unfathomable black hole.

Following globalisation, implementation of laws was shown scant respect by many unscrupulous employers. Reliance is alleged to employ contract labour on production operations and in the same job which their permanent workers do. It looks like an open secret. The Government is silent. We know why. The unions are also silent. We know why!

Now Rajasthan Government stepped in. They amended the Act to say that it will not apply if you employed less that fifty workmen. It will also not apply to contractors who employed less than fifty workmen. This was the effect of the amendment which came in force in October 2014.

Whom does it benefit? It absolves the Government of keeping control on what goes on in small establishments. The employers are saved of botheration of implementation. And contractors who had certain responsibilities as conditions of license do not have to discharge them. In the process workers will suffer, they were suffering earlier too, but now it is official!

What pains is that this Rajasthan amendment is copied verbatim by Maharashtra Government. Shockingly, it was praised by Loksatta, a Marathi daily with very high readership.

Now look at the justification given by the Rajasthan Government to amend the Contract Labour Act:

Contract Labour (Regulation and Abolition) Act, 1970 provides that the Act shall apply to every establishment in which twenty or more  workmen  are  employed  or  were  employed  on  any  day  of preceding twelve months as contract labour. Similarly, the Act also applies to every contractor who employs or who employed on any day of the preceding twelve months, twenty or more workmen.

Because  of  above  threshold  limit,  principal  employers while  hiring  personnel  or  procuring  commodities  from  tiny  and small  entrepreneurs  and  petty contractors,  find  it difficult  to execute  contracts,  as  the  small  units  face  hardship in ensuring formalities under the Act. It has been observed that the lower limit either encourages non-compliance or restrict the engagement of required labour as per demand.

In order to provide more opportunity of employment and to facilitate employers of tiny and small units and petty contractors, it is  proposed  to  enhance  the  above  threshold  limit  from  twenty  to fifty workmen.

The Bill seeks to achieve the aforesaid objectives.

It is shocking because in the overall labour reform process, this is not the most strategic action to take! It is just peripheral!!

The Second National Commission on Labour took a balanced view. This is what the Commission said:

The Commission is conscious of the fact that in the fast changing economic scenario and changes in technology and management, which are entailed in meeting current challenges, there cannot be a fixed number of posts in any organisation for all time to come. Organisations must have the flexibility to adjust the number of this workforce based on economic efficiency.  It is essential to focus on core competencies if an enterprise wants to remain competitive.  We would, therefore, recommend that contract labour shall not be engaged for core production/services activities. However, for sporadic seasonal demand, the employer may engage temporary labour for core production/service activity. We are aware that off-loading perennial non-core services like canteen, watch & ward, cleaning, etc. to other employing agencies has to take care of three aspects – (1) there have to be provisions that ensure that perennial core services are not transferred to other agencies or establishments; (2) where such services are being performed by employees on the payrolls of the enterprises, no transfer to other agencies should be done without consulting, bargaining (negotiating) agents; and (3) where the transfer of such services do not involve any employee who is currently in service of the enterprise, the management will be free to entrust the service to outside agencies. The contract labour will, however, be remunerated at the rate of a regular worker engaged in the same organisation doing work of a comparable nature or if such worker does not exist in the organisation, at the lowest salary of a worker in a comparable grade, i.e. unskilled, semiskilled or skilled. The principal employer will also ensure that the prescribed social security and other benefits are extended to the contract worker. There is a reason that compels us to make this recommendation.  At many of the centres we visited, we were told during evidence, that there were cases of contractors making deductions from the wages of contract workers as their contribution towards social security, and then absconding without depositing either the contribution realised from the workers or their own contributions into the appropriate social security fund. [Para 6.109: Summary of Recommendations of the Second National Commission on Labour]

It should be clear why the Maharashtra Government’s amendment is not a step in the direction of reform. Copying Rajasthan Amendment has taken it nowhere!

There are many organisations, I am told that Essar Steel in Gujarat was one of them, which employed only contract labour. They are not alone in with that dubious distinction. Such a state could not have been reached without connivance of the Government.

The fact is that contract labour is like the Jaipur Foot! You can’t move without it, but it is not a part of your body!!

Any wise man with a Jaipur Foot must take care of it, if he does not wish to be immobile.

Vivek S Patwardhan