Our company is facing severe financial distress and is unable to pay vendors through whom we engage contract workmen. Consequently, the vendors are not paying their laborers. This situation has led some of the laborers to approach the labor commissioner's office, which has called us for a meeting. The letter from the labor office is addressed to the head of the organization.
1) Can the head of the organization depute someone else on his/her behalf to attend the meeting?
2) Since we are in distress and don't have the money to pay pending bills of the vendors, what could be the implications?
3) What orders or instructions are expected from the labor commissioner?
From India, Hubli
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1) Can the head of the organization depute someone else on his/her behalf to attend the meeting?
2) Since we are in distress and don't have the money to pay pending bills of the vendors, what could be the implications?
3) What orders or instructions are expected from the labor commissioner?
From India, Hubli
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As the matter is referred to the Office of the Labour Commissioner, now the matter could be further pursued across the table in the presence of the Labour Commissioner.
While the company is in financial distress, payment should be made for the services availed by the company from vendors or the employees of vendors. It is the primary responsibility of the Company - which is the PE. The Labour Commissioner may address the Chief of the Company only.
As far as possible, the Head of the Company should attend the meeting convened by the Labour Commissioner, as this shall be set as an overriding priority.
Answering your queries:
1) Whether the head of the organization can depute someone else on his/her behalf to attend the meeting.
ANS: Yes, the Head of the company can authorize his deputy to attend the meeting convened by LC if the Chief has an unavoidable priority on the date which is convened by LC. However, the Chief of the company shall make a written request addressed to LC, explaining the circumstances which prevent him from attending the meeting and also his intention to authorize his Second-In-Command to attend the meeting on his behalf.
2) Since we are in distress and don't have money to pay pending bills of the vendors, what could be the implications?
ANS: As the services have already been availed by the Company, it shall be the responsibility of the company to arrange payment. Somehow or the other, the company should mobilize funds to meet the payment.
3) What orders or instructions are expected from the Labour Commissioner?
ANS: You explain your problems. LC's instruction is most likely in favor of Contract workmen. However, LC, with the powers vested in him, can give some lead time to the company if the company is able to present the reasons sincerely and honestly.
From India, Aizawl
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699While the company is in financial distress, payment should be made for the services availed by the company from vendors or the employees of vendors. It is the primary responsibility of the Company - which is the PE. The Labour Commissioner may address the Chief of the Company only.
As far as possible, the Head of the Company should attend the meeting convened by the Labour Commissioner, as this shall be set as an overriding priority.
Answering your queries:
1) Whether the head of the organization can depute someone else on his/her behalf to attend the meeting.
ANS: Yes, the Head of the company can authorize his deputy to attend the meeting convened by LC if the Chief has an unavoidable priority on the date which is convened by LC. However, the Chief of the company shall make a written request addressed to LC, explaining the circumstances which prevent him from attending the meeting and also his intention to authorize his Second-In-Command to attend the meeting on his behalf.
2) Since we are in distress and don't have money to pay pending bills of the vendors, what could be the implications?
ANS: As the services have already been availed by the Company, it shall be the responsibility of the company to arrange payment. Somehow or the other, the company should mobilize funds to meet the payment.
3) What orders or instructions are expected from the Labour Commissioner?
ANS: You explain your problems. LC's instruction is most likely in favor of Contract workmen. However, LC, with the powers vested in him, can give some lead time to the company if the company is able to present the reasons sincerely and honestly.
From India, Aizawl
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Hi Kartik,
I endorse the above suggestions. But, I may add: what's your rapport with the LC and how strong is the Union? Are they agitative types or reasonable/cooperative? Considering ground realities, you should also have one-to-one discussions beforehand with the LC and union individually to assess their thinking/plan of action. While doing so, you should have your well-thought-out future plans. Are you in a position to accept/propose some commitments right now? What's going to be your Plan B if nothing goes well for an amicable solution?
As for the question of whether the CEO should sit for the discussion or not, I would say yes and no. If both the LC & Union are egoistic, then the CEO can sit. If cooperative, the HR and/or Finance Head should deal with the matter, assuming no other matter except the funds position is the crux of the problem. If necessary, you should have your bank balance statement in hand to convince the LC.
From India, Bangalore
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I endorse the above suggestions. But, I may add: what's your rapport with the LC and how strong is the Union? Are they agitative types or reasonable/cooperative? Considering ground realities, you should also have one-to-one discussions beforehand with the LC and union individually to assess their thinking/plan of action. While doing so, you should have your well-thought-out future plans. Are you in a position to accept/propose some commitments right now? What's going to be your Plan B if nothing goes well for an amicable solution?
As for the question of whether the CEO should sit for the discussion or not, I would say yes and no. If both the LC & Union are egoistic, then the CEO can sit. If cooperative, the HR and/or Finance Head should deal with the matter, assuming no other matter except the funds position is the crux of the problem. If necessary, you should have your bank balance statement in hand to convince the LC.
From India, Bangalore
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Dear Kartik,
While endorsing both Mr. Nair and Prof. Kumar, I would like to add my comments with an answer to your third question as follows:
The bona fide reason for the delay in payment should be recorded with the authority with supporting evidence. You are not denying the payment due to the contractor; that also needs to be recorded, and you should ask for some time to make the payment to the contractor under the circumstances.
Making payment of wages to contract labor is the prime responsibility of the contractor. When the contractor fails to pay, the principal employer is obligated to pay and then seek reimbursement from the contractor. Therefore, in my view, the authority under the CLRA and the Payment of Wages Act has no legal right to call you.
You are at fault for not settling the contractor's bill under the civil contract. You are not strictly liable to the Labor Commissioner.
If the contract laborers raise an industrial dispute, then only the authority can call you along with the contractor. Unfortunately, many individuals in authoritative positions, as well as owners or their representatives/HR, are not well-versed in the law.
Regarding your third question, the authority may direct you to make the payment of delayed wages, along with payment of compensation not exceeding three thousand rupees but not less than one thousand five hundred rupees, or as prescribed in your State Rules. The authority may grant you some time to make the payment.
I further assert that this Authority lacks jurisdiction to entertain and decide claims involving complicated questions of law and facts. If you wish, you can complicate this matter with the help of a lawyer. It would be an abuse of the legal process if the authority continues the proceedings (Abdul Waheed v. Authority, Payment of Wages Act, (1995) II LLJ 1079).
From India, Mumbai
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While endorsing both Mr. Nair and Prof. Kumar, I would like to add my comments with an answer to your third question as follows:
The bona fide reason for the delay in payment should be recorded with the authority with supporting evidence. You are not denying the payment due to the contractor; that also needs to be recorded, and you should ask for some time to make the payment to the contractor under the circumstances.
Making payment of wages to contract labor is the prime responsibility of the contractor. When the contractor fails to pay, the principal employer is obligated to pay and then seek reimbursement from the contractor. Therefore, in my view, the authority under the CLRA and the Payment of Wages Act has no legal right to call you.
You are at fault for not settling the contractor's bill under the civil contract. You are not strictly liable to the Labor Commissioner.
If the contract laborers raise an industrial dispute, then only the authority can call you along with the contractor. Unfortunately, many individuals in authoritative positions, as well as owners or their representatives/HR, are not well-versed in the law.
Regarding your third question, the authority may direct you to make the payment of delayed wages, along with payment of compensation not exceeding three thousand rupees but not less than one thousand five hundred rupees, or as prescribed in your State Rules. The authority may grant you some time to make the payment.
I further assert that this Authority lacks jurisdiction to entertain and decide claims involving complicated questions of law and facts. If you wish, you can complicate this matter with the help of a lawyer. It would be an abuse of the legal process if the authority continues the proceedings (Abdul Waheed v. Authority, Payment of Wages Act, (1995) II LLJ 1079).
From India, Mumbai
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The agreement with the contractor is most likely that the contractor will execute the work and will be paid the agreed price for it. It may also have a clause that the contractor will discharge all statutory obligations and it is not linked with the payment received from the Principal Employer. The two are independent of each other. So the contractor has to discharge his liability irrespective of being paid by PE. The PE's liability to pay the contractor personnel arises only if the contractor fails to pay. So the contractor has to primarily answer the question before the Labour Commissioner and as PE its role is to highlight the above aspects of the contract with the contractor.
Now coming to the queries:
1. While the notice from the Labour Commissioner would be in the name of its Head/CEO, it is neither necessary nor desirable that such persons attend the hearing. These are not criminal proceedings to warrant personal presence and can be represented by any person authorized to do so. Even if the organization is proprietary, it still is not necessary for the proprietor to attend. In case he attends, there will be a lot of pressure on him by the labor unions as well as the Labour Department to announce certain decisions then and there which one may not be prepared for. An authorized person can wriggle out of such situations. This is particularly so as you are not in a position to pay the due amount.
2. The power of the Labour Commissioner is to persuade the parties to come to a mutual agreement. Their role is not judicial and is only conciliatory. If no agreement is reached, the matter could be referred to adjudication. At any stage of the judicial proceedings, as and when the situation improves, you can settle the matter by making due payment to the contractor, and the contractor settles with his workmen.
3. As already pointed out, the Labour Commissioner has a very limited role, and the better option is to bide your time, as the present situation is not likely to last long.
From India, Mumbai
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Now coming to the queries:
1. While the notice from the Labour Commissioner would be in the name of its Head/CEO, it is neither necessary nor desirable that such persons attend the hearing. These are not criminal proceedings to warrant personal presence and can be represented by any person authorized to do so. Even if the organization is proprietary, it still is not necessary for the proprietor to attend. In case he attends, there will be a lot of pressure on him by the labor unions as well as the Labour Department to announce certain decisions then and there which one may not be prepared for. An authorized person can wriggle out of such situations. This is particularly so as you are not in a position to pay the due amount.
2. The power of the Labour Commissioner is to persuade the parties to come to a mutual agreement. Their role is not judicial and is only conciliatory. If no agreement is reached, the matter could be referred to adjudication. At any stage of the judicial proceedings, as and when the situation improves, you can settle the matter by making due payment to the contractor, and the contractor settles with his workmen.
3. As already pointed out, the Labour Commissioner has a very limited role, and the better option is to bide your time, as the present situation is not likely to last long.
From India, Mumbai
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Dear KK!HR,
Your first paragraph, I do agree with. In fact, I said the same thing. However, it seems to me that you differ on the rest of what I said. You are a Super Moderator. I request you to kindly re-look at your response.
From India, Mumbai
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Your first paragraph, I do agree with. In fact, I said the same thing. However, it seems to me that you differ on the rest of what I said. You are a Super Moderator. I request you to kindly re-look at your response.
From India, Mumbai
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Dear Akhil,
Where there is a default in payment of wages by the contractor, the PE is under statutory liability to make the required payment and deduct the same from the bills of the contractor. The PE has no escape but has to face the situation, the contractor could afford to be untraceable for the time being or may even join hands with his employees and direct their ire against PE. These are the practical realities one has to face. The relationship between the PE and the contractor is based on the work order (a contract indeed) between them, but the present circumstances constitute Force Majecure (meaning extra ordinary circumstance beyond the control of parties) so the performance of contractual obligations stand postponed. So the legal rights of the contractor against PE are also limited.
Regards
From India, Mumbai
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Where there is a default in payment of wages by the contractor, the PE is under statutory liability to make the required payment and deduct the same from the bills of the contractor. The PE has no escape but has to face the situation, the contractor could afford to be untraceable for the time being or may even join hands with his employees and direct their ire against PE. These are the practical realities one has to face. The relationship between the PE and the contractor is based on the work order (a contract indeed) between them, but the present circumstances constitute Force Majecure (meaning extra ordinary circumstance beyond the control of parties) so the performance of contractual obligations stand postponed. So the legal rights of the contractor against PE are also limited.
Regards
From India, Mumbai
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Dear KK!HR,
Respected Sir,
You are endorsing what I said in the first part. You elaborated on it. Thanks for that.
What I said in the first part is given verbatim:
"You are at fault for not settling the bill of the contractor under the civil contract. You are not liable to the Labour Commissioner strictly."
However, your below-given statements are contradicting my views, and therefore, I had to write on your post.
1. For the Head/CEO, it is neither necessary nor desirable for such persons to attend the hearing.
2. The power of the Labour Commissioner is to persuade the parties to come to a mutual agreement ONLY.
One can have different views. But what I feel is, the authority has certain rights to call the PE also in certain circumstances, and when the authority calls you, you cannot just neglect or ignore it. If you feel the authority is exceeding its powers, you have the right to raise your points and fight legally.
From India, Mumbai
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Respected Sir,
You are endorsing what I said in the first part. You elaborated on it. Thanks for that.
What I said in the first part is given verbatim:
"You are at fault for not settling the bill of the contractor under the civil contract. You are not liable to the Labour Commissioner strictly."
However, your below-given statements are contradicting my views, and therefore, I had to write on your post.
1. For the Head/CEO, it is neither necessary nor desirable for such persons to attend the hearing.
2. The power of the Labour Commissioner is to persuade the parties to come to a mutual agreement ONLY.
One can have different views. But what I feel is, the authority has certain rights to call the PE also in certain circumstances, and when the authority calls you, you cannot just neglect or ignore it. If you feel the authority is exceeding its powers, you have the right to raise your points and fight legally.
From India, Mumbai
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Ok sirs and solution request Karthiji.
The company made a contract with the contractors in a legal way. Whether the company pays the bills or not, or delays them, the contractors have the primary responsibility to pay salaries to their workers. Literally speaking, all those workers were called upon by the contractors to work in a specific company. So basically, these workers should be paid by the contractors. If the contractors fail to pay the salary dues of any contract workers, the Principal Employee is liable to pay all dues, and later amounts could be deducted from the contractor bills. Therefore, the contractors, in this case, point fingers at the company management for reasons for not paying salaries.
Under the Contract Labour Act, orders the principal employer has to pay all dues in any way, even selling property or taking a bank loan. There is no question of jurisdiction and powers of LC. He has sufficient powers. Moreover, there is no necessity to file another case under IDAct. This complaint could be converted and is sufficient for making necessary decisions on the principal employer for payment dues. This joint meeting is enough to call the management. If the employer also neglects and denies paying the dues, the LC has the power to prosecute the PE under the Contract Labour Act.
Both cannot escape the primary duty of payment of salaries of daily contract labour, whether you are financially stable or not. You can convince your workers for installment-wise payment of dues if accepted. The issue is not related to whether the union is strong or not but it should be approached from a humanitarian angle, and the confirmed responsibility should be fixed by the Contract Labour Act for paying the dues even if your contractor fails to do so. Please go through the C. L. Act, Sir. Unless it leads to unrest, industrial peace...
From India, Nellore
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The company made a contract with the contractors in a legal way. Whether the company pays the bills or not, or delays them, the contractors have the primary responsibility to pay salaries to their workers. Literally speaking, all those workers were called upon by the contractors to work in a specific company. So basically, these workers should be paid by the contractors. If the contractors fail to pay the salary dues of any contract workers, the Principal Employee is liable to pay all dues, and later amounts could be deducted from the contractor bills. Therefore, the contractors, in this case, point fingers at the company management for reasons for not paying salaries.
Under the Contract Labour Act, orders the principal employer has to pay all dues in any way, even selling property or taking a bank loan. There is no question of jurisdiction and powers of LC. He has sufficient powers. Moreover, there is no necessity to file another case under IDAct. This complaint could be converted and is sufficient for making necessary decisions on the principal employer for payment dues. This joint meeting is enough to call the management. If the employer also neglects and denies paying the dues, the LC has the power to prosecute the PE under the Contract Labour Act.
Both cannot escape the primary duty of payment of salaries of daily contract labour, whether you are financially stable or not. You can convince your workers for installment-wise payment of dues if accepted. The issue is not related to whether the union is strong or not but it should be approached from a humanitarian angle, and the confirmed responsibility should be fixed by the Contract Labour Act for paying the dues even if your contractor fails to do so. Please go through the C. L. Act, Sir. Unless it leads to unrest, industrial peace...
From India, Nellore
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