Contract Labour (Regulation and Abolition) Act, 1970
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This article is written by Devarshi Singh, a student pursuing five year BLS LL.B from Government Law College, Mumbai. In this article, the author has given a brief overview of the current scenario in the Indian Labour Law.


The chronicles of Indian labour legislation date back to the era of British occupation of our country. The first labour legislation to govern the Indian workforce was the Factories Act, 1883. Through the law, India received the first clause of working hours to be limited to eight hours, the abolition of child labour, and the addition of limitations on women in night employment for safety purposes, and the initiation of the provisions of overtime wages for work done over and above the mandated eight hours. Before its onset, Indian labour market had seen the ill-effects of an unregulated market as workers were subjected to all kinds of maltreatment and were perceived as mere cogs in the wheel of industrialisation. 

In the year 1947, when India received deliverance from the British colonial rule, the country aimed to base itself upon the principles of a socialist welfare state and strove to safeguard and endorse the economic and social upkeep of the people.

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In recent years, especially since 2014, a number of programmes centred towards reforming the country’s labour legislations have been brought forward by introducing amendments to the pre-existing laws, giving sanctions to new statutes and effecting their codification. They also include the issuance of guidelines for the reform procedure of the collective economy by furnishing the employers with legal dispensations, thereby expediting the ease of doing business and easing the inflow of substantial investment by foreign companies into Indian industries. It has also been asserted that liberalising the labour law inspection systems are apposite to unshackle proprietors from stringent regulations of the olden times.

In India, the repercussions of the COVID-19 pandemic has affected all classes but the socio-economically deprived groups have had to bear the brunt of the crisis in the most tragic way possible. The nationwide lockdown imposed by the Central government compounded their miseries which led to the displacement of migrant labourers and workers in the informal sector on a mass level, along with their families with limited or negligible social security coverage.

Last month, in light of the economic and humanitarian crisis perpetuated by the pandemic, several states moved to amend prevailing labour laws, either repealing them entirely or amending provisions related to operational hours to promote commercial transactions and sustain industrial production, principally in the processing division.
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Labour Laws – A Broad Categorization

The catalogue of laws that administer India’s labour force is inherently sizeable with at least 40 central level statutes and more than 100 state-level acts and regulations.

However, there is no established elucidation of labour laws in the country. In a general sense, they can be classified into four categories. 

Acts administering working conditions:

  • Factories Act, 1948;
  • Shops and Commercial Establishments Act, 1961;
  • The Contract Labour (Regulation & Abolition) Act, 1970.

The Factories Act, 1948 aims to manage the working situations in factories, to control health, protection, annual leave and approve special provisions regarding the workforce in factories, mines or estates. Through this legislation, various duties and liabilities are assigned to the owner of the factory and to the manager as well.  Various amendments to the act and decisions by the judiciary has enlarged the purview of the definition of occupier, chiefly in relation to procedures in factories involving occupational hazards.  

The Shops and Commercial Establishments Act, 1961, has similar provisions as the Factories Act as it aims to regulate hours of work, payment, overtime, weekly day off with pay, other holidays with pay, annual leave, employment of the workforce but the differences between these laws are twofold. This act covers establishments that do not come under the definition of factory, mines or plantations.  In addition, unlike the Factories Act, it is a part of the state list and each state has a separate Shops and Commercial Establishments Act. E.g. Bombay Shops & Establishments Act, 1948,  the Delhi Shops and Establishments Act, 1954, etc.

The Contract Labour (Regulation and Abolition) Act, 1970 (CLRA Act) focuses at overseeing employment of labour on a contractual basis in establishments and the termination of contract labour in specific circumstances. A workman is deemed to be employed as a Contract Labour when he is hired in connection with the work of an establishment by or through a Contractor.

Acts safeguarding social security:

  • Employees’ Provident Fund Act, 1952;
  • Workmen’s Compensation Act, 1923;
  • Employees’ State Insurance Act, 1948.

The Employees’ Provident Fund Act, 1952, makes provisions for schemes such as Employees’ Deposit Linked Scheme, an insurance coverage programme furnished by the Employees’ Provident Fund Organisation (EPFO) and  Employees’ Pension Scheme which stipulates providing for superannuation pension, retiring pension, permanent total disablement pension to the concerned employees and disbursal of the widow or widower pension, or the children or orphan pension to the near charges of the employees under their charge.

The Workmen’s Compensation Act1923  stipulates the employers with the payment of compensation to the workmen under their charge or to beneficiaries of such employees in event of any personal injury precipitated by mishaps or work-related ailments resulting from and occurring during employment and/or culminating in incapacitation or death. 

The Employees’ State Insurance Act, 1948 understands a coordinated social protection scheme that would work to safeguard the interest of workers in occurrences, E.g. maternity, illness, incapacitation, either permanent or temporary, demise of a worker owing to injuries in the course of employment culminating in loss of income or the capacity to earn. The Act also ascertains proper medical assistance to workers and their near charges.

Acts providing for wages and remuneration:

  • Payment of Wages Act, 1936;
  • The Minimum Wages Act, 1948.

The Payment of Wages Act1936 superintends the timely disbursal of emoluments to employees including both direct and ancillary workers. The purpose of this statute is to be a remedy against unaccredited docking of payment by employers and/or payment of wages held in unjustified remit.

The Minimum Wages Act, 1948 provides protection to more workers than any other labour law. This Act provides for determination and emendation of minimum wages of the workers employed. It also stipulates governments both central, as well as state, to provide for and re-evaluate the minimum wages with regards of scheduled employments within their jurisdictions and administer their remittance.  

Acts with provisions for security of employment & labour relations:

  • Industrial Disputes Act, 1947;
  • Industrial Employment (Standing Orders) Act, 1946;

The Industrial Disputes Act, 1947 deals with matters of employment such as the payment of compensation to the employees on account of lay off, retrenchment or closure of industrial operations. The legislation also mandates enterprises which recruit employees in excess of 100 to seek prior authorization from the government in event of lay off, retrenchment or closure of industrial facilities.

The Industrial Employment (Standing Orders) Act, 1946 requires the employers in industrial setups to formally lay down the conditions of employment under their watch by submitting five copies of the standing orders draft proposed by the proprietor to the certifying officer. The draft contains terms to be implemented in the industrial facility within six months the act becomes pertinent to an industrial unit. Through the provisions of the Act, the employers are also required to solicit authorization to appoint an employee to another role or task. 

Considering the ambit of regulatory outreach, reforming labour law seems to be a rational decision.

Even though it’s undeniable that labour laws in India are inflexible, convoluted and arduous, doing them away in their entirety can’t be seen as the only avenue for reform.

Government Moves

In the recent past, through multiple legislative and policy measures, an anti labour law sentiment has been insinuated by the Centre and a number of state governments as well. The Economic Survey of India for the Fiscal Year 2019-20 gave the impression that the cause of the modest entrepreneurial index were the stringent labour statutes. It reiterated the faith that to augment employment statistics, the removal of state regulations could be on the horizon.

The laws which are being pursued to be curtailed have been sought to be restricted in the past, as well, through parliamentary attempts at their diminution. Legislations on contract labour, minimum wages, migration on an interstate level and gratuity payment encapsulated in theUttar Pradesh Temporary Exemption from Certain Labour Laws Ordinance, 2020 have earlier been part of the subject matter of the ​Code on Wages 2019 and the ​Occupational Health, Safety and Working Conditions Code of 2019​. The apprehensions are not groundless, that the lockdown would have afforded a suitable opening to execute an enduring ambition to amend the pre-existing labour statutes.

The reproves of these statutes identify that the new codes appear to be devices of safeguarding employers’ interests while jeopardizing the rights of the workers.

The provisions of crucial elements, e.g., minimum wages, have been omitted and governments have been conferred the liberty to decide their own plans of action to designate the clauses. The proprietors have been shielded from criminal as well as monetary liability, such as from accidents or death caused at workplaces. Disincentives like disciplinary proceedings are also withdrawn, administration systems have been done away with, and proprietors have been furnished with a self-certification scheme to show compliance with regulations.

Quite a few state governments have taken advantage of their concurrent powers, and have effected amendments to the existing labour statutes. In this respect, the Rajasthan government has preceded every other state. In the year 2014, the contemporaneous Rajasthan cabinet expanded the ambit of the implementation of the Factories Act, 1948 and the Contract Labour (Regulation and Abolition) Act, 1970 which resulted in multitudes of workers being excluded from the protection accorded to them by these laws.

Since the last year, labour associations have been involved in a protracted struggle against the Trade Unions Amendment Bill of 2019 which entrusts absolute authority to the government to validate the labour unions. The rationale behind the vehement opposition to the modifications to the labour laws is that these amendments subvert the rights of workers gained by great effort and will pave the way to the oppression of workers to an even greater extent. This move has also been perceived to impinge upon the trilateral agreement between proprietors, workers and the government and most importantly, the rights to negotiate on their conditions of employment as a collective front, regarded as a crucial element of workers’ prerogative to have a say in matters related to their wages and working conditions.

COVID-19: A Pandemic or an Opportunity?

In April, alluding to the COVID-19 health emergency, the labour divisions of Rajasthan, Himachal Pradesh and Gujarat promulgated notifications regarding the extension of working hours of factory workers to the limit of 12 hours per day and 72 hours per week. They have been disseminated by adducing Section 5 of the Factories Act and will be enforceable for a span of three months.

Concomitantly, the Punjab labour department communicated an order bearing resemblance to those of the aforementioned states by invoking Section 65 of the Factories Act under which industrial establishments will be absolved of the liability analogous to the hours of work on a day-to-day and hebdomadal basis under the Act to handle the enormous burden of work. 

In May, the administrations of Odisha, Maharashtra and Goa, in a similar vein, hiked the daily operational hours. In the urge to lengthen the working hours, the states have failed to notice the impact that these moves may have on the health and well-being of the workmen working in industries situated in their states.

Furthermore, the states dependent on labour force from other states have been suffering from a labour deficit, resulting in an increase in wages. This occurrence led such states to respond by restraining migrant labourers from going back to their native states. Article 19(1)(d) of the Indian Constitution safeguards the citizens’ prerogative to have unobstructed movement throughout the area under the Indian jurisdiction. The decision taken by Karnataka government regarding the cancellation of trains for the migrant labour, however overturned afterwards, would almost certainly have been in contravention of the provisions specified under Article 19(1)(d).

To be constrained to work is in violation of Article 23 of the Indian Constitution, which confers a Right against Exploitation forbidding trafficking of humans, begar, and forced labour.

In the case, People’s Union for Democratic Rights vs Union of India (1982), the division bench of the Supreme Court consisting of Justice P.N. Bhagwati and Justice Baharul Islam opined that statutes affording protection to labourers hired on contractual basis and workmen who have migrated in an inter-state manner were aimed at safeguarding basic human dignity; contravening these legislations would result in breaching Article 21 which protects the right to life. 

The bench adjudged that forced labour, forbidden under Article 23, entailed coercive measures, not just limited to intimidations like physical force but the retribution of incarceration or financial penalty as well.

Additionally, it remarked that no one would labour for a salary below the minimum wage, of his own volition. Predicaments like starvation, mendacity and penury among others are invariably the coaxing factors. However, instead of inspiring confidence among the workmen to return through safeguarding wages and the improvement of conditions of labour, changes in the legislations by the states are revoking fundamental provisions intrinsic to the labour legislations.

The Uttar Pradesh government surpassed every other state in terms of the magnitude of relaxing the statutes by issuing the Uttar Pradesh Temporary Exemption from Certain Labour Laws Ordinance, 2020 that invalidates the functionality of all labour laws associated to manufacturing complexes and industrial units within the state. The ruling is in force for a three year spell, however, certain laws have been exempted and will remain functional. They include  Workmen’s Compensation Act, 1923, the Bonded Labour System (Abolition) Act, 1976, the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 and clauses in the labour laws linked to the workforce consisting of females and minors. 

Although, the legal draft stipulates proprietors to pay the base wages as defined by the state government and also warrants consistence with the clauses stated in the Factories Act related to workplace conditions and safety of the workers employed. The working hours were proposed to be extended to a span of 11 hours per day with an option for a further extension to 12 hours, left to the discretion of the employers. However, this decision was later retracted by the Uttar Pradesh government.

The outcome of these measures is that employers in the state would have no moral imperative to provide the labourers with anything over the basic wage laid down by law. They wouldn’t have to abide by their commitments under the prevailing agreements regarding collective negotiations.

Moreover, the labourers would be deprived of their rights relating to social security. Employers will be afforded absolute freedom regarding the termination of employment of their workers and are not liable to provide any compensatory payment to them. They can hire workers on temporary contracts and operate their industrial facilities without providing even rudimentary amenities to them. The factory owners don’t need to bear in mind any co-ordination with labour unions, consequently, divesting workers of representation of any sort in matters of their conditions of work and wages. 

For the next three years, new trade unions won’t be able to apply for their registration. In addition, workers will be denied avenues of grievance redressal to voice their concerns.

If the President approves the Uttar Pradesh government’s ordinance, a number of statutes stand to be rendered invalid. For instance, The Trade Unions Act, 1926, despite the fact that Article 19(1)(c) safeguards the fundamental right to set up unions and associations, which encompasses industrial guilds, as well. The clauses regarding the wellbeing and security of the workers, except the section pertaining to health and statutory clauses associated to procedures which are hazardous in nature, are the solitary provisos of the Factories Act, 1948 to have been included in the draft ordinance. They incorporate arrangements as regards to sanitation, ventilation systems, congested spaces, potable water, lavatories and so forth; factors which have assumed greater significance in the times of a widespread health crisis pervasive over the whole world. 

In Occupational Health and Safety Association of India vs Union of India (2014), the division bench of Justice K.S. Radhakrishnan and Justice A.K. Sikri in the Supreme Court adjudged that the workmen exposed to conditions involving great health hazards be furnished with personal protective equipment kits. The workforce’s right to health has been acknowledged as a sacrosanct component of the right to life in various rulings similar to this verdict.

Similarly, in  Delhi Jal Board v National Campaign for Dignity and Rights of Sewerage and Allied Workers (2011), the division bench of Justice G.S. Singhvi and Justice A.K. Ganguly in the Supreme Court upheld the legal acceptability of the Delhi High Court’s order of awarding interim compensation to the bereaved families of the workers who had lost their lives after inhaling poisonous effluvium during manhole cleaning. 

The Gujarat cabinet also approved an ordinance which absolves manufacturing complexes that are established within a year of its effective date to comply with every labour legislation barring the Minimum Wages Act, the Employees’ Compensation Act and the terms of the Factories Act associated with protection of the employees, for a three year duration.

If the ordinance is given the President’s approval, employees in recently formed plants in the primary and tertiary divisions will end up being dispossessed of their entitlement to equitable pay, working environment of an acceptable standard, a robust mechanism of social security and their liberty to form unions as well as partaking in negotiations with their employers.

The Karnataka government joined the bandwagon of the states amending the labour statutes by coming up with a plan to hike the upper limit for the implementation of the Factories Act, the Contract Labour (Regulation and Abolition) Act and Chapter V-B of the Industrial Disputes Act that stipulates government approval to be sought in advance for executing lay off, retrenchment and closure. Taking such measures would result in the ambit of these legislations being greatly limited which would consequently be tantamount to revoking the safeguard devices accorded to the workforce by virtue of these legislations.

Last month, the Madhya Pradesh administration discharged each and every industrial unit in the state from abiding to any statutory proviso mentioned in the Factories Act apart from the ones bearing relevance to sanctions, authorization, listings, safety, procedures of hazardous complexions among other stipulations.⁹ The government also absolved industrial owners of the commitment to report to the officials the accidents that culminate in grievous bodily injury or demise prompted by mishaps in the course of employment. In the matter of industries that are non-hazardous and which possess a labour force of 50 or less workers, third party certification will be granted for a three month spell effective from the date of proclamation of the notice.

Through this development, it can be inferred that the clauses of the Factories Act analogous to the sustenance of wellbeing and cleanliness, specifications regarding scrutiny of conditions of work will not hold any applicability upon manufacturing plants for a three month duration.

The Madhya Pradesh cabinet has additionally promulgated a notification exculpating new production units from the terms specified in the Industrial Disputes Act besides the ones identifying with temporary or permanent termination of employment and cessation of operations in manufacturing establishments for a time of 1000 days, operative from the date of the issuance of the notice. It goes to imply that labourers working in factories that have recently started their operations will be unable to employ their prerogative of forming unions and negotiate with their employers regarding equitable wages and a better working environment for a time limit spanning 1000 days.  

The ordinance by the Madhya Pradesh has also freed manufacturing facilities of 11 forms from the stipulations of the Madhya Pradesh Industrial Relations Act that entails provisions analogous to the accreditation of labour unions by proprietors. This decision is perceived as a retrenchment measure as regards to rights involving industrial unions. 

Economic Involved

It would be naïve to assume that better wages and presence of a strong union system would act as a hindrance to economic progress. The degree of the work rate of the workforce per hour in the US, where labour unions are not prevalent, is almost corresponding to France, where a solid labour guild system exists. At the time when Japan gained sovereignty after its occupation by the United States of America, the drafting of Japan’s constitution which upholds pacifist values, took place. For instance, Article 9 of the Japanese constitution outlaws acts of war to resolve dissensions in matters concerning the state. It was also ensured that a strong union mechanism was in place by bringing more than 50% of the labour force under the purview of unionisation.

Since then, the Japanese industry has harnessed the framework of unions to its great advantage by employing the labour force in pursuance of augmenting efficiency and work rate to the topmost echelons of the world. Customarily, Europe has always had a solid union system in place and greatly benefited from the Soviet system of social contracts that advocated for the inclusion of labour by making them an affiliate and by entitling them to be a claimant of the profits. Labour unions in Germany function in consonance with the administrations to avert the complications related to unemployment on a macro level. South Korea, a nation state with an effective and organised labour union structure, possesses a number of the world’s leading enterprises dealing with technology and automation.

In their rush to reform the labour market, the central and state governments have failed to notice the fact that the cost incurred by a firm to employ a worker determines the capacity to spend for the remaining market. From a macroeconomic perspective, these slew of measures would be inimical for the overall market on an aggregate level especially for the enterprises transacting in luxury goods and services if businesses start cutting down on the pay and hike the operational hours of the employees. The existence of a well-founded structure of industrial unions would have proved key in urging proprietors for improvements in pay packets and curbing the inordinate increase in hours of operation. Collectively, it would have given a fillip to the entire economy with a higher volume of consumer spending which in turn would have created opportunities for greater demand in the market.

The International Labour Organisation (ILO) conducted a research into the laws and regulations analogous with the prerogatives of the workforce. The report demonstrated the demerits of relaxing the norms, brought about on the grounds of giving a momentum to the economy and curbing the rise in unemployment. In the case of developing economies and especially the Indian economy, such measures would only worsen matters in an economy already in the grips of an economic slowdown. Several analyses have suggested that it would only lead to undue exploitation of the disempowered classes existing in the employment sector.  

The example which lends credence to the argument is of the amendments effected in 2014 by the Rajasthan government headed by the erstwhile chief minister, Mrs. Vasundhara Raje Scindia. The Rajasthan cabinet revised the established statutes as regards to provisions related to recruitment and termination of employment of workers hired on contractual basis, whilst making the filing mechanism more onerous for new industrial collectives by adding more rigidity to the certification procedures.

This decision was received positively by the Economic Survey of the Indian Government and the Indian corporate sector, better known by its sobriquet, India Inc., but contrary to the elation, the repercussions of this move sent the Rajasthan economy into a downward spiral. 

As a consequence of the demonetization of the Indian currency, the rate of increase in remuneration, considered to be a marker of a performant economy, suffered an appreciable decline. The state also saw an uptick in the portion of the labour force left without a job as well as witnessing a slump in its gross domestic product figures. Another worrying statistic pointed towards a growth in the Net Value Added per worker. The workers are compelled to elevate their work rate and burden of work because of the arbitrariness assumed by proprietors in absence of a statutory mechanism in matters of recruitment and retrenchment. It does not bode well for the workers because in the event of a prolonged stasis in salaries, this would only result in them being neglected and ill-treated in large measures.  


India has given formal consent to six of ILO’s eight core conventions which incorporate ​Forced Labour Convention, 1930 (No. 29), Equal Remuneration Convention, 1951 (No. 100), Abolition of Forced Labour Convention, 1957 (No. 105), Discrimination (Employment and Occupation) Convention, 1958 (No. 111), Minimum Age Convention, 1973 (No. 138) and Worst Forms of Child Labour Convention, 1999 (No. 182). By ratifying these conventions, India is obliged by law to abide by these covenants at national as well as global forums.

However, rather than acting in accordance with the stipulations, the move to effect amendments to the labour statutes by the state governments is perceived to be a catalyst in exacerbating the already grave humanitarian and economic complications that face the country in the times of the  coronavirus pandemic. Their repercussions might result in the widening of the fissures in the society upon faith, creed and gender related issues as well as in the income disparity between the citizens.

The guiding precepts of the Directive Principles of State Policy (DPSP) serve as a code of ethics for the government to take into account for laying the foundations of a democracy that’s solid on a societal level and is economically sound bearing the tenets of a welfare state in mind. While they might be non-justiciable in nature, they adjure the administration not to flout the norms mandated by the constitution in their decisions.

For instance, Article 38 implores the state “to minimize the inequalities in income, and endeavor to eliminate inequalities in status, facilities and opportunities. It’s provided in Article 39,  “that the ownership and control of the material resources of the community are so distributed as best to sub serve the common good”, “that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment.”  In Article 41, it’s mentioned, “The State shall, within the limits of its economic capacity and development, make effective provision for securing the right to work.” While Article 43 urges the state tosecure, by suitable legislation or economic organisation or in any other way, to all workers, agricultural, industrial or otherwise, work, a living wage, conditions of work ensuring a decent standard of life.”  

In the times of the COVID-19 pandemic, when every citizen of India has been asked by the government to stay locked down within the confines of their homes and practice social distancing, weakening the rights of the workers and coercing them to work or else daunting them with the prospect of losing their means of livelihood is similar to subjecting them to forced labour and segmenting them as a different class altogether. It’ll be highly momentous in such a tough and unprecedented period, if the administrations at both centre and state levels reaffirm their allegiances with the DPSP and ILO conventions by affording to the workers the safety to return to their homes, along with the certitude of secure workplace conditions and earning base salaries without them having to have any concerns for their sustenance.


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