SUBJECT – LAW OF CONTRACT

ASSIGNMENT – CONTRACTUAL LABOR: A COMPARITIVE STUDY

SUBMITTED TO – SHUBHAM SIR

SUBMITTED BY – SHAMBHAVI MISHRA (0241LLB013)

SHWETA (0241LLB061)
MAANYA BAJAJ (0241LLB066 )
Introduction
It is a fundamental right under Article 19 (1)(g) of the Indian constitution to
carry on any trade , business, occupation or profession of choice with
reasonable restrictions that can be imposed by the state on the grounds of
public Interest , Moreover under section 27 the Indian Contract Act,1872 all
those contracts stand void that restraint any business or trade , provided
that the business activity that is being carried out is lawful . The above
mentioned provisions not only provides the Indian citizens to carry out their
profession and trade of choice freely , but also to expand one’s own
business within the due limits of law, and for the aforementioned purpose
one is bound to delegate its work through employees , contractual labour ,
partnerships, etc .

Workers hired by a contractor to provide a particular service to a user

enterprise are considered contract labour. These workers are typically
independent and accountable for carrying out the project, with the contract
specifying the project's specifics and schedule. The labour market in India
has been significantly impacted by contractual labour, which has led to
changes in employment dynamics. Contractual employment has
experienced a steady increase due to globalization, the liberalization of the
Indian economy, and the growing demand for flexible labour. This research
offers a comparative examination of contractual labour in India, with a focus
on the workforce's nature, legal provisions, and socio-economic
implications. The study also delves into the differences between permanent
and contractual workers, the challenges that contractual labourers
encounter, and the necessity for policy reforms.

History
During the colonial era, contractual labour became necessary in India due
to the demand for a large workforce in industries such as railways, textiles,
and plantations. After gaining independence, the focus of the Indian
government shifted towards creating labour laws to govern working
conditions, wages, and job security. The Industrial Disputes Act (1947) and
the Factories Act (1948) were introduced as key legislations to protect the
rights of workers. However, with the privatisation liberalisation and
globalisation of the Indian Economy , outsourcing, and the pursuit of cost-
effective labour, the prevalence of a contractual workforce grew over time .
Moreover in the 21 st century with the 4 industrial revolution Information
Technology and AI have become an extensively connected part of
everyone’s life which makes it even more easier to delegate one’s work out
to others also establishing a new array of contractual labours such as -
Digital Marketers , Web designers , etc . Therefore in the current times
there is a growing requirement for the contractual labourers and contractual
labour laws in the country

LABOR LAWS IN INDIA

1. The Contract Labour (Regulation an Abolition) Act, 1970:This is the
main law that governs contractual labour in India and aims to control the
employment of contract workers and protect their well-being. It also
specifies the situations in which contract labour can be prohibited. The
legislation requires contractors to register and establishments that hire over
20 contract workers to obtain a license
2. The Minimum Wages Act, 1948: The purpose of the act is to safeguard
workers from being exploited by making sure that employers compensate
them with at least a minimum wage for the work they do
3. The Industrial Dispute Act, 1947: This statute covers industrial conflicts
and protects workers against retrenchment, layoffs, and strikes. However,
contract workers are frequently denied the full advantages of this statute

The Contract Labour (Regulation and Abolition) Act, 1970

A worker will be considered as hired under the category of "contract labour"

if he is employed for such work by a contractor, whether or not the principal
employer is aware of it. This rule is valid for all companies that had twenty
or more workers, whether they were permanent or contract, at any point in
the past year. It applies to every contractor who employs or who employed
on any day of the preceding twelve months twenty or more workmen. The
Contract Labour (Regulation and Abolition) Act, 1970 is an important law in
India that focuses on managing the use of contract workers and enhancing
their work environment.
The Contract Labour (Regulation and Abolition) Act, 1970 is an important
law in India that focuses on overseeing the use of contract workers and
enhancing their work environment. The law is relevant to businesses with
20 or more temporary employees and to contractors who employ 20 or
more individuals.
The Act applies to establishments employing 20 or more contract labourers
and to contractors hiring 20 or more workers. Its salient features include the
mandatory registration of principal employers (the organization using
contract labour) and licensing of contractors. It ensures that contract
labourers are entitled to fair wages, timely payments, basic amenities (such
as canteens, restrooms, and drinking water), and health and safety
measures at the workplace. The Act empowers the government to prohibit
contract labour in certain situations where work is of a permanent or
perennial nature, emphasizing the elimination of contract labour in such
instances. Additionally, the Act establishes advisory boards at both central
and state levels to advise on matters of abolition and regulation. By
distinguishing between contract and permanent labour, the Act aims to
protect the rights of contract workers while ensuring that employers uphold
minimum standards of employment and welfare.

RIGHTS OF THE CONTRACT LABOURERS

The law lays out the rights of contract workers to protect them from being
exploited. These rights guarantee equal treatment with employees and can
be legally upheld in court if violated. Contract workers' rights are protected
in terms of pay, hours, benefits, healthcare, and social protection. Any
agreement that goes against the Act's benefits and is disadvantageous to
workers will be called invalid. Contracted employees have the right to
receive the wages, including extra pay for overtime, and benefits specified
in their agreement with the company. Payment must be made promptly
when the wage period comes to an end.
The contract workers must receive safety measures and immediate
healthcare in case of injury as required by the Minimum Wages act. They
have the right to access amenities such as bathrooms, dining areas,
laundry services, first aid resources, and other services. Women workers
have the right to have their own separate washrooms and restrooms.
Additionally, they have the right to not be engaged in any activities that are
prohibited by law.

STATE-SPECIFIC AMENDMENTS AND APPLICATION OF THE

CONTRACT LABOUR ACT, 1970 IN INDIA
The law is relevant to businesses with a staff of at least 20 contract
employees. However, several states have modified this threshold,
increasing the number of workers for which the Act applies: Maharashtra:
The threshold has been raised to 50 workers for establishments to come
under the Act. Haryana: The state has also raised the threshold to 50
workers. Punjab and Uttar Pradesh: Both states have increased the limit to
50 workers, making the Act applicable only to larger establishments.
In most states, contractors hiring 20 or more workers must obtain a license.
Some states have amended this requirement: example Gujarat: The
threshold has been raised to 50 workers for contractors, allowing smaller
contractors more flexibility without requiring a license.
The penalties for non-compliance with the Act, as stated in Section 23 and
24, are enforced differently across states. States like Maharashtra and
Kerala have stricter penalties for violations, with more proactive inspections
and enforcement, while enforcement in states like Bihar and Jharkhand has
historically been weaker due to fewer inspections.
States like Andhra Pradesh and Odisha have introduced state-specific
amendments to the Act that tailor the provisions to local industry needs. For
example, Andhra Pradesh has introduced streamlined procedures for the
registration of employers and contractors, aiming to reduce bureaucratic
delays.
COMPARITIVE ANALYSIS OF PERMANENT WORKERS VS.
CONTRACTUAL WORKERS
The conditions of employment, job security, pay, and benefits are what
differentiate permanent from contract labor. Permanent workers benefit
from social security, better pay, job security, and legal protection against
wrongful termination. Contrarily, contract workers are employed for a set
amount of time and frequently do not have formal employment contracts,
which results in job instability and a lack of benefits.

1.Job Security:
Permanent Workers enjoy long-term employment with greater job security.
They cannot be easily terminated, and dismissal typically involves legal
processes or severance payments under labor laws. Contractual Workers
are hired for a specific period or task, with employment terminating upon
project completion or contract expiration. They face higher job insecurity
and can be terminated easily at the end of their contract.
2. Wages and Benefits:
Permanent Workers receive higher wages and are entitled to various
benefits such as provident fund, bonuses, paid leave, health insurance,
gratuity, and pensions. They often enjoy wage stability and periodic
increments. Contractual Workers often earn lower wages than their
permanent counterparts for similar work. Benefits like provident fund or
health insurance are typically limited or absent, depending on contractual
terms.
3. Legal Protections:
Permanent Workers are protected by comprehensive labour laws like the
Industrial Disputes Act, which governs termination, layoffs, and
retrenchment. They can also form or join trade unions.
Contractual Workers are covered under the Contract Labour (Regulation
and Abolition) Act, 1970, which offers some protections but is less
comprehensive. Contract workers often lack union representation, and
enforcement of their rights can be weaker.
4.Working Conditions:
Permanent Workers, typically enjoy better working conditions, including
regulated working hours, paid overtime, and safer environments.
Contractual Workers often face less favourable conditions, especially in
sectors like construction or manufacturing, where they may work longer
hours with fewer safety regulations.
5.Skill Development and Training:
In case of permanent Workers, they are more likely to receive formal
training and skill development opportunities, as employers invest in their
long-term career progression. Contractual Workers: Typically receive little
to no training, as they are seen as temporary hires, which can limit their
career growth and mobility.

CONTRACTUAL LABOUR IN INDIA

In India, companies in industries like automobiles, construction, and mining
often avoid hiring permanent workers for project-based needs because
terminating them involves giving notice, compensation, and informing the
government. India's rigid labour laws are reportedly a major obstacle for the
industry. However, businesses have resolved this issue by bringing on
board a significant amount of contract employees. Recently released data
provide insight into the scope and frequency of this behaviour at select top
Indian companies. Contract workers make up 46% of the industry
workforce and 8.8% of the services sector workforce. In sectors such as
software and financial services, there are higher numbers of permanent
employees. The specialized skills required in these industries, as well as
regulatory requirements in banking, are the reasons for this. However,
telecom is distinguished by having a significant 46% proportion of contract
workers within the service sector. Manish Sabharwal, Chairman of Team
Lease Services, explains that in the business sector, temporary workers
make up a larger percentage because of labour- intensive positions and the
difficulty of ending employment contracts. In the car manufacturing sector,
labour disputes have become more noticeable in the past few years, with a
rate of 47%. However, the rate is even higher in industries like energy and
utilities with 54% and cement with 52%. Larsen and Toubro Ltd (L&T)
stands out in the engineering industry because of its large size and the
practice of hiring temporary workers for projects in its engineering services
division. Without it, the sector has a rate of 22% but incorporating L&T's
data increases it to 75%. Industries like pharmaceuticals and consumer
goods also have comparatively lower levels. One can only speculate about
the extent of contract labour in India's leading companies.
ECONOMIC IMPLICATIONS OF CONTRACTUAL LABOUR
The key aspect pf contractual labour is that the term and responsibilities of
the employment relationship is based on a contract , the contract must
abide by the sections of the Indian Contract act , 1872 regarding the offer,
acceptance ,consideration, object and voidability of the contract. The
parties thereof contracting must abide by the sections of the Act and must
be obliged with the remedies available in case of breach of contract by
either party to contract
Although Contractual labour is only for the purpose of contracting for a
specific time period for a specific amount the Contractual labour differs
from permanent workers and have different economic implications upon the
Economic System as follows
1.Cost effective tools for Employees: Contractual labour provides the
employees with an alternative cost effective technique wherein they can
attain the benefits of delegating their works at lower costs by only hiring
temporarily for the purpose of a specific task and can renew the contract
upon demand rather than hiring a full time employee which have to be
provided with a regular salary and other employee benefits like housing,
travel allowance ,etc
2.Informality in the job sector: Contractual labour introduces a new array
of informalisation in the job sector , due to the absence of the aspects that
the Employer can’t tell the Independent contract how to perform his task
there is a maintenance of healthy relationships with the respect of power
status as equals this leads to the in formalisation of the job sector
3.Employment rates: contractual labour has increased the employment
rates by providing a vast array of opportunities in the employment sector ,
however on the same hand it has also decreased the employment rate
because the startup companies with less funding are more likely to hire
Independent contractors than permanent employees as a cost effective
mechanism

COMPARISON OF CONTRACTUAL LABOUR BETWEEN INDIA AND

USA
Labour Rights
India: Contract workers often lack the same rights and benefits as
permanent employees. Limited access to social security, health benefits,
and job security. Unions play a role, but contract labour is often less
organized.
USA :Contract workers (including freelancers and gig workers) often have
fewer protections. The rise of the gig economy has led to debates about
labour rights and classification. Some states are moving to provide better
protections for gig workers.
Workforce Dynamics
India: Contract labour is prevalent in sectors such as construction,
agriculture, and manufacturing. Economic necessity often drives individuals
into contract roles, leading to a significant informal workforce.
USA: Contract work is increasingly common in sectors like technology,
healthcare, and creative industries. Many workers choose contract roles for
flexibility and autonomy, although they may sacrifice benefits.
Legal Framework
India: The labour laws governing contractual labour include the Contract
Labour (Regulation and Abolition) Act, 1970, which aims to regulate the
employment of contract workers and provide certain protections. However,
enforcement can be inconsistent, and many workers remain unregistered
and unprotected.
USA: Contract labour is regulated through various federal and state laws,
including the Fair Labor Standards Act (FLSA). The regulations can vary
significantly by state, but workers typically enjoy stronger protections
regarding wages, overtime, and working conditions.
Working Conditions
India: Contract workers often face challenging conditions, with lower
wages, limited job security, and lack of benefits like health insurance or
retirement plans. The informal sector comprises a large portion of
contractual work, which can lead to exploitation.
USA: Contract workers generally receive better pay and working conditions
compared to their Indian counterparts. However, issues like job security
and access to benefits can still be problematic, particularly in gig economy
jobs.
COMPARISON OF CONTRACTUAL LABOUR BETWEEN INDIA AND
CHINA
Laws and Regulations
India: The main law for contractual labour is the Contract Labour Act from
1970. It aims to protect workers, but many companies don’t follow the rules
strictly, leading to poor worker conditions.
China: The Labor Contract Law from 2008 requires all workers to have
formal contracts. China generally enforces these laws better than India, but
issues still exist.
Workforce Structure
India: About 30-40% of workers are in contractual or informal jobs,
especially in construction and services.
China: Contractual labour is also common, particularly in manufacturing.
More workers have formal contracts now due to better enforcement
Worker Rights
India: Contract workers often miss out on benefits like healthcare and job
security. There’s a big gap between formal and informal workers.
China: Although there have been improvements, many contract workers
still struggle with benefits and rights. Migrant workers often face challenges
integrating into urban life.
Economic Effects
India: Contractual labour offers flexibility for businesses but can lead to
unstable jobs and low wages.
China: The use of contract labour has helped economic growth, but it has
also led to social issues and demands for better worker rights.
Cultural Factors
India: Caste and regional differences affect job opportunities and treatment
of workers.
China: Many rural workers move to cities for jobs but often face
discrimination and struggle to fit in.

KEY CHALLENGES
The key challenges that are faced by the contractual labour are as follows
1.Breach of Contract: In several cases wherein there is a breach of
contract by the party employing , although there are remedies available for
their breach of contract but the non performance of the other party drains
the contractual labour of their limited resources and gets them trapped in
the circle of debts
2.Social Security Access : The contractual labour lacks the access to
social security schemes which are provided to the permanent employees
by the employee in form of some remuneration from the company for the
overall welfare of their employees
3.Ambiguous Employee: Employer relationship: The absence of the
aspects that the Employer can’t tell the Independent contract how to
perform his task there is an ambiguity regarding the relationship dynamics
of the employee and employer
4.Lack of skill development: Most contract workers are unskilled or semi
skilled and lacks the experience of working in a full fledged job space along
with job security which leads to a lack of skill development in the
contractual labour market
RECENT DEVELOPMENTS
The gig economy refers to a labour market characterized by short-term,
flexible jobs or freelance work instead of permanent, long-term
employment. Workers in this economy, often called "gig workers," as the
name suggests the workers are not full fledged 24/7 employed workers but
they are performing for a short specific period of time , that is to say they
give a gig appearance/ performance in the financial sector
The concept of Contractual labour has further enhanced the concept of gig
economy , The introduction of platforms like Swiggy , Zomato are a true
representation of contractual labour and enhancement of the gig economy,
in the above mentioned platforms there are several independent
professional cooks who are associated with the platform of swiggy and
zomato based on a conditional contract regarding the terms of payment in
reference to orders received for the product of the independent contractor
This arrangement highlights the interplay between contractual labour and
the expansion of the gig economy.

CONCLUSION
Contractual labour helps in achieving the directive principle of state policy
of Right to Work mentioned in the Article 41 of the Indian constitution by
providing work to the willingly and able for a certain period of time along
with considerable remuneration A comparison with global practices shows
that India’s regulatory framework is evolving but still has a significant gap in
implementation and worker welfare when compared to developed
economies. Addressing these disparities through better enforcement and
inclusive labour policies is crucial for improving the status of contractual
labour in India. Contractual labour helps in balancing with the financial
needs of the company along with employment in the market maintaining a
healthy balance of income and workforce in the economy