THE system of engaging contract workers has witnessed a change from bad to worse. In the early days, employers used to employ contract workers mainly in peripheral and low-skill work in their enterprises, though many of these works were of a permanent and continual nature, while operational jobs were generally manned by regular workers. MENACING INCREASE But the situation has undergone a sea-change in post-liberalisation, and regular operational and production jobs are also being increasingly assigned to contract workers. The ever increasing incidence of engaging contract labour in core operational and technically sophisticated jobs in continually running processes has posed a serious challenge to industrial relations at workplaces. Today contract workers are doing the most sophisticated, hazardous, sensitive and skilled jobs. Through contract system, employers seek to make the employment relationship between the principal employer and contract worker indirect. They thereby evade the responsibility and extract bigger surplus by taking advantage of the fragile service condition of the workers. It is important to note that principal employer is the ultimate recipient of the benefit of production process in its final form. In this connection, we quote from a 1996 judgement of the Supreme Court of India: “If the raw material is supplied by the employer, supervision is done by the employer and the end product or services are used by the employer and only payment is made through the contractor, the contract is false and the workers are regular employees of the principal employer.” About contractisation, neo-liberalism has brought forth broadly two distinct scenarios. One, in industrial units, the share of temporary workers of various names (contract, temporary, contingent etc) in total workforce has hugely increased, crossing the number of regular workers in many places. These temporary workers are being deployed either through contactors or supplied by employment agencies, thereby making the employment relationship with the unit’s owner indirect. The second scenario is of decentralisation and fragmentation of the workplace through offloading, outsourcing, distributing various parts or whole of the production jobs of a particular enterprise to different agencies. However, marketing of the final product is done in the brand name of the enterprises after its assembling and stamping in the main centre. Sometimes even that job is done by a separate agency. Suiting the employers’ requirements, contract jobs too have been reflecting different patterns. In steel, engineering, capital goods and also in consumer durables, a kind of job contract system is emerging --- a part of production process is being offloaded to another agency at a pre-determined rate for the job. (In many cases that agency carries out its work in the principal employer’s premises.) In this manner, the principal employer evades responsibility towards the workers, though for all practical purposes the job is carried on wholly for the principal employer. CHANGING PROFILE OF EMPLOYEE COMPOSITION The profile of the workforce is now changing fast due to fast track contractisation and fragmentation of workplaces. Even in public sector units, central as well as state, the proportion of contract or temporary workers in the workforce has already crossed the 50 percent mark on an average. Different ministries of the central government have resorted to engagement of contract labour on a huge scale. These workers, deployed in regular jobs, are paid less than one tenth of what permanent workers get. Even in the sectors involving highly sophisticated and mechanised processes, contract workers are being deployed increasingly on the same shop-floor as the permanent workers. The situation is far worse in private sector units, particularly those which mushroomed from 1991 onwards. Here non-permanent workers represent more than 90 percent of the workforce. Even in large-scale production units like Maruti, Hero Honda, Honda Motorcycles & Scooters Ltd, Speedomax, Shivam Autotech and Amtech Siccardi Ltd --- all located in Gurgaon-Dharuheda area of Haryana --- 60 percent workers in regular production work are on contract, temporary or trainee basis. Moreover, most of the contract workers in India are outside the framework of legal inspection and scrutiny. The number of those working under licensed contractors is declining throughout the country though contract employment is sharply increasing all around. This means a sharp increase in subcontracting, where subcontractors are mostly unlicensed and thus evade all scrutiny by the labour law enforcement machinery. As per the annual report (2005-06) of the union labour ministry, contract workers covered by licenses declined from 13.27 lakh in 2002-03 to 9.6 lakh in 2004-05. The trend continues. At the other end, with an unbelievable decline in the number of regular workers, there is a dreadfully disproportionate rise in the number of executive cadres. But the job profile of executive cadres has been downgraded. Taking advantage of capital intensive, sophisticated technology and automation systems, employers are deploying so called executives to jobs which used to be done by regular skilled workers earlier. For example, today in continuously running plants, the control room is being manned by executives only, whereas permanent workers used to man such points earlier. MECHANISM FOR CRUDE EXPLOITATION This contract labour system is a mechanism for extreme exploitation of labour under the guise adjusting with the problems of the market. According to employers, the liberalised economy has subjected the market to wide fluctuations, enhanced competition and made the business environment fragile. So they want total labour flexibility to address the situation, which means excessive use of contract workers, along with unfettered authority to hire and fire in the name of ‘right sizing.’ Further, they want constant cost cutting by reducing labour costs: economy in cost of production at the cost of workers. Here is a concrete example as to how the successive anti-worker governments have been attempting to snatch the workers’ rights in order to create a capital friendly environment. In the name of promoting industrial growth, the Planning Commission (2007) outlined in its eleventh five year plan document the need for state governments to consider appropriate amendments in section V-B of the Industrial Disputes Act “to facilitate exit” and the Contract Labour Act “to give the industry the flexibility to compete in international markets.” The national manufacturing policy, aggressively pushed by the UPA government, advocated that some zones must have a fair amount of labour flexibility and other concessions, including the non-applicability of the Contract Labour Act, which employers have been demanding. Let us recall what Yashwant Sinha, the then finance minister of the NDA government, said in his budget speech 2001; he said section 10 of the Contract Labour Act would be amended to “facilitate outsourcing of activities without any restrictions as well as to offer contract appointments,” and that the law “would not differentiate between core and non-core activities.” This disastrous move of the NDA government enabled the employers to illegally dispense with the concept of permanent or perennial jobs and practically introduced the concept of core and non-core jobs. It is this fragmentation and decentralisation of production system under neo-liberal regime that has made the employer-employee relationship vague, abstract and indirect, enabling the principal employer to fully expropriate the fruits of production with the least possible obligation towards their workers. This neo-liberal economic order is dominated by finance capital that is extremely mobile and speculative in character, seeks to multiply itself fast by nesting on most profitable posts and searches for the most lucrative markets. In this situation, industrial capital seeks to adjust all the factors of production including labour with the ups and downs of the market --- to maintain and even to maximise its profit and to maintain the resources at hand in liquid form to the extent possible. Industrial capital thus demands total flexibility and fragility of employment relations through outright contractisation. This makes neo-liberalism the most barbarous form of extraction of surplus. CONTRACT LABOUR (R&A) ACT 1970 However, it is from the mid-sixties that proliferation of contract system began in the industries, public as well as private. The trade union movement reacted effectively against this trend through direct industrial actions and by seeking parliamentary and judicial interventions, which brought the Contract Labour (Regulation & Abolition) Act 1970 into being. In this regard, the judgement of the Supreme Court in the historic Standard Vacuum Refinery Company case said contract labour should not be employed where (a) the work is perennial and goes on from day to day; (b) the work is necessary for the factory; (c) the work is sufficient to employ a considerable number of whole-time workmen; and (d) the work is being done in most concerns through regular workmen. The said act prohibited deployment of contract workers in jobs of permanent or perennial nature in any enterprise, and also stressed coverage of contract workers by all labour laws while making the principal employer responsible for regulating the service conditions of contract workers as per the laws of the land. Despite many procedural limitations and loopholes and despite its ineffective implementation by authorities, the 1970 act enabled the organised segment of contract workers’ movement to gain many rights, including regularisation in many places. It also paved the way for many landmark judgments by the judiciary in favour of workers’ rights during the 1970s and 1980s. Over a period, the Contract Labour Act has been as the most widely violated act in the country. The private sector apart, various government departments and companies too are the worst offenders. In fact, there are many loopholes in the act which lead to its flagrant violation. Section 25 of the central rules formulated under the act provide for equal pay and benefits for contract workers with their regular counterparts, in case the jobs done by them are of the ‘same and similar nature.’ This provision is nowhere implemented in the country, either in public or in private sector. OPPOSITION TO THE ACT The employers’ class has been against the act right from the beginning. First, they tried to get it annulled through the judiciary. The constitutional validity of the act and of the central rules was challenged in the Supreme Court in the Gammon India Limited vs Union of India case. The apex court upheld the constitutional validity of the act, and the act and rules were enforced from March 21, 1974. Employers’ organisations like the CII, FICCI, ASSOCHAM etc are at one on the issue of labour laws and Contract Labour Act. Their proposals, inter alia, are as follows: 1) The ‘Abolition’ clause of the Contract Labour Act should be done away with. 2) There should be no restriction on employment of contract labour even in perennial jobs. 3) The existing definition for coverage of the act should be altered to cover only establishments or contractors employing 51 contract workers or more, and not 20; 4) Principal employer must be free from all liabilities. 5) Responsibility for payment of wages or claims should lie with the contractor. 6) With the change in contractor, workers may be changed unless the new contractor is willing to take the old workers. 7) Contractors and not principal employers should be prosecuted for default. In a nutshell, the proposed changes in the act aim at contractisation of almost entire workforce to ensure maximum ‘labour flexibility,’ to adjust ‘labour cost’ with market fluctuations. In the process the employers’ class is aiming to realise their motive to turn the regular worker category redundant and to restructure the human resource component into executive cadres and contract workers, with no permanent regular workers. As contract workers do not have effective trade union rights, the game-plan of the employers is to have a union free workplace. This must not be overlooked. ATTITUDE OF THE JUDICIARY As for the judiciary, courts have pronounced a number of judgements on this issue on different occasions. Here is a quotation from the Supreme Court judgement in a 1995 civil appeal: “The only ostensible purpose in engaging the contract labour instead of direct employees is the monetary advantage by reducing the expenditure. Apart from the fact that it is an unfair labour practice, it is also economically short-sighted and unsound policy, both from the point of view of the enterprise concerned and the country as a whole. The economic growth is not to be measured only in terms of production and profits. It has to be gauged primarily in terms of employment and earnings of the people.” Shockingly, the attitude of our judiciary has undergone a directional change under the influence of neo-liberal policies adopted by successive governments since 1991, resulting in a tremendous erosion of the workmen’s rights; laws are now being interpreted with a pro-employer orientation. This has been sharply manifested in regard to right to strike; subtle introduction of the principle of hire and fire by refusing reinstatement and grant of back wages; denial of regularisation of daily-wage, casual and temporary workers employed for years. Through several verdicts in the era of liberalisation, the judiciary is legitimising 'hire & fire' and full scale contractisation and casualisation of workplaces, while freeing the contractors and principal employers from any obligation towards the workers they employ. In Air India vs United Labour Union case (1997), the Supreme Court said a contract labour automatically becomes the principal employer’s employee in the event of abolition of contract labour. However, in Steel Authority of India vs National Union of Water Front Workers case (2001), the Supreme Court unsettled the settled, and ruled against automatic absorption on abolition of contract labour, whereby the workmen’s rights were heavily impaired. In subsequent cases too, the Supreme Court took a negative attitude --- even in cases where because of the work of permanent and perennial nature, contract workers deserved to be the principal employer’s employees. The court held that though control was one of the important tests in determining employer-employee relationship, it was not the only test. The court further said whether an employer-employee relationship is genuine or a camouflage through the mode of a contractor is to be determined on the basis of features of the relationship, written terms of employment and actual nature of employment, to be decided by an industrial adjudicator. The court ruled that no relief could be granted to workmen without ascertaining the facts. The Supreme Court also ruled against the workmen of a canteen though it was established by a company in its premises under its statutory obligations under the Factories Act 1948. The court said the concerned canteen workers could not be held to be the company’s employees because:(1) they are not directly employed by the company; (2) they never moved to the company for leave and other benefits enjoyed by regular and direct employees of the company; (3) they got their wages from contractors; (iv) they signed the attendance cum pay register maintained by the caterers. Such judgements of the apex court legitimise the blatant violation of Contract Labour Act on an unparalleled scale throughout the country, with the central and state governments being in the forefront. Thus the act stands virtually amended, which the government has been unsuccessfully trying to do in the ‘economic reforms’ era. These court decisions have introduced the doctrine of hire and fire through the backdoor. THE ILO’S FAILURE The governing body of International Labour Organisation, in its 262nd session in March 1995, decided to take up the issue of contract labour in the ILC session 1997. Accordingly, ILO brought to the agenda of ILC 1997 and also 1998 a standard setting exercise on contract labour. But the move to adopt an international convention and/or a recommendation got bogged down due to opposition from employers and some governments. In 2003, the ILC took up the issue, but failed to adopt a recommendation. Dick Blin of ICEM observed: “If there is any one thing that undermines the ILO’s declared position on “Decent Work,” it is today’s excessive and uncontrolled use of contract and agency labour by employers.” From different fora of the ILO, trade union delegations have been demanding international and national instruments to protect the contract labour’s rights and interests. A presentation at one such forum pointed out that many countries of Europe, Latin America and Africa have “laws in which the primary employer is responsible for the standards of other employers (read: contractor) engaged in its (primary employers’) operations..… The reality is, however, that contract and agency labour have become fixtures on the employment landscape. What is missing is….. an international standard that guarantees the dignity of work.” Unrest among the victimised workers and concern of trade union movement is also spreading fast. The consequences of not checking the growing use of contract or short-term labour as replacement for permanent jobs are evident in the growing cases of protest worldwide. One may note here that India, a founder member of ILO, has not yet ratified the ILO’s core conventions 87 and 98. THE ROLE OF TRADE UNIONS Right from the commencement of imperialist globalisation, right to association and to collective bargaining have increasingly come under attack. And now the ongoing capitalist crisis dictate “austerity measures” which means further intensified attacks on the working class. In India, at present, even less than two percent of workers have the right to collective bargaining. However, the reducing number of regular workers and unimaginable increase in contractisation means this coverage is further going down alarmingly. Through this atrocious design, employers are effecting ‘cost control’ to remain ‘competitive,’ thus denying to workers due wages, facilities, service protection, social security and statutory benefits. In this scenario, the share of labour cost in total cost of production has steadily declined over the years; as per a report of annual survey of industries it went down from 7.84 percent in 1999-00 to 6.82 in 2003-04. The same survey also exposed that the average daily wage of a contract worker is around 65 percent less than the average daily wage of a regular worker in industry. According to trade unions, there are many loopholes in the act which need be plugged and the act comprehensively updated to take care of workers under new forms of contractisation --- outsourcing of jobs, sub-contracting, direct job contract to individual workers etc. Enforcement machinery must be revamped and punitive measures made more stringent to make the violations costlier than the gains from violations. The theory touted by protagonists of ‘flexible labour’ regime --- that “temporary employment is better than no employment” --- has an ulterior motive: to smuggle in a social sanction for perpetually temporary employment. Yet another untenable propagation is that unprotective labour laws help generate more employment. But none of these theories stands the test of reality --- not only in our country but all over the world. COMMITTEE’S SUGGESTIONS The trade union movement was able to compel the successive governments to include the issue of contract labour in the agenda of Standing Labour Conferences (SLC) and Indian Labour Conferences (ILC) on several occasions. In recent past the issue was discussed in the 42nd SLC (December 2007), 42nd ILC (February 2009) and 43rd ILC (November 2010). The 43rd ILC constituted a tripartite committee on the problems of contract labour, social security, wages etc and on amendments to the contract labour legislation. The committee “recognised the pressing need to protect the interests of contract workers,” and discussed the amendments suggested by the tripartite group constituted by the 42nd ILC. The committee then made the following suggestions: 1) All efforts should be made to ensure that provisions of the 1970 act and the rules made thereunder are implemented in letter and spirit. 2) Labour enforcement machinery at the centre and in states must be strengthened by providing requisite manpower and other facilities. 3) States must constitute tripartite state advisory boards under the act. As a number of states have not constituted such boards, it asked such states to constitute these boards at the earliest. 4) Payments should be made to contract workers through banks. Necessary amendments should be made in the act and rules. The committee also put forward the following proposals: 1) In case a contract worker performs the same or similar kind of work as a workman directly appointed by principal employer, the wage rates, holidays, hours of work, social security and other conditions of service must be same for contract worker too. This provision exists in substance in the rules and needs to be incorporated in the act. 2) The threshold limit of 20 workers for applicability of the act should be dispensed with. These proposals were supported by the representatives of workers as well as state governments. But the employers’ representatives did not agree with them. The workers’ group also suggested that in the event of abolition of contract labour under section 10(2) of the act, the concerned workers must be regularised. State governments agreed to it but the employers’ group disagreed. DESIGN OF A UNION FREE WORKPLACE The phenomenon of decline in regular workforce and increase in contractisation at regular work points has intensified the exploitation of labour --- the real motive of the employers. The idea, as said earlier, is to have a trade union free workplace. Rampant contractisation has given rise to three serious aspects: (a) the numerically dominant section of workforce is refused fundamental trade union rights and the right to a decent living, (b) the country is moving towards the bottom on the question of freedom of association, protection of the right to organise and collective bargaining, (c) wage component in the cost of production has been dwindling as noted above. However, naturally, this all round exploitation of workers is generating an explosive situation at the workplaces and sporadic explosions have been witnessed. But in the absence of effective steps to address the problem at its very root, the society as a whole is bound to get impacted. It is a matter of hope that all central trade unions in the country have expressed concern over the cancerous growth of contractisation and its adverse impacts on the working class, and have initiated a joint movement on the issue. Simultaneously, regular workers too are increasingly realising that rampant contractisation is impacting their own right to collective bargaining. The need of the hour is to strengthen the understanding on the issue and to develop a powerful united movement to defeat the capitalist design on the basis of some short term and long term approaches. SHORT AND LONG TERM APPROACHES The trade union perspective is to carry forward united struggles to achieve immediate relief and also to achieve long term goals. Abolition and Absorption: In jobs of perennial nature, the final goal is abolition of contract labour and absorption of contract workers as regular workers of principal employer. The act should be amended to include statutory absorption. Right to Association: Trade union rights, including the right to recognition and to collective bargaining, should be guaranteed to contract workers. Immediate Relief: The minimum grade of pay (basic pay plus dearness allowance), in force for permanent workers of an enterprise, must be paid to contract workers. As for other allowances, at this stage the work related allowances must at least be paid to contract workers also. They must also have healthcare, safety measures, children’s education aids, statutory social security benefits, leave, holidays, weekly offs with pay, etc, which permanent workers have Equal Pay for Equal Work: Rules under the 1970 act provide for same wage rates, holidays, hours of work and other conditions of services to contract workers. These must be implemented. Relations with Principal Employers: Employment relationship must be redefined on the basis of linkage between the final recipient of gains of production (principal employer) and the producer at the lowest rung of production process. Outsourced Workers: Outsourcing should be treated as a contract and covered by the Contract Labour Act. Continuity of Service: With a change of contractor, workers engaged by the previous contractor must continue in the job without interruption or change in service conditions. This provision should be incorporated as a condition in the tender to invite contractors. Record of Contract Workers: The annual return on employment submitted to labour department by a principal employer should compulsorily include details of his contract workers, contractors and licence details etc. Workmen Compensation: In the event of death or injuries owing to accident or otherwise in course of employment, contract workers should be paid same rate of compensation as regular workers are paid under the Workmen’s Compensation Act. Implementation of Labour Laws: Principal employer should be held responsible for implementation of all labour laws for contract workers like maintenance of employment register, submission of annual returns to labour department, PF, gratuity, ERA, maternity benefit, ESI and other social security measures. Any violation should attract stringent punishment for principal employers. Monitoring Mechanism: A tripartite contract labour monitoring board must be constituted in every state and at the centre (with representatives of trade unions, employers and government) to monitor the implementation of labour laws for contract workers. The above is illustrative, not exhaustive. Giving these proposals a structured and final form would require more consultation at grassroots level and with experts in the field. In any case we must not give credence to the so called theory that flexibility in labour market is an instrument of employment generation..