Contract Labour (Regulation and Abolition) Act, 1970

The Contract Labour (Regulation and Abolition) Act, 1970 (CLRA Act) is a central Indian legislation enacted on September 5, 1970, and effective from February 10, 1971.

It was introduced to regulate the employment of contract labour in certain establishments, prevent their exploitation, and provide for the abolition of contract labour in specific circumstances where it is deemed feasible.

The Act addresses issues like poor working conditions, lack of job security, and unequal treatment compared to regular employees.

It consolidates provisions for registration of establishments, licensing of contractors, welfare measures, and penalties for non-compliance.

The Act is administered by both Central and State Governments, depending on the “appropriate government” (Central for establishments under Central control, like railways or public sector undertakings; State otherwise).

Note on Current Status (as of November 2025): The CLRA Act is set to be subsumed under the Occupational Safety, Health and Working Conditions Code, 2020 (OSH Code), which consolidates 13 labour laws, including this one. However, full nationwide implementation of the OSH Code remains pending, with many states still in the process of notifying rules. As of late 2025, the CLRA Act continues to apply until the codes are fully enforced. Recent judicial interpretations, such as in 2023 cases, confirm its ongoing relevance.

Objectives

• To regulate the employment of contract labour and ensure fair treatment, including wages, working hours, and welfare facilities.
• To abolish contract labour in processes that are perennial, incidental to the main work, or typically performed by regular employees, thereby promoting direct employment.
• To prevent exploitation by contractors and principal employers, ensuring accountability for violations.
• To establish advisory boards for policy guidance and mechanisms for registration, licensing, and inspections.
• Explanation: The Act balances industrial needs with worker rights, recognizing that contract labour is essential in some sectors but prone to abuse. It does not outright ban contract labour but provides tools for its regulation or prohibition where exploitation is evident.

Applicability and Key Definitions (Sections 1 & 2)

• Applicability: The Act applies to every establishment (factory, mine, oilfield, plantation, port, railway, or other notified entity) employing 20 or more contract labourers on any day in the preceding 12 months. It also applies to contractors employing 20 or more workers. Exemptions include intermittent or casual work (less than 120 days in a year or seasonal work less than 60 days). It does not apply to managerial or advisory roles. The “appropriate government” can extend or exempt via notification.
• Explanation: This threshold ensures coverage for larger operations where exploitation risks are higher, while excluding small-scale or temporary setups to avoid burdensome compliance.
• Key Definitions:
• Contract Labour: A workman hired for an establishment’s work through a contractor, with or without the principal employer’s knowledge (Section 2(b)). Includes indirect employees like daily wagers supervised by contractors.
• Contractor: A person supplying contract labour or undertaking work through it (Section 2(c)); includes sub-contractors.
• Principal Employer: The head or owner of the establishment, or a designated manager (Section 2(g)).
• Establishment: Any place where industry, trade, business, or occupation is carried on, including government departments.
• Workman: Skilled/unskilled/manual/clerical workers employed on wages, excluding managerial staff.
• Appropriate Government: Central for Central Government-controlled entities; State otherwise.
• Explanation: These definitions distinguish contract from regular employment, emphasizing the intermediary role of contractors to prevent sham arrangements where direct employment is disguised to deny benefits.

Advisory Boards (Chapter II, Sections 3-5)

• Central and State Advisory Boards are constituted to advise on the Act’s administration. The Central Board includes a Chairman, Chief Labour Commissioner, and representatives from government, industry, contractors, and workers (11-17 members). State Boards have similar composition (9-11 members).
• Explanation: Boards ensure multi-stakeholder input, particularly in decisions on abolition, promoting balanced policy-making.

Registration of Establishments and Licensing of Contractors (Chapters III & IV, Sections 6-15)

• Registration (Section 7): Principal employers must register with the registering officer (Gazetted Officer) within a stipulated time, providing details like location and nature of work. A certificate is issued; revocation possible for misrepresentation or violations after a hearing.
• Licensing (Section 12): Contractors must obtain a licence from the licensing officer, specifying work details and conditions. Licences are time-bound, renewable, and revocable for non-compliance.
• Explanation: These provisions ensure accountability; unlicensed contractors cannot employ labour, preventing fly-by-night operations. Appeals against orders lie with an appellate officer within 30 days.

Welfare and Health Provisions (Chapter V, Sections 16-21)

• Contractors must provide: Canteens (for 100+ workers), restrooms (for overnight stays), drinking water, latrines/urinals (separate for genders), washing facilities, and first-aid boxes.
• If contractors fail, principal employers are liable and can recover costs.
• Explanation: These mimic facilities for regular workers, ensuring humane conditions. Rules are prescribed by the appropriate government, emphasizing health and dignity.

Hours of Work, Wages, and Records (Sections 28-30)

• Hours and wages align with other labour laws (e.g., Minimum Wages Act). Contractors handle payment before due dates; principal employers liable on default.
• Registers for workers, wages, and muster rolls must be maintained.
• Explanation: Prevents wage delays or underpayment; inspections ensure compliance.

Prohibitions and Abolition (Chapter VI, Section 10)

• The appropriate government, after consulting advisory boards, can prohibit contract labour in any process if it is perennial, incidental to main work, done by regular workers, or employs full-time workers.
• Explanation: Abolition aims at direct employment for core/perennial jobs. Over 88 notifications have prohibited it in specific sectors (e.g., certain mining operations). No automatic absorption post-abolition unless the contract is sham.

Penalties and Procedure (Chapter VII, Sections 22-27)

• Violations (e.g., employing unlicensed labour): Imprisonment up to 3 months, fine up to ₹1,000, or both.
• Obstruction of inspectors: Up to 3 months imprisonment/₹500 fine.
• Cognizance only on inspector’s complaint; company officers liable if responsible.
• Explanation: Strict penalties deter non-compliance; inspectors have powers to enter, examine, and seize records.

Important Case Laws

• Gammon India Ltd. v. Union of India (1974): Upheld the Act’s constitutional validity, ruling it does not violate Articles 14, 19, or confer excessive powers. Explanation: Confirmed the Act’s reasonableness in regulating labour.
• Standard Vacuum Refining Co. v. Their Workmen (1960): Defined genuine vs. sham contracts; no absorption if genuine. Explanation: Early benchmark for identifying exploitation.
• BHEL Workers Association v. Union of India (1985): Contract workers entitled to same pay and conditions as regulars for similar work. Explanation: Promoted parity to prevent discrimination.
• People’s Union for Democratic Rights v. Union of India (1982): Principal employer liable for benefits if contractor defaults. Explanation: Reinforced joint liability.
• Gujarat Electricity Board v. Hind Mazdoor Sabha (1995): Only government can abolish under Section 10; no automatic absorption. Explanation: Limited judicial role in abolition.
• Air India Statutory Corporation v. United Labour Union (1997): Directed absorption post-abolition (overruled later). Explanation: Emphasized worker protection but reversed for lacking statutory basis.
• Steel Authority of India Ltd. v. National Union Waterfront Workers (2001): Landmark; no automatic absorption post-abolition; only if sham contract. Preference in future hiring. Explanation: Overruled Air India; aligned with liberalization, prioritizing business flexibility.
• R.K. Panda v. Steel Authority of India (1994): Absorption for long-serving (10+ years) contract workers. Explanation: Factored continuity in determining sham setups.
• Kirloskar Brothers Ltd. v. Ramcharan (2023): Absorption requires Section 10 notification and sham finding. Explanation: Recent reaffirmation of SAIL principles.
• Parimal Chandra Raha v. Life Insurance Corporation (1995): Statutory canteen workers absorbable as principal employees. Explanation: Linked to Factories Act obligations.

Miscellaneous (Sections 28-35)

• Inspectors appointed for enforcement; power to exempt in public interest; rules-making authority with governments.
• Explanation: Allows flexibility while maintaining oversight.