Fixation of minimum wages for contract employees engaged in a factory which is classified under the ‘residuary’ category under Minimum Wages Act, 1948

Minimum Wages Act, 1948 provides for minimum wages in certain employments specified in para I or para II of the Schedule appended to the Act. Entry 65 of part I of the Schedule provides for minimum wages to the workers employed in ‘Employment in any factory defined under Factories Act, 1948’.

Section 2(e) of the Minimum Wages Act provides for the definition of ‘employer’. The said definition includes contractor.

Further, Section 2(j) of the Minimum Wages Act provides for the definition of ‘employee’. The said definition includes employees of contractor.

On this background, the issue whether employees of the contractor are entitled to minimum wages applicable to the contractors industry or that of the principal employer came for consideration before Division Bench of Bombay High Court. The Hon’ble Bombay High Court in the matter of Indian Labour Organization & ors v. D.H. Deshmukh Presiding Officer 6th Labour Court Bombay, reported in 1998 III LLJ 512 Bom, has held that the employees of the contractor are covered by minimum wages applicable to their employer and minimum wages applicable to principal employer are not applicable to the employees of the principal employer. Perusal of the said judgment will show that industry of the contractor determines the rates of minimum wages payable to the workers of the contractor and not the industry of the principal employer into whose premises the contract workers may have been deployed.

Therefore, the employees of the contractor are not entitled to minimum wages of the principal employer.

However, Government of Maharashtra has framed rules under Contract Labour (R & A) Act, 1970. The rules are named as the Maharashtra Contract Labour (R & A) Rules, 1971. The said rules provide for application for license and grant of license. Form No. IV provides for application for license wherein the contractor is required to provide all relevant details mentioned in the said form. Rule 21 (2) provides for certificate by principal employer in Form V. The said certificate provides an undertaking that the principal employer will be bound by all the provisions of Contract Labour (R & A) Act, 1970 and Maharashtra Contract Labour (R& A) Central Rules, 1971 in respect of employment of Contract Labour.

Rule 25 provides for form and terms and conditions of license; Rule 25(2) (iv) (a) provides that the rate of wages payable to the workmen by a contractor shall not be less than the minimum rates of wages fixed under Minimum Wages Act and also for any agreement/ settlement the rate shall not be less than the higher of the two rates. As per the said Rule 25(2) (iv) (a) r/w Rule 25 (iv) (b), the workmen of the contractor, if performing the same kind of work as the workmen or class of workmen directly employed by the principal employer, the rates of wages payable to the workmen by the contractor shall be the rates payable to the workmen directly employed by the principal employer doing the same kind of work.

Form VI under Rule 25(1) of the Maharashtra Rules provides for conditions for license to be granted to a contractor. The said form has verbatim provisions that are contained in Rule 25 (iv) (a) & (b) and therefore, in spite of the decision of the Bombay High Court in 1998 III LLJ Bom 512, the contractor is liable to pay at least minimum wages applicable to its establishment.

Besides the rules, one important aspect has to be considered while determining payment of wages to the employees of the contractor. The Contract Labour (R & A) Act 1970 prohibits employment of workers in the manufacturing process of the establishment. The Government of Maharashtra, Industry, Energy and Labour Department has issued a notification under Contract Labour (R & A) Act 1970 on 25.02.2011; the said notification provides for a declaration to be given by the principal employer. The said declaration seeks an undertaking from the principal employer declaring that the employment of contract labour is not incidental & is necessary and that, it is not of perennial nature & it can’t be carried out ordinarily through regular workmen etc.

Thus, in the light of the above, one can always argue that judgment of Division Bench Bombay in Indian Labour Organization & ors v. D.H. Deshmukh, Presiding Officer, 6th Labour Court Bombay & Ors reported in 1998 III LLJ 512 Bom, is no more good law.

However, while deciding the issue of wages & service conditions of employees of contractors it is advised that employers should be fair so as to avoid unionism & facilitate uninterrupted continuation of employment of contract labour.

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