Article (November-2017)


Ethical engagement of contract labour

Deepanjan Dey

Designation : -   General Manager-HRM

Organization : -  Tata Steel BSL Ltd., Angul, Odisha


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The belief that compliant to Law is the parameter for ethical engagement of contract labour was emboldened by the fact that the Air India Statutory Corporation case (1997(76) FLR 119 (SC) = 1997(1) LLN 75 (SC) stood reversed by the SAIL judgment (2001 LLR 691 (SC) = 2001 LAB I.C 3656(SC)). As a consequence of SAIL judgment absorption of contract labour stood no more a sine qua non even after prohibition of the engagement of contract labour in any process of the establishment by the appropriate Government.

In order to practice ethical engagement of contract labour the organization needs a mindset to go an extra mile in accommodating this work force who plays a vital role in the prosperity of the organization. However, sadly the fruits of the organization are reaped mostly by the officers and regular workmen of the organization and these sections of workmen are meted with a raw deal. What is most unfortunate in many organizations leaving aside the value based companies the contract labour are sometimes even deprived of even of the minimum wages which is a bare minimum requirement. After overseeing and managing the engagement of contract labour for many years across various industries the practice of engagement of contract labour appears per se to be exploitative. It is an irony that this law was enacted with prime objective to stop the exploitation of this class of employees by abolishing the contract labour system wherever prevalent and to regulate wherever abolition is not possible. After thirty one years of enactment of this law it appears that the law has failed to full fill its objective.

An organization believing in the philosophy of inclusive growth can only think of practicing ethical engagement for contract labour. In spite of good intentions of many companies for inclusive growth, in practice we found that the contract labour are always vulnerable to losing jobs without any compensation even after working uninterrupted for long years especially in case a company goes for a rationalization or cost cutting drive. However, a proper and judicious cost benefit analysis may sometimes demonstrate such reduction of contact labour have a negligible impact on cost vis-a-vis with reduction of one percent raw material consumption through re-engineering or two percent reduction in wastage. Nevertheless, management having obsession to show some tangible result the contract labour becomes the soft target in spite of their immense contribution to the organization for years. In one of my assignment I had a target to reduce one hundred fifty contract labours from engineering department many of them with ITI qualification. These contract labours were working in the organization for fifteen to twenty years uninterrupted at a stretch. At first instance seventy employees were targeted and the concerned contractor was advised to seize their gate passes. The contractor in turn terminated their services even without compliance to section 25 F of Industrial Dispute Act. These labours approached the union but the union could be easily managed as these contract labours did not have the right to vote for electing the sole bargaining agent. As the union was not acting as their true representative they approached the local MLA for relief. The MLA was also managed without much pain as the company is well reputed in his constituency. Finding no solution from the MLA, they approached the local labour office through a union not recognized by the company. In their written complaint to the labour officer inter-alia they stated their position as contract labour of the company and prays for "reinstatement" under the principal employer. On receiving the complaint letter forwarded by the labour officer for comments of the company I was relieved to receive it as unit HR head but pained as an individual. Their admittance as contract labour has made their claim weak at the outset in view of the Supreme Court ruling in the Steel Authority of India Ltd. And another Vs State of West Bengal and others (2008 (3) CLR 457 (SC) = 2008 (119) FLR 589 (SC)) whereby the apex court had held such admittance as contract labour makes it impermissible to plead at a later stage that the arrangement between the principal employer and contractor is sham or it is interposed to camouflage the real intention of the employer. Hence, by such admittance they have made their case weak and the company as principal employer will not be under any obligation to absorb these workmen as later on they cannot make out a case of sham contract. This case equivocally demonstrates that these class of labours do not even have the privilege to sound legal advice and they mostly rely upon the union representatives who are mostly ignorant on the various facets of the law guiding the contract labour.

The other unethical deployment of contract labour are found across many industries (including value based companies) when they are engaged on similar and same nature of job along with the regular workman. However, when it comes to wages the contract labour has to remain content with the minimum wages whereas his counter part who is a regular workman will get wages which is not only fair but at times exuberant. Apart from the wages these regular workman are generally eligible for other perks and privileges. It may be noteworthy to mention that in cases where the contract labour performs the same or similar kind of work as that of the direct workman of the principal employer Rule 25 (V) (I) of central and various states pertaining to contract labour demands that the contract labour should be paid equal pay and similar privileges as enjoyed by the regular workman. However, this rule stands violated with impunity even in companies who swear by values and ethics. There might be few exceptions if there is a strong union of the contract labour in the organization/s as they are guided by their own settlement/s. However, in most of the cases this settlement/s provides wages above minimum wages but nothing close to the wages or privileges entitled to the regular workman of the organization. As a consequence of such difference of treatment meted out to two categories of workmen it creates a huge discontent among contract labour who have been working in the organization for years. This kind of situation gives rise to a feeling of 'we' and 'they' and has contributed to major IR strife including violent ones in many organization/s. The unfortunate part is that management wittingly or unwittingly declines to even acknowledge the existence of this problem and to address the issue with empathy. In one of my assignment with one of the most revered brand of this Country I have put this issue before the managing director and have placed a plan to address it. In response I was told to mind my business well as there is a basic difference in the qualification between these two categories of workmen. I replied to the MD that he might be legally correct in view of the Supreme Court judgment in U.P Rajya Vidyut Utpadan Board and Another Vs U.P Vidyut Mazdoor Sangh (2010 (1) LLN 124 SC = 2010 LLR 453 (SC)) whereby the apex court has ruled that the degree of skill and dimension of the job are required to be considered for determining any claim for equal pay for equal and similar nature of job by the contract labours. However, when it comes to ethics and empathy we cannot deny that we are actually in a exploitative mode as the contract labour are performing similar and same nature of job as that of their regular counterparts. This response further infuriated the MD.

The organization I referred to deploy a huge pool of contract labour and to show empathy they have introduced a scheme to protect the social security of the contract labour. According to this scheme the contractor has to contribute a small percentage of his total billing and similar amount will be contributed by the company in some insurance fund and in case of any premature death or disablement of the contract labour he or his family will be eligible for pension and compensation. Any voluntary measure on social security taken is welcome but I saw no merit in this scheme as the statutory provision of PF and ESI already takes care of such unfortunate incidents. What would have been welcome is the true recognition of the contract labour who are working in the core process for years along with the regular workmen. They deserve to be on the muster roll of the company with fair wages and privileges and should not be left to lurch forever. As it would involve cost it can be done in a phased manner in a newly created grade to keep the cost under control. The ethical engagement of contract labour demands such voluntary action from benevolent and ethical employers.

The discrimination is also prevalent when it comes to welfare measures be it canteen, uniform or rest rooms. The canteen of contract labours in most companies are makeshift sheds and food served there are inferior to that of what is served to the permanent employees. Some benevolent employers might have taken measures to provide better amenities to the contract labours but they are few in numbers. In my career span I had to face a violent agitation wherein the contract labours felt let down by the amenities and food provided to them in the canteen. The ethics and empathy of this company for their employees including contract labour cannot be questioned. Nevertheless, the contract labours were infuriated by the fact that the canteen amenities for officers and permanent workmen were far superior than what was provided to them in spite of almost paying the same price. Their grievance was genuine and true. After such agitation the company provided a better canteen structure with a dedicated HR officer to keep an eye on the hygiene and food served in the canteen.

It is high time in order to be fair to the contract labours the Central Government should bring an amendment in Contract Labour (Regulation & Abolition) Act 1971 (CLRA) whereby engagement of contract labour is prohibited in core activities of the organization. Such measures will at least mitigate the genuine grievances of contract labour to great extent across industry. The Andhra Pradesh Government in 2003 has already amended the CLRA Act wherein the engagement of contract labour has been prohibited in the core process of the organization. The Central Government on similar lines can also take necessary initiative. However, a caveat needs to be added as any such amendment to CLRA Act will impact business especially the manufacturing sector which is groping with many challenges to survive. Hence, the Government should also mull to bring an amendment to chapter VB of the Industrial Disputes Act simultaneously whereby the applicability of this chapter should be amended from 100 to at least 1000 workmen. This chapter of ID Act has been to an extent responsible for a burgeoning contract labour force in the country whose conditions are pitiable. Successive Government since PV Narsimha Rao tenure intended to amend this chapter but could not do it owing to the various extraneous and political pressures. The present Government in the labour code Industrial Relation Bill 2015 has already proposed for raising the number to 300. Some State Government has already amended this chapter and raised the number from 100 to 300. However, to support and to allow the major big players to also stay competitive the number should be somewhere around 1000 or even more. The trade union leaders opposing such amendment should see reason and support the initiative of amending the applicability of this chapter. They should rise above partisan politics as such amendment in the ID Act will only alleviate the condition of the contract labour and create job opportunities for the prospective workforce.