Contract Labour System must be completely abolished

T.Hariparanthaman, Judge (Retired) – Madras High Court

(transcribed and translated from a speech given by Justice Hariparantham.)

The situation before 1970

Before 1970, the contract labour system was used rarely for very few jobs in a few companies.

It was prevented by protests of permanent workers and the trade unions in these companies. In some places, the permanent workers took to legal action in the courts to abolish the contract labour system through their trade union. Labour courts, High court and Supreme Courts delivered judgements which said that workers are subjected to excessive exploitation in the contract labour system and the system is against the welfare of the workers. Their judgments barred contractual employment.

Omax Workers protest dismissal of contract worker

Government gave in to pressure from employers

In this situation, on the urging of employers, the Parliament enacted a legislation for the regulation and abolition of contract labour. This law, recognises the right the employers to contractualise jobs which were being done by permanent workers.

Little by little, the contract labour system was brought into state government, central government companies (public sector companies) and private industries. In this way, a hierarchy of employment (varunasiramam)was established among the workers.

Contract workers were not allowed to use facilities like canteens, rest rooms, medical facilities, housing, and company transport which were provided to permanent workers. A new form of untouchability was practiced.

Since employers cannot do anything about their electricity charges, raw material costs, excise duty and other taxes, they could maximise their profits by lowering wages of workers as much as possible.

Today the situation is that the number of contract workers exceeds the number of workers employed directly by a company. In some companies, the whole work force is contract workers. Since the number of contract workers is much more, the bargaining power of the permanent workers has reduced. By creating categories such as daily wage, casual, temporary, badli and trainee, even among workers employed directly by the company , employers are able to earn large profits. These workers are not taken by trade unions. If they join trade unions, their employment is over (they lose their jobs).  Though the law provides equal wages for equal work and regularisation after 480 days of employment, these workers, even when employed directly by the company, find equal wages and permanent employment unattainable.

Read Tamil Version HERE

Equal Wages for Equal Work

Despite the fact that the legislation requires equal wages to be paid for equal work, no company pays contract workers the same wages as permanent workers.

Women workers are often underpaid

Only state has the power to abolish contract work

As per the 1970 law mentioned above, it is the concerned government – central or state – which must take the decision regarding abolition of contract labour in a particular company. The law states that the courts do not have the authority to do this.

A Supreme Court which changed in favour of contract work

In 2001, the Supreme Court overturned an order by the Tamil Nadu government which said that contract workers must not be engaged for garbage collection/sanitation and cleaning of toilets in all companies which are under the Labour Department.

This is a regressive step as the same Supreme Court once said that contract workers are exploited.

After the 1970 legislation, the position of the Supreme Court changed. Even if the government abolished contractualisation of certain types of work, the Supreme Court encouraged it.

Tamil Nadu government encourages contract work

Apart from issuing orders prohibiting employment of contract work for filling and printing of cement bags in the cement industry and issuing an order abolishing contract labour in certain jobs in the electricity board, the Tamil Nadu government has not abolished contract labour in any other employment.

That is, apart from the jobs mentioned in the cement industry, there is nothing to prevent any company under the Labour Department to employ contract labour and maximise their profits. Therefore by using this law – the 1970 contract labour law – employers are contractualising all jobs in their companies.

There has been no order from the government prohibiting contract labour, using the authority available under this law to abolish contract labour in jobs of a permanent nature. Even if such an order is given by the government, employers take their objections to court and it remains doubtful if the court will affirm the order or do away with it.

Migrant Workers in contract work have increased in TN

Supreme Court judgement affirms the employment of contract labour

In 1976, the central government issued an order that contract labour must not be employed for work related to sanitation, cleaning, security for all industries which come under the central government labour ministry.

Due to this, employment of contract labour in several companies was prevented.

In companies where contract labour was employed despite this order, workers and trade unions were able to prevent it through struggle and by taking it to court.

But after 25 years, in 2001, in the case filed by the Steel Authority of India Limited, a five judge constitutional bench of the Supreme Court quashed the 1976 order of the central government  due to which a bad situation arose where contract labour was employed not just in the above mentioned jobs, but also in work related directly to production.  Despite the fact that orders were issued prohibiting employment of contract labour in mines under the control of the central government’s Labour Department and in a few other industries, after this judgement, employment of contract labour in all jobs became the norm.

Today with no distinction between public and the private sector, contract workers are employed everywhere at very low wages.

These workers do not have the right to take leave. They will ask – what is the meaning of dearness allowance? They do not even know that trade unions arrive at agreements once in 3 or 4 years which give permanent workers a wage hike. They do not have bonus. If they retire, they are not entitled to gratuity. Moreover, there is always a doubt if the contractor is correctly remitting the deductions of the workers and the employer to the provident fund. Even the safety of contract workers is a question mark. The accident involving the collision of two ships off Kamraj Port in Ennore is an example of this.  All works in the port starting from when the ship enters the port is done by contract workers.

Whether God is present everywhere or not (as said in scriptures), there is no place where contract workers are not present.

Today without any mechanisms to regulate contract labour, the system has become a fertile ground for excessive exploitation and is done with with full support of the central and state governments. The government and the courts, instead of protecting the workers are like fences destroying the very crops they are supposed to protect.

My experiences

The central government’s telecommunication company recently fixed a landline in my house. The technical worker who came was a contract worker, not an employee of the company. Before I retired, there was a case before me. The Chennai Corporation employed a dentist on contract. I quashed the appointment. After that, I do not know what happened.

A municipality and its sanitation workers  came before me and said that the sanitation work was given on contract to a self help group. The name of the self help group was Roja malar vaada malli. I pronounced a judgement that these women sanitation workers are permanent workers of the municipal corporation. I do not know what happened after that.

Contract workers in multi nationals

Trade unions are not allowed to function in multinational companies. No law can touch them. Labour Department always acts in favour of them. In these multinational companies, contract workers are employed in large numbers. For example in the Hyundai car company near Chennai, as per a press report from 2 years ago, I present to you the number of workers–

Department No. of workers Monthly wage
Permanent workers 1550 Rs.28000
1 year trainee (Probationer) 250 Rs.10500
3 year trainee 350 Rs.5400
Company apprentice 1250 Rs.4500
Government apprentice 2550 Rs.2600
Contract workers 4600 Rs.3100


This explains how owners of multinational companies are earning huge profits. G.Sampath wrote an Oped in The Hindu that after a trade union was formed by workers in Maruti factory in March 2012, 546 permanent workers and 1800 contract workers were terminated. In July 2012 during a labour dispute one manager died and 40 others were injured. Haryana government arrested 147 workers and sent them to jail. 113 workers spent more than 2 years in jail before they were released on bail. 34 workers are still in jail.

He also said that the Haryana government appointed a well known advocate Mr.Tulsi as the special prosecutor at a cost of Rs.5.5 crores.

In another article, Sampath wrote that the in the multinational Honda Motorcycles and Scooters, of 3000 workers only 466 are permanent workers and the others are all contract workers and apprentices who work on low wages.

Trade Union Movement which ignores contract workers

I want to place on record my disappointment that when I was a lawyer, left leaning trade unions who led permanent workers did not come to the streets, nor to the courts to struggle for contract workers in the same company. I am taking about the legal struggle of the contract workers in Best & Chrompton, Indian Oil and paper mills. That the permanent workers and trade union did not support their struggle, is the truth. If this is the case, there nothing to say about other trade unions.

Recently, the Madras High Court appointed me to oversee the elections of the Simpson’s trade union. I came to know from both sides and the election committee  that only permanent workers are members of trade union and that contract workers almost equal in number to permanent workers, earn lower wages but are not organised by the union. They said that this is the situation in all other companies.

Therefore, when Comrade Kuchelar who won the election and has organised this gathering of trade unions seeking to abolish contract work, invited me to address you, I readily agreed.

Whatever government comes to power in the centre or the state, they will not abolish contract labour system. Even if they pass orders abolishing employment of contract labour in certain jobs, there is a chance that the court will quash such orders. Therefore a movement calling for the repeal of  the  Contract labour Act 1970 is the need of the day.

It has been people’s movements that have achieved victories in issues such as abolition of NEET, methane-GAIL and jallikattu. No party or government can take credit for these victories. This is the only path that is available for the workers too. Uniting workers, irrespective of whether they are contract workers or permanent workers, is the only way to abolish contract work. If we fail to do this, there is possibility that even a category such as permanent worker will cease to exist.




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