Contract Labour Report SLD 2012

A Study of the Contract Labour System

in the Garment Industry in Gurgaon

Society for Labour & Development

New Delhi, September 2012

Table of Contents

Foreword ..…………………………………………………………….…………………………………………………………3

1. Introduction ...................................................................................................................7

2. Objective and Methodology ..........................................................................................9

3. Legal Framework of the Contract Labour System in India ............................................11

4. Growth of the Contractualised Workforce in the Gurgaon Garment Industry ...............14

5. Institutionalised Illegalities in Contract Labour Practices .................................................17

5.1 The Model Employer Sets a Poor Example...................................................................17

5.2 Illegal Employment of Contract Workers in Core Activities..........................................17

5.3 Supplying More Workers than What the License is Granted for...................................18

5.4 Evasion of License through Abuse of the “20 Workers” Clause.....................................19

5.5 Insufficient and Incompetent Inspection......................................................................20

5.6 Non Submission of Mandatory Reports and Incomplete Reporting..............................20

5.7 Perverse Record Keeping.............................................................................................21

5.8 Supply of Workers without License by the Contractor and Employment of Contract

Labour without Registration by the Principal Employer................................................21

6. Conditions of Employment of Contract Workers in the Garment Industry.......................22

6.1 Degradation of Workers’ Status from Regular to Casual and Denial of their Legal

Rights……………………………………………………………………………………………………………………......22

6.2 Insecurity of Piece Work..............................................................................................22

6.3 Contract Labour facilitates ‘Easy Hire and Fire’............................................................22

6.4 No Proof of Employment ............................................................................................24

6.5 Denial of Leave............................................................................................................25

6.6 Lack of Wage Accountability.......................................................................................25

7. The Supernatural Earnings of Contractor.............................................................................28

7.1 Earnings from Commission..........................................................................................28

7.2 Extraction Derived from Compulsory Overtime............................................................28

7.3 Extraction through Deduction from Wages or Deceptive Rate Fixing System ..............28

8. Theft of Wages and Social Security by Contractors ............................................................29

8.1 Cases of Wage Theft...................................................................................................29

8.2 Examples of Wage Theft by Contractors Employed by Three Companies.....................29

8.3 Violation of Social Security Provisions.........................................................................35

8.4 Loss to Workers and PF Department due to Non Compliance by 7 Contractors from

Three Companies..........................................................................................................36

8.5 Loss to Workers and ESI Department from Non Compliance by 7 Contractors from Three

Companies...................................................................................................................38

9. Grievance Redressal and Freedom of Association...............................................................40

9.1 Union Busting Role of Contractors with the Help of the Management.........................40

9.2 Corporate Level Corruption.........................................................................................41

9.3 Non Performance of the Grievance Redressal Role of the Management/

Contractor………………………………………………………………………………………………..………………..41

10. Conflicts existing in the Garment Industry in Gurgaon.....................................................43

11. Conclusion............................................................................................................................45

3

Foreword

The outburst of industrial unrest at Maruti Suzuki in Manesar, which is in the Gurgaon

industrial belt, is symptomatic of the deep conflict that is developing in the industrial

relations in the manufacturing sector. These conflicts have focused national attention on the

contract labour system and it has become a subject of intense debate, both in media and in

the public sphere. In many ways, this study anticipated the urgency of addressing contract

labour as a key issue of the capital-labour conflict in the present times. The trajectory of the

underlining conflict between labour and capital in the Maruti Suzuki plant is reflected in the

tenacity of the workers, in opposing the contract labour system and making it one of the

core demands for negotiation and the ruthless opposition of the company to it.

The Indian judiciary has time and again applied the doctrine of ‘lifting the veil’ and has

examined the employer-employee relationship of contract labour in innumerable cases, and

almost always, has come to the conclusion that stable, regular and direct employment

relationship exists with the company. In other words, almost all judicial scrutiny has showed

the fraudulent nature of the contract labour system, hiding behind the trail of paper records

that attempt to demonstrate that the employee is that of an intermediary contractor. In the

face of this pattern of judicial scrutiny, the continuous demand of the industry to allow

unbridled contract labour system shows that it is becoming an intrinsically structural

element of the labour-capital relationship in Indian industry.

In a way, the strategy of capital is to convert the permissibility under the Contract Labour

Act into a legal finality, taking it out of both, judicial scrutiny and the scope of collective

bargaining. This reading of the inherent right to employ contract labour under the Contract

Labour Act is becoming a norm, in industry after industry. This study also establishes this

fact. Management strategy has been to use the law as an instrument to redefine the labour-

capital relationship.

The legislative intent of the Contract Labour Act was to progressively abolish contract labour

system. It is now being subverted to become an instrument of massive expansion of the

contract labour system. With the government issuing general licenses, restricting the

registration of unions of contract labour, not constituting the Contract Labour Advisory

Boards or make them non-functional, not promoting contract labour issues within the scope

of bargaining or referring the matters for adjudication; all this is evidence of the clear shift

in the policy of the government and of its collaboration with capital.

One of the most archaic and inhuman forms of labour relationships has resurfaced as a part

of the corporate labour management strategy in the contemporary times. In order to justify

and legitimise this, a discourse has been posited which shows that contract labour system is

a flexible form of production required for globalised production and is not directly linked to

4

the capital-labour relationship. This need to be contested at an empirical level and this

theory requires to be debunked. This report is one such study that brings out the reality of

contract labour system and its empirical dimensions in the city of Gurgaon which has

become the symbol of the modern urban world of the so-called new India. The evil that

lurks under the shining world of glass and steel, not only creates a life of impoverishment

but also perpetuates a systemic denial of justice and rights and an indifference to the

constitutional spirit. Capital propels profit seeking into the domain of crime; a realm that

society believes is immoral and unethical.

More significant, the contract labour system is growing under the shadow of the Trade

Union movement which almost never speaks about it, and when it does, it is without

seriousness, partly because it belongs to the world of migrants, dalits, tribals, minorities and

other marginalised sections of the society. The deep distress in rural life is forcing the rural

poor to look for a life in the dirty, insecure, unsafe workplaces and unhealthy living quarters.

But, it is also slowly bringing them to the gates of the working class movement and yet the

unions, which can get revitalised and infused with the new blood of passion and resistance

that these new labour formations bring, is reluctant to engage and include them in the

world of solidarity. In spite of the difficulties that arise from their fragmented lived

experience, workers are organising themselves to change their own life and work

relationship, at times, supported by social activists, human rights and political organisers.

These efforts are mostly localised, and sometimes fragmented even in the same company

and do not acquire the political weight to pierce the silence at the national level and give

strategic thrust to the renewal of the labour movement.

In other words, this new layer of workers in the organised sector, who remains embedded

in the contract labour system have to emerge as a force to reshape the labour movement.

The trade union movement has to respond to this need. One of the efforts is to bring all the

unions of contract labour from their shadowy existence at the local level and within

different federations onto a single platform to enable them to share, coalesce and shape a

national strategy to address the question of contract labour. The National Forum Against

Contract Labour is one such effort which has brought together at national level contract

labour unions from many federations, and from key sectors of engineering, coal, garment,

and fertiliser. As part of its campaign, it has reoriented the focus of labour research onto the

study and investigation of the contract labour system prevalent in different sectors. It is

from this perspective that The National Forum Against Contract Labour decided to

collaborate and publish this report. It is a small effort towards realigning the labour research

agenda with new organising efforts in order to build a new union movement.

It is important to understand the location and dynamics of the contract labour system in the

production system, the specific way in which it relates to different industries and different

managerial frameworks of the capital-labour relationship. The dominant form in the high-

end organised sector, as exemplified by Maruti Suzuki, reveals the use of a contract labour

5

system as a managerial strategy for curbing the unionising effort of workers and restricting

the scope of negotiations and collective bargaining on contract labour. In fact, it was the

intrinsic unity of the contract workers and permanent workers, who were unwilling to trade-

off for their sectional interests, which brought out the full force of the company’s and the

state’s backlash against the Maruti Suzuki Workers Union. The contract workers were

getting minimum wages, but were deprived of the capacity to form a union and through the

union address the question of regularisation and negotiation of the terms of employment.

Increasing the proportion of contract labour within a framework of a dual labour regime in a

factory is the preferred strategy of capital to reduce the unit labour cost of products.

Contract labour is essential to fragment the internal labour relationship. It is an instrument

against union building and collective bargaining.

This becomes even more sinister when even the regulatory framework is deliberately

undermined by both state and capital. This study brings out the specificity of the contract

labour system in the garment industry. In an industry where there is hardly any difference

in the wages of permanent and contract workers and where all workers are at-best

employed at the minimum-wage levels, what is the specific purpose of the contract labour

system? This report demonstrates that the contract labour system is becoming the

preferred strategy to deprive workers of their legally mandated minimum wage and

statutory rights of PF, ESI, bonus and earned leave and to force longer working hours

without the legally mandated overtime wage rate. In other words, in the garment industry

the contract labour system serves the purpose of both extending working time and engaging

in wage theft. In contradistinction from function of the contract labour system seen in the

automobile industry, the deployment of contract labour system in the garment industry

sustains the illegal act of wage theft and an illegal labour regime while shifting the burden of

the illegality onto the intermediary agents. It is unfortunate that the government is in

absolute collusion in promoting and sustaining this massive illegal practice.

The report, totally debunks the rationale given by the industry that the contract labour is

necessary to allow them flexible production. In fact, notwithstanding the opposition of the

union movement, the Indian law permits fixed-term contracts which give managements

numerical flexibility to allow them to align manpower with fluctuations in export orders. By

opting for contract labour system instead of a fixed-term contract where the employer-

employee relationship remains with the principal employer, it is clear that capital seeks to

deprive workers of their rights and impose a wage cut. In the higher-end manufacturing

industries such as the automobile industry, this shift seeks to institutionalise a system of

wage restraint and keep it at near minimum-wage level and eliminate the capacity for

workers to unionise and engage in collective bargaining. The shift of the employment

relationship to contract labour system allows for both a coercive method and fragmentation

of workers into numerous categories to sustain this system. In the low-end industries,

where the industry as a whole at best operates at minimum wage levels, the contract labour

system is implemented to institutionalise the violation of the minimum legal regime and

6

shifts the associated high risk and liabilities onto labour contractors. It is a well established

sociological fact that wide and rampant illegality cannot be sustained without it being

embedded in a web of illegal or criminal relationship. Such a labour regime then contributes

and becomes a part of extortion, mafia operations and corruption.

Though, the research predates the latest phase of struggle at Maruti Suzuki, it is being

published at a time when the struggles of Maruti Suzuki workers has already brought the

debate on the contract labour system to the forefront. In fact this report is an effort on the

part of the The National Forum Against Contract Labour to understand the nature of

contract labour systems and broaden the understanding of new labour conditions and

relationships particularly in the new industrial areas. If the automobile industry represents

the high-end of the manufacturing sector and garments the low-end, the report

complements other studies to show the dominance of the contract labour system, which

while fulfilling different functions and strategies of the management system, is the

overarching institutional framework of the new labour relationship The working people of

Gurgaon, the union movement and anyone who has a notion of human rights or

constitutional propriety should be able to see the lurking inhumanness of this system which

requires to be changed. It is unfortunate that the political system, including the liberal

section, does not see the signs that the working people will not wait too long and are

learning to change this system at any cost. The report brings out with force the legitimacy of

this new upsurge of the working class.

Ashim Roy 11 September 2012

General Secretary

New Trade Union Initiative

7

1. Introduction

Haryana State is one of the fastest growing states in India. The GDP was Rs 2, 162,870

million in 2009-2010 and Rs 2,577,930 million in 2010-2011, an increase of 19% in a single

year. This reflects an increasing trend of economic growth in Haryana over the last decade

despite the global downturn and its impact on the export/foreign investment-oriented

industries that now characterise the economy of the state. In keeping with the neo liberal

economic policies introduced in India during the early 1990s, the state has attracted

investment through various incentives to the industrial sectors, embarking on the

industrialisation of an economy that had traditionally been based on agriculture. Industry in

Haryana is highly dependent on a migrant workforce that has flooded in to the state along

with its phenomenal economic growth.

The Industrial and Investment Policy Report for 2011 published by the Industries &

Commerce Department of the Government of Haryana summarises the industrial growth

the state has seen as follows1:

“With a splendid economic growth, one of the highest per capita income

index, sound industrial infrastructure, strong manufacturing base, advanced

agriculture sector and vibrant service sector, Haryana is among the highly

economically developed and industrialised States of India. The State has its

manufacturing stronghold particularly in sectors like automobile & auto

components, light engineering goods, IT & ITES, textile & apparels and

electrical & electronic goods.”

In 2010-11, the per capita state domestic product of Haryana was Rs 59,188 which is

significantly higher than the national average of Rs 35,917. It is no coincidence that the

majority of migrant workers in Haryana come from the two North Indian states to the east,

Bihar and Uttar Pradesh, which have the lowest per capita state GDP nationwide ( Rs 13,303

and Rs 17,418 respectively)2. This huge disparity in income among the states is an important

factor in the migration of labour to Haryana.

The garment and textile sector is a major sector contributing to the state domestic product

and is also an important source of foreign exchange earnings for the state. However, this

export oriented sector is highly dependent on the migrant workforce from Bihar and Uttar

1 http://hsiidc.org/eDocuments/IP2011.pdf

2itself The 2004-2005 data suggests that the Haryana State Per capita GDP was Rs 37,842 while the national average was Rs

24,143 and the same for Bihar was Rs 7,914 the lowest among the states and for UP was Rs 12,950, the second lowest.

http://mospi.nic.in/Mospi_New/upload/State-wise%20SDP%202004-05_16sep11.pdf

8

Pradesh, who have been drawn to the jobs available in Haryana, and have come especially

to the primary city of Haryana, Gurgaon, which is a major hub of the export oriented

garment industry in India.

Though the government of Haryana recognises the Gurgaon industrial area as a centre for

manufacture and export of ready-made garments, it has long ignored the fact that the

migrant working class is a critical factor in sustaining the growth of the celebrated industrial

sector. The state has not only ignored the exploitation of the migrant working class in

Gurgaon, but has also colluded with industrialists and their accomplices in worsening the

situation. The burgeoning growth of contract labour in the manufacturing industries, and

especially in the garment factories of Gurgaon, is an indicator of this connivance. The

contract labour is defined as a worker who is hired by or through a contractor in connection

with the work of a company, with or without the knowledge of the principal employer.

Theoretically, the main distinction between the contract and regular worker is the

involvement of a contractor in the recruitment process. However, the law mandates that

contract workers be provided minimum wages, social security and all other facilities as

mandated for regular workers.

9

2. Objective and Methodology

The research on which this study is based was conducted by the Society for Labour and

Development (which is based in New Delhi), with the financial support of the Rosa

Luxemburg Foundation, a left German political foundation with regional office in New Delhi.

The study aims to understand the operation of the contract labour situation in India, with

specific reference to its operation in the garment industry in Gurgaon. The SLD research

team carried this out by interacting with each of the various kinds of stakeholders in the

Gurgaon garment industry: workers, contractors, employers, and government officials, to

get their views on how the system operates in Gurgaon, its underpinnings and implications.

Fieldwork for this research was carried out by a team consisting of Samsad Alam, Dee Kelly

and Saleena P. Samsad Alam facilitated interviews with workers and the contractor and the

supervisor; Saleena interviewed workers, the contractor, the supervisor and trade union

leaders; Dee interviewed the management executive. Worker interviews were carried out

on Sundays or late evenings in the housing colonies where workers live, the contractor and

the supervisor were also interviewed in the community in which they live. The management

executive was interviewed in their company offices. The trade union officers were

interviewed in their respective offices. The development of RTI applications and analysis of

data obtained through RTIs was done by Saleena. Ms. Anannya Bhattacharjee, Secretary of

the Governing Board of SLD, contributed to the argumentation presented in the report.

The Right to Information Act of 2005 was used; both to obtain general information

concerning the contract labour situation in Gurgaon, and also for information pertaining

specifically to the seven companies whose labour practices were investigated for this

report3. Of these, 4 were Tier 1 companies, which employ more than 1000 workers and have

multiple production units and have direct sourcing relationships with brands and retailers,

as defined by Asia Floor Wage Alliance, and 3 were medium-sized companies which employs

between 100 to 1000 workers. 4/

5Staff from the Office of the Deputy Labour Commissioner

(who is also the department’s Public Information Officer) was cooperative and helpful in

providing the information. However, they indicated to the research team that it might be

dangerous to be collecting information regarding contractors. The research team was told,

“They might harm you. They can even get you killed.” This would suggest that the

3RTI applications were filed to collect data about ten companies; however, the Office of the Deputy Labour Commissioner

did not have sufficient information on three of the companies 4Tier 1 garment companies are defined as those companies in the Indian context of export oriented garment industry as one

which employs over 1000 workers, have direct dealings with brands and retailers and multiple production locations. 5 For the purpose of our understanding, we define medium sized companies as those who employs anywhere between 400-

1000 workers in a single manufacturing facility.

10

government officials themselves believe that the labour contractors might find this research

to be posing a threat to their lucrative business and might try to retaliate.

The research team attempted to interview management personnel at garment supplier

companies, to obtain their views on the contract labour system in general and the growing

dependence on contract labour in Gurgaon. Three companies were repeatedly approached.

However, only one company allowed the interview. The team obtained contact details for

representatives of contractors and made calls to them expressing interest in meeting with

them, and were successful in engaging with one small contractor and with a supervisor

working for one of the biggest of the Gurgaon contractors. Some of the big contractors

threatened the research team members and tried to scare them away from the ongoing

research work. One went to the extent of saying “You better leave all this nonsense

research; otherwise you will have to face dire consequences.”

Interviews with workers were the least difficult part of the fieldwork, owing to the well-

established relationships that Mazdoor Ekta Manch has with workers. Nevertheless,

workers had to be repeatedly assured of the confidentiality of their identity, and reassured

as to support for their physical protection and for the protection of their jobs. At one

interview, one of the workers re-assured his colleagues, saying,

“Our job has no security even if we do not participate in interviews. So, don’t worry about

your job.” In all, 92 contract workers from six different companies were interviewed to get

their account of the working conditions in the factories and obtain their views on the

employers’ and labour contractors’ treatment of them with respect to their human rights

and labour rights. Trade union representatives in Gurgaon from the All India Trade Union

Congress and the Garment and Allied Workers Union were also interviewed, to learn of their

experiences with the contract labour system in Gurgaon.

“They might harm you.

They can even get you

killed.”

‘You better leave all this

nonsense research; otherwise

you will have to face dire

consequences.”

11

3. Legal Framework of the Contract Labour System in India

The Contract Labour (Regulation and Abolition) Act was enacted in 1970 by the central

government in recognition of increasing problems and abuses imposed on workers by the

contract labour system. The purpose of the Act is summed up in the full title as “an Act to

regulate the employment of contract labour in certain establishments and to provide for its

abolition in certain circumstances and for matters concerned therewith.”

The Act is applicable to any establishment that has employed 20 or more workers as

contract labour in any one of the days in the preceding twelve months, and to any

contractor who has employed 20 or more workers on any day within the preceding twelve

months. This covers virtually all of the manufacturing establishments and contractors in

Gurgaon. Every establishment to which this Act is applicable is required to be registered

with the State-appointed Registrar under Section 7 of the Act, and every contractor is

required to obtain a license from the state-appointed licensing officer under Section 12 of

the Act. According to the Act, the company is the principal employer of workers even though

they are employed through a contractor. In order to obtain a license for a contractor, the

principal employer has to provide a certificate whereby he/she states that the contractor is

employed by him/her and he/she undertakes the liability of complying with all provisions of

the Act. Section 28 of the Act entrusts the state governments to appoint staff to carry out

inspections of any premises where contract labour is employed; examine any pertinent

records, notices, or registers; interview any worker who is believed to be a contract worker;

and inspect any person who supplies or employs contract labour.

The Act entrusts the state government to prohibit contract labour in any process, operation,

or any other work in any establishment as it sees fit. Moreover, the Act “prohibits the

employment of contract labour in any operation or other work incidental to or necessary

for” the industry, trade, business, manufacture or occupation that is carried on in the

establishment. It also “prohibits the employment of contract labour in any work of perennial

nature”, that is, if the work is of sufficient duration with regard to the nature of the industry,

trade, business, manufacture or occupation that is carried on in the establishment. The

employment of contract labour “in any work in an establishment is prohibited if the same

work is done through regular workers in the same establishment or in similar

establishments.” Moreover, the employment of contract labour is “prohibited if it is

sufficient to employ a considerable number of full time workers”, meaning if regular workers

could be employed in the capacity where contract workers are employed, it is prohibited to

employ contract workers.

The Act further provides for the regulation of working conditions of contract labour

12

wherever it is not prohibited to employ contract labour. This includes provision of canteen

facilities to contract workers, first aid facilities, supply of sufficient wholesome drinking

water, and sufficient number of latrines and urinals and washing facilities. The principal

employer is required to provide these facilities to workers in case the contractor fails to

provide the same.

The Act also requires that the principal employer nominates a representative to be present

during the disbursement of wages by the contractor, and it shall be the duty of the

representative to certify the amounts paid as wages by the contractor to workers.

Moreover, the Act holds the principal employer responsible for paying any amount due to

workers on account of non payment, short payment, or late payment by the contractor.

Over the last few decades, employers and their associations have raised a huge outcry to

dilute provisions of the Contract Labour Act. However, judgements by various courts, have

repeatedly affirmed the liabilities that are the responsibility of the principal employer6.

Over and above the Contract Labour Act itself, various other labour-related laws also

regulate the wage situation, provision of social security, and other labour rights provisions

that pertain to contract labour. The main laws are as follows: in terms of the Employee State

Insurance Act of 1948, contract workers are entitled to the same provisions and benefits as

regular employees. This is evident from the definition in the Act of an employee as

“any person employed for wages in or in connection with the work of a

factory or establishment to which the ESI act applies and who is

employed by or through an immediate employer on the premises of the

factory or establishment or under the supervision of the principal

employer or his agent on work which is ordinarily part of the work of

the factory or establishment or which is preliminary to the work carried

on in or incidental to the purpose of the factory or establishment.”

Provident Fund is an important contributory social security provision available to working

people in India. Under the provisions of the Employees’ Provident Fund & Miscellaneous

Provisions Act of 1952, any company which employs 20 or more workers is mandatorily

required to enrol all workers under the EPF and deduct a contribution of 12% of the wage

towards PF. Along with this deducted 12%, the employer is required to contribute another

6 To cite an example, The Allahabad High Court had judged that “A principal employer has to ensure that contractor’s

workers are paid minimum wages’: General Manager, Aligarh Dugdh Utpadak Sahakari Sangh Ltd (Parag Dairy) SAsni,

HAthras v. Prescribed Authority, Minimum Wages and Dy Labour Commissioner, Aligarh, 2009 LLR 316(Allahabad High

Court)

“If the contractor fails to pay wages to his employees engaged by him, the principal employer will be liable to pay the

same” Cominco Benani Zinc Ltd v. Pappachan, 1

989 LLR 123 (Kerala)

13

12% on his behalf to the workers’ provident fund. This Fund is kept with the Government

and on which the PF member earns interest. Similarly, under the Employees’ Provident Fund

& Miscellaneous Provisions Act of 1952, contract workers are entitled to the same rights as

regular workers regarding provident fund and pension. This is evident from the definition in

the Act of an employee as:

“any person who is employed for wages in any kind of work, manual or

otherwise, in or in connection with the work of an establishment and who

gets his wages directly or indirectly from the employer, and includes any

person employed by or through a contractor in or in connection with the

work of the establishment.”

Again, the Payment of Bonus Act of 1965 provides that contract workers in the garment

industry are entitled to an annual bonus of 8.33% of the total wage they earned in the

previous year, and contract workers should be eligible for that since their employment as

factory workers is not among that which is excluded under section 32 of the Act. Other

major central legislations providing for decent working conditions and wage and social

security provisions applicable to contract workers are the Payment of Wages Act 1936, the

Minimum Wages Act 1948, The Payment Gratuity Act 1972, and the Equal Remuneration

Act 1976.

The issue of contract labour has been a focus of labour discussions in India for a few

decades now, ever since the Contract Labour Act came into effect in 1970. It was one of the

points of contention at the November 2011 meeting of the Parliamentary Committee that

advises Parliament in matters related to labour. At that meeting a representative, from the

Council of Indian Employers stated that Western models for improving the conditions of

contract labour could not be transmitted to India; rather, there should be focus on the

direct impact of the practice in generating employment. He also emphasised that flexibility

in employment was essential for maintaining industrial competitiveness and should not be

underestimated either by the government or trade unions. Trade unions, for their part,

have long recognised that existing law facilitates the exploitation of workers by allowing

employers to pay lesser wages and maintain poor working conditions, and have been

demanding extensive amendment of the Act. However, the employers’ organisations have

been resisting any amendment to the Act.

14

4. Growth of the Contractualised Workforce in the Gurgaon

Garment Industry

Employers in the garment industry in Gurgaon insist that most factory workers are migrants,

liable to move and quit their job at little notice. A director of one company said in an

interview that the company would prefer to have regular employees, but that the workers

themselves prefer to work for contractors. However, all of the workers who were

interviewed repeated that they do not prefer the contract labour system under any

circumstances; not only is it precarious employment, but also - as will be shown below -

there is enormous opportunity for contractors to cheat workers of the payment that is due

to them.

Being a “regular” employee gives a worker some measure of job security and assurance of

adequate working conditions, plus the added rights and benefits that come with longer

tenure, not to mention the dignity of status as a regular employee rather than the more

casual status of being a contracted worker. They say that the companies do not wish to

employ workers on a regular basis, seeking to avoid giving them their legal rights. For

employers, the logic of using contract labour is that assigning the hiring and firing of workers

to a contractor is simpler for management and generally also much cheaper than employing

the same worker on a regular basis. Moreover, the contractor will ensure that no worker

will form or join a union in the company and thus the employment of contract labour

ensures a union free shopfloor for the employer. For these reasons, companies in Gurgaon

are moving rapidly towards almost full contractualisation of their workforce.

The widespread operation of the contract labour system in Gurgaon is clearly visible in the

industrial areas every morning, with the contractors and their men calling out their need for

workers at the gates of the garment and leather manufacturing companies. Data from the

State licensing officer under RTI shows the growth in the number of licensed contractors in

Gurgaon supplying workers to garment and textile manufacturing companies increased

almost by 10% in two years, from 1286 in 2009 to 1411 in 2011. The RTI data on the

registration of companies under Contract Labour Act also suggests that the number of

supplier companies registered under the Act increased from 672 in 2009 to 863 in 2010 and

later in 2011 it declined to 599.

Based on the information uncovered by our RTI enquiries, and what has been learned from

our discussions with various players, our research indicates that the contract labour system

as practiced in the garment industry in Gurgaon does not operate uniformly from one

employer to the next. A number of different models of operation can be discerned; some of

the more common ones are described below.

15

At one extreme, all production takes place within the company. The company not only

supplies the machinery, raw materials, and accessories, but also hires all of its managers and

its skilled and unskilled workers, determines the wages of the workers, and pays them

directly. The contractors’ role is limited to supplying “supervisors”, whose job it is to

“discipline” workers on the shop floor, ensuring that production targets are met every day,

and to brutally stop any trade union activities. Most of the supervisors hired by the

contractors tend to be local Haryana residents, often persons with a criminal history. For

performing this role and for every piece of finished product, the contractor is paid a fixed

rate of commission by the company. In a second model, again production takes place on the

company premises, with the company’s own equipment and materials. In this case, the

company itself employs the managers and accounting staff, while the contractor hires both

the workers and the supervisors, and is paid by the company for supplying workers at an

agreed rate per worker per month. The company simply pays the total wage bill to the

contractor and then the contractor pays workers. This is the contract labour model

preferred by the garment industry in Gurgaon. According to workers, under this model in

contrast to the former one, the contractor has considerable opportunity to cheat them of

their wages, paying them less than the rate nominally due to them from the company.

There are some variations of this model, according to the basis on which contracted workers

are paid; whether according to a piece rate, or monthly rate, or daily-rated monthly-paid

(popularly and wrongly known as “daily wages”).

A third model is where the company itself employs some workers as regular employees on

an ongoing basis, while the majority of workers are supplied by the contractor for a

particular production run, on a so-called ‘temporary’ basis. The company negotiates with

16

the contractor a particular rate for the entire production, and the contractor brings in

workers according to the requirement. In this case, contract workers and regular workers

work together on the same shop floor, but usually under different supervisors, with the

contractor bringing in his own supervisors to control contract workers. The company

maintains records and documents for regular workers, while the contractor keeps the

attendance and production record of contract workers and pays them directly. This

‘temporary’ basis arrangement is temporary in name only, since a production contract

might go on for some years, or be rolled over periodically, sometimes being renewed in the

name of a relative or friend of the contractor. The main advantage of this system is that

company records can readily be made available to show to the State Labour Department

and to auditors of brands and retailers who might come to inspect the records, to

demonstrate that the company has some regular workers. This is the most prevalent

system of contract labour in the garment industry in Gurgaon.

A fourth model is where production itself takes place outside of the company premises. In

this case, the company engages a contractor and provides the raw material and accessories

needed for manufacturing the intended garment. The rate per unit is determined between

the company management and the contractor after the contractor has proven his ability to

make the required garment to the satisfaction of the company’s quality control department.

The contractor in turn may have one or more small sweatshops with the requisite

machinery. This “outsourcing” model of contract work in the garment industry has been on

the rise in Gurgaon over the last few years. One of our respondents who works as a

supervisor with a contractor, said that the rate fixed between the company manager and

the contractor will generally be something less than the rate the manager reports to the

owner of the company, and it will also be much higher than what the contractor pays to his

workers. Under this model, it is not only the contractor who benefits, but also managers

who squeeze the company by making use of the contractor.

All of the contracting models described above in which workers are paid by the contractor

are characterised by an inherent opportunity for rampant wage theft on the part of the

contractor, as detailed below. Moreover, while it is the contractors who abuse and exploit

the workers they employ, the factory owners do so at arm’s length by making use of the

contractors’ services, leaving it to the contractors to engage in disagreeable activities and

questionable practices.

17

5. Institutionalised Illegalities in Contract Labour Practices

Our research unearthed various kinds of illegalities associated with the contract labour

system, practiced institutionally by various stakeholders in the garment industry, in the

context of the global supply chain. In some cases, the law enforcement machinery is

oblivious to the illegality, but quite often there is tacit condonation, and sometimes active

collusion. The net effect is to utterly defeat the intention of the Contract Labour Act. As will

be seen, many of the illegalities are mutually supportive. Moreover, like any other illegal

system, more and more illegalities are practiced and invented to sustain the existing ones.

5.1 The Model Employer Sets a Poor Example

The Haryana Government itself engages contract labour in its various departments,

including some persons who work in the Labour Department in Gurgaon. Many of the

recently recruited clerical jobs in the Labour Department were filled through contractors,

and these contract employees are paid significantly less than their regular counterparts7.

5.2 Illegal Employment of Contract Workers in Core Activities

Contractors’ licenses are linked to the registration of the company to which the contractor

supplies labour, and are obtained after the manufacturing company vouches for the

contractor being in compliance with the Contract Labour Act. In the course of registration,

supplier companies must vouch to the authority that “contract labour would not be

engaged in the core activities of the establishment”. However, we have found in data

obtained though RTI that contract labour is extensively used in companies’ core activities

throughout the year. Nonetheless, the same authority which registers the company, also

grants licenses to the contractors for supplying labour to undertake core activities like

stitching, cutting, washing, finishing etc. in the company.

According to the data, Company A, one of the leaders in the industry in the Gurgaon,

engages 9 contractors comprising 4 in the core activities, and employs 2,486 workers in total

for the first half year 2011. The four main contractors, through whom workers are employed

in core activities, together employed around 2400 workers in the first half year of 2011. The

company employed 751, 567 and 578 workers respectively in the years 2008, 2009 and

2010. The company workers contributed man-days of 229,055; 171,801 and 204,895 in

these half years. At the same time, contract workers contributed 217,210; 257,890 and

416,908 man-days. This data suggests that there is a steady increase in the contribution of

contract workers to the total work in Company A. The percentage of core work done by

7 One of the contract employees in the Mini Secretariat-(Gurgaon Labour Department) reported that his regular counterparts

earn 50% more than him.

18

contract workers increased from 48% (in January –June 2010) to 60% (in June –December

2010) to 68% (in January –June 2011).

Company B engaged two contractors in its premises in the year 2009; one contractor

supplying 350 workers for core activities like fabrication of garments, stitching, cutting,

finishing, sampling, washing etc and another one supplying 5 workers for security services.

The data shows that the contractor supplying around 350 workers for the core activities

renews the license to employ contract labour in the company year after year. According to

the interviewed workers, contract workers run the company completely. For the year ended

on 31 December 2009, contract workers employed by Company B worked 57,949 man-days

while the direct workers employed by the company worked 42,520.5 man-days for the same

period. This shows that contract workers did around 58% of the total work in the company

in 2009. In 2010, contract workers worked 51,373 man-days while regular workers worked

41,721 days. This data shows that over 55% of the work in the company was done by

contract workers for the year 2010. The company has been engaging contract workers for

regular work which is ‘incidental and necessary to the industry’ and for work of perennial

nature and thus violating provisions of CL(R&A) Act, 1970.

Company E employed 55 regular workers and 155 contract workers for over the last 10

years in the core activities of the company. That is for over a decade, 74% of the core work

in the company is done through contract workers.

5.3 Supplying More Workers than What the License is Granted for

In addition to supplying contract workers for core activities, many contractors supply more

workers than what they are granted the license for. This has become the practice

throughout the industry in Gurgaon. In addition, the company employs more contract

workers than what it reports to the authority under the Act. The mismatch between the

data from RTI and the account of workers obtained through the fieldwork and informal

conversations with contractors’ assistants in the area suggest this.

The maximum number of workers supplied to Company A by Contractor A for the half years

ended on June 2010, December 2010 and June 2011 is 1097; 1,192 and 936 respectively

while the license was granted only for 800 workers. The maximum number of workers

Contractor B employed in Company A in any day is 5,370; 5,713 and 5,349 respectively for

half years ended on June 2010, December 2010 and June 2011 while the license was

granted only for 800 workers. The maximum number of workers Contractor D employed in

Company A on any day during the half years ended on June 2010, December 2010 and June

2011was 2,180; 20,355 and 17,414 respectively where the license was given for only 600

19

workers. (Though this last set of numbers is officially obtained through RTI from the

authority, they seem improbable. Otherwise, the company would literally be running as a

sweatshop employing between 17,000 and 20,000 workers in its premises.)

5.4 Evasion of License Through Abuse of the “20 Workers” Clause

In addition to the illegality of supplying contract workers for core activities, companies

employs more contract workers than what it reports to the authority. Under the Contract

Labour Act, contractors are required to obtain a license and submit half yearly reports if

they supplied more than a total of twenty workers on any one day in the preceding twelve

months. The trade unions seek to have the clause amended and have been trying to make

government see the potential for abuse in this requirement. Nevertheless, it remains in

effect, providing opportunities to contractors and companies for exploiting workers while

knowingly and deliberately evading their responsibility to comply with the Act. In doing this,

both the companies and the contractors independently and collectively abuse the Act.

Many companies in the Gurgaon garment industry make use of multiple contractors, each

supplying the company with fewer than 20 workers although in total they are supplied with

many more than that. Contractors also frequently resort to this falsification. One of the

contractors interviewed for the study does not have any license to supply contract workers

and claimed that he provided only 15 contract workers in total to three companies, and

therefore he does not require a license. However, an independent inquiry with workers has

proved that this contractor provides around 150 workers to each of the three companies.

There are numerous such contractors in Gurgaon running successful business with hundreds

of contracted workers, and companies knowingly making use of their services.

The data shows that 40% of the companies studied here engage in the misuse of the “20

workers” provision. Some companies reported to the authority that their contractors

employ less than 20 workers and therefore are not responsible for submitting any returns.

Companies themselves also provide false information. For instance, one of the garment

companies we studied mentioned in their application for registration of contract labour for

the period from June 2011 to May 2012 that the company planned to employ four

contractors who were different from their contractors in previous years, and these four

contractors in total would employ sixty workers in buttoning and finishing, which is a core

activity to which the “20 workers” clause applies. However, the workers said that the

company employs a total of 155 contract workers through four contractors who are

different from the ones they have obtained license for.

20

5.5 Insufficient and Incompetent Inspection

In the years 2009 through 2011, a total of only 616 inspections of companies and

contractors were carried out by the Gurgaon Labour Department. This is despite the fact

that there were a total of some two thousand companies and contractors engaging contract

workers for the garment industry in Gurgaon in each of those years, with 9% to 12% of

companies being inspected each year. At this pace, the Labour Department would take

around 10 years to do one round of inspection of all companies and contractors in the

garment industry in Gurgaon. This creates fertile conditions for contractors to expand the

exploitation of migrant workers over the years.

Moreover, the competence and credibility of these inspections are doubtful. For all

inspections carried out in those three years, the inspecting authority found no companies in

violation of the law and no contractor warranted revocation of license. In those same years,

twenty companies were prosecuted under the Act for violating some of the major

provisions. Those provisions include employment of contract workers in the operation

incidental to or necessary for the industry, or in operations of perennial nature, or in any

work which is ordinarily done through regular workers in the same/similar establishments,

or under such situations where a considerable number of regular workers can be employed.

The foregoing data show that the authority has been derelict in conducting inspections and

examining records in a way that would ensure that violations are brought out during

inspection, and violators of the Act prosecuted.

5.6 Non Submission of Mandatory Reports and Incomplete Reporting

Under section 29 of the Contract Labour Act, contractors and principal employers are

required to maintain complete and up to date registers and records with the number of

contract labourers employed, rates of wages paid, nature of work performed, etc. The Rules

mandate that every contractor shall send half-yearly returns to the authority and all

principal employers shall submit annual returns with all details of contract labour employed

in their premises. However, our study found that of the ten companies whose information

was obtained under RTI, only one company submitted the annual returns and only

contractors from four of the companies submitted complete half yearly returns. (The

correspondence between the office of the deputy labour commissioner and companies

show that the authority on the need for a missing annual return reminded some of the

companies after receiving the RTI application.) Some of the returns that were obtained

show contradictions between the annual returns of the principal employer and the half-

yearly returns of contractors of those principal employers. The half-yearly returns of some

21

contractors also showed extensive violation of the minimum wages and social security acts

(which is elaborated in the later section 8).

5.7 Perverse Record Keeping

The garment supplier companies are known to engage in maintaining multiple sets of

records regarding the number of contract workers, the nature of their work, wages paid to

them, etc. One set of records is the actual in-house record kept for purpose of management

information. Another be the records provided to government authorities for taxation

purpose. Yet another is the record shown to the labour regulation branch of government,

aimed at presenting themselves as compliant with various labour laws. And a fourth set of

records is what is shown to the overseas buyers and their auditors. It is hard to believe that

the Labour Department is ignorant of these practices.

Yet another kind of perverse record keeping of which the Labour Department seems

oblivious is the contractors’ practice of nominally changing their business name. Ownership

of the contracting business remains the same, the nature of work and wages remain the

same, the workers in many cases are the same individuals, but the business name of the

contract labour enterprise is changed. Workers from one contracting company reported

that for the last ten years, the contractors have not changed anything, except for the name

of the business. Again, it is a means of evading reporting requirements and avoiding the

accumulation of evidence of non-compliance.

5.8 Supply of Workers without License by the Contractor and Employment of Contract

Labour without Registration by the Principal Employer

Many contractors in the garment industry in Gurgaon employ workers without having a

license. One example is cited in the above section. Companies also employ contract workers

without registration. Some data from RTI regarding one of the companies we studied

suggests that there are companies which employ 250-300 contract workers and are still not

registered under the authority in contravention with this Act.

22

6. Conditions of Employment of Contract Workers in the Garment

Industry

This section reports on the systematic violations of contract workers’ labour rights and

human rights both by the companies and the contractors.

6.1 Degradation of Workers’ Status from Regular to Casual and Denial of their Legal Rights

Under the contract labour system, most of the workers in manufacturing are designated as

daily wage workers and are paid only for the actual days worked. However, they are not

paid on a daily basis; contractors generally pay fortnightly or monthly. In one of the

companies covered under the study, some of the contract workers have been working for

the last ten years on a daily wage basis!

The designation of the worker, as a daily wage worker, is in itself degrading, a denial of

legitimate status for their skills and experience. Beyond this, however, degradation of their

status entails denial of their legal rights to minimum wages commensurate with their skill

level, social security, paid leave etc.

6.2 Insecurity of Piece Work

Piece work is a particular form of employment mainly used by contractors in the Gurgaon

garment industry to deny workers their legitimate status and rights. The piece rate system

is prevalent among regular workers as well. A piece rate worker earns according to the

quantity he/she produces. When there is enough work to be done, piece rate workers are

able to earn above the standard minimum wage, but when there is no work for them, they

are laid off without compensation. One of the major companies covered under this study is

almost completely dependent on piece rate workers.

6.3 Contract Labour Facilitates ‘Easy Hire and Fire’

Hiring workers is easy under the contract labour system. The companies just have to inform

the contractor regarding the demand for workers during a particular time, contractors will

arrange for workers without fail. The contractor is expected to look after the documentation

regarding the workforce and that makes it easy for companies. Contractors frequently

terminate workers without following due process. According to workers who were

interviewed, the termination is completely arbitrary and without following the legal process.

In the garment industry in Gurgaon, most of the termination from service happens without

23

following due legal process and the practice of not following any process increases when it

comes to contract labour.

Workers from one company cited the example of their co-worker’s termination over a row

with the supervisor about a false accusation of spoiling a piece of garment deliberately. The

worker resisted the supervisor’s accusation, pleading having made a mistake, but the

supervisor insisted that it was done on purpose and threatened him with recovering the

value of the garment from his salary. The contractor was informed about the incident and

told the worker not to come in to work again. At that point, the contractor had not paid the

worker for a month and a half. When the worker was paid after a few weeks, he found that

Rupees 600 had been illegally deducted from his wages.

Contractors lay off workers without notice or compensation. According to workers from one

company, they are laid off for 15-20 days a year, from half a day to seven days at a time, and

are not paid any compensation for those days. After the layoff, they come back to the same

company and work there again when they are informed by the company. Workers report

that these temporary layoffs put them in a very helpless situation. One worker explained,

“We do not have information regarding how long the lay-off will continue.

If we start working at some other place for those laid off days and then

return to work at the first place, we might not get paid for the work at the

second place, because if we work for less than a month in any company, it

is difficult to get paid there, especially if we work through a contractor. You

have to stay in the company until the 7th

of the next month to get the

wage.”

Generally, contract workers are not paid their dues after termination. The contractors

harass them by delaying their earned wages after termination and workers end up losing

many more working days to recover the earned wages from the contractor.

24

6.4 No Proof of Employment

Despite the condition vouched by principal employers to the authority that “each and every

worker will be issued identity cards signed by the principal employer and the contractor”,

many contract workers from the five companies that were studied are not provided with

identity cards, neither by the company nor by any contractors. Their irregular status is

strengthened in the absence of any documentation. The lack of any documentation

regarding the employment poses a lot of hurdles when workers have to adopt legal ways of

settling any dispute that may arise with the principal employer or the contractor. Moreover,

workers face a lot of other hardship due to the absence of any documentation. In 2010,

during the Common Wealth Games in Delhi, many workers who did not have employment

proofs were forcefully sent back to their villages by Police and thus denying their right to

livelihood. Industrial workers in Gurgaon were seriously affected by this discrimination8.

Workers from one company reported that they had worked for more than two years at that

company and have repeatedly requested the contractor to provide them identity cards.

Some of these workers recently approached the local union with a complaint regarding the

police troubling those workers seen near the company premises at night after overtime

work, for not having identity cards.

When workers are issued with an identity card, they sometimes find themselves being

issued new cards periodically with a change of the contractor’s name and showing the

worker as being paid by the ‘new contractor’ and being relatively newly hired. One worker

reported that he has been in continuous service at a particular company through the same

8 Interestingly, some workers were provided with temporary identity cards in 2010 at the time the Commonwealth Games,

when the police were intimidating workers for not having identity proof. These identity cards gave no details as to the

duration of their employment.

Workers say, “Police stop us at night and ask us where are we are coming from.

When we give the name of the company, they ask for identity cards, which we

do not have. A few times, we requested the contractor to provide us identity

cards but he never paid attention. In addition, when we approached the

management with complaints, they tell us that since we are contract workers,

we should go to contractor with our grievances. We have been working in the

company for two years- some of us have been here for the last three years-but

the company says it has nothing to do with us.”

25

contractor since 2008, but the company has changed his identity card four times, each time

issuing the card under a different contractor.

6.5 Denial of Leave

The Punjab Industrial Establishment (National and Festival Holidays and Casual and Sick

Leave) Act, 1965 that is applicable to Haryana state provides for three national holidays, five

festival holidays, seven days of casual leave and seven days of sick leave9 . However, the

companies and contractors invariably deny contract workers’ right to have leave. Some

contract workers are not required to work on national holidays and festival holidays but

these are unpaid holidays. None of the contract workers that we interviewed were given

any paid casual leave or paid sick leave. Those contract workers who are covered under ESI

get sick leave paid by the ESI. Other types of mandatory paid leaves such as casual leaves,

earned leaves, maternity leave do not exist in practice at all for contract workers, though

laws mandate otherwise.

Under the daily wage and/or piece rate systems, it is too easy to exclude workers from

statutory provisions for paid leave, even for national holidays, since they do not have the

status of regular workers. This is extremely objectionable according to workers, for who

national holidays and festival days are pleasurable occasions for visiting relatives and

relaxation with friends. And since there is little or no paid leave, workers sometimes choose

to take leave without pay, generally without giving notice to the employer. Workers say

that they do not feel any obligation to their employers under the working conditions where

their legal rights are denied.

6.6 Lack of Wage Accountability

There have been many incidents of contractors failing to pay workers the wages due to

them on time, and sometimes not paying them at all. In such situations, some companies

might make partial payment to the workers, while other companies refuse to engage with

workers at all in matters relating to payment, despite the principal employer having

9 Sick leave provision under this Act is not applicable to those workers who are covered under ESI Act. But all other

provisions regarding other leaves are applicable to all industrial workers in Gurgaon.

One worker said, “When we work we get wages, if we do

not work, we do not get anything from the company or the

contractor. So we do not feel obliged for informing them

on days we are absent. If I don’t want to work one day, I

just don’t go and I do not inform them.”

26

ultimate legal responsibility under the Act to ensure that workers are paid what is due to

them on time. Furthermore, the presence of a representative of the principal employer

during the payment of wages is mandatory under the Act; however, actual payment of

wages in many factories takes place with no supervision at all by the principal employer or

representatives.

One of the respondents associated with a contractor narrated an incident that happened in

the company where he had worked. The company paid the contractor for the work done by

the contract workers, and the contractor delayed further payment to workers. After the

middle of the next month, workers tired of waiting for their wages and protested on the

shop floor by downing tools. Company management came to talk to the protesting workers,

who reported that the contractors had not paid them for the previous month even though

the current month would be ending in a few days. The contractor maintained that he had

given the money to the supervisor to distribute to workers, while the supervisor contended

that that never happened. At this point, the company manager slapped the supervisor. The

workers protested further and at this point, the management called the police in, who are

readily available to companies and contractors to assist in case of labour disputes in

Gurgaon. The police helped the company settle the matter with the workers for 25% less

than the total wage that was supposed to have been paid to them. The police also

instructed the workers who had protested not to come to work the next day, and thus the

company got rid of those troublesome workers.

Contract workers often have difficulty in claiming the payment due to them from

contractors after termination from service. The contractors harass them by delaying their

earned wages, and workers end up losing working days while pursuing recovery of their

earned wages. A union organiser in the Garment and Allied Workers’ Union who had been a

worker in the garment industry for nine years reported as follows,

“The scene in front of the company is sometimes really pathetic. The

company engages those contractors who quote the cheapest price per

piece to get the work done; the contractor brings in workers and starts

work. He works for a month and gets the payment from the company and

runs away with it. If you see workers sitting at the gate asking contractors

to pay their dues, it hurts to see it. The contractor treats workers as if they

are beggars. They shout at them and verbally abuse them, using ugly words

about their sisters and mothers.”

To ensure that contract workers are paid due wages in time, the authority under the Act in

Haryana had made it a condition to the principal employer that ‘the payment of wages of

the workers shall be made through a bank and account of workers shall be opened in the

27

bank immediately’ after the registration of companies with the authority. However, none of

the companies studied follow this. Rules pertaining to the Contract Labour mandate that for

every wage period of more than one week, issuance of a wage slip one day before the

payment of wage is compulsory. However, none of the contract workers that we

interviewed are normally given a wage slip at all.

28

7. The Supernatural Earnings of Contractors

7.1 Earnings from Commission

Contractors are paid a commission per worker, both under the daily wage/salary system and

under the piece rate system. According to the contractor who was interviewed; the

company pays him 7% of the total wage bill of the workers he supplies. Unlike other

businesses, the investment of a contractor is insignificant.

The contractors’ supervisor who was interviewed estimated that his employer, who supplies

around 200 workers to a major garment manufacturing facility in Gurgaon, is paid

something between Rs 200,000 to Rs 300,000 every month. This is payment for only this

particular facility; the same contractor also supplies many workers to other manufacturers

in Gurgaon. The supervisor also told of the income of a friend, a small contractor who had

only recently begun supplying contract labour, and was supplying 20 piece rate workers to a

company and being paid Rs 30,000 in 15 days. This business is very lucrative for contractors

who supply workers and help companies get away from all legal liabilities arising out of the

employment of regular workers, along with acting as a protector of a ‘union free shop floor’

under any circumstances.

7.2 Extraction Derived from Compulsory Overtime

Overtime work in the manufacturing industry tends to be compulsory, both for regular and

contracted workers; if there is a large order with a tight deadline, everybody is forced to

work overtime, coerced by the threat of termination for refusal. Workers from garment

manufacturing companies report that they work at least two hours of overtime every day,

except for the two months of low season in their industry. Furthermore, overtime work is

usually compensated at the single rate, in violation of the Minimum Wages Act of 1948,

which mandates that overtime be compensated at double the regular rate.

7.3 Extraction through Deduction from Wages or Deceptive Rate Fixing System

Normally contractors and employers in Gurgaon prefer the piece rate system. Contractors

supply workers on daily wage (daily rated monthly paid) and also on salary basis. Under the

piece rate system, the contractor makes an extra margin over every piece of garment made

(by paying workers less than the wage rate agreed between the company and the

contractor). Firstly, the contractor earns 200-300 Rupees per worker per month as a

commission/fee from the company. Secondly, under the salary/daily wage system the

contractor pays workers a lower salary than agreed with the company.

29

8. Theft of Wages and Social Security by Contractors

Contractors earn a commission per worker per month as well as per piece (under the piece

rate system). Over and above this income, contractors, and their accomplices have devised

various ways of extracting a great deal more profit through various mechanisms of non-

payment, as well as malfeasance with regard to withholdings and deductions from workers’

earned wages.

Gross disregard of statutory minimum wage rates is the major, although not the only,

mechanism by which workers receive less than what is due to them. The data shows that

huge amounts of money are illegally siphoned off this way. In companies following the

monthly and daily wage system, the data clearly show this illegal extraction from workers’

wages10

8.1 Cases of Wage Theft

Contractors are required to submit to the licensing officer half-yearly reports for each

company to which they supply more than twenty workers, enumerating days worked, man-

days of workers supplied, and total wages paid. These reports make it easy for us to

recognise that wage theft has taken place, although it is strangely not evident to the

authorities.

8.2 Examples of Wage Theft by Contractors Employed by the Three Companies

During the half year ending on June 2010, Company A worked 154 days and Contractor A

supplied 141,219 man days to the company11

. That is, the company employed an average of

917 workers on a daily basis through Contractor A. The total wage bill paid to these workers

during this period is Rs 19,783,287 and the average daily wage paid to each worker comes

to Rs 140 from this total wage bill.12

However, the lowest legal minimum daily wage fixed and notified by the labour department

of the Government of Haryana is Rs 162. 0813

14

. This is a clear violation of the Minimum

Wages Act, 1948. During the half year ending on December 2010, Contractor A supplied

136,634 man days to the company for a total wage bill of Rs 19,733,567 and the average

daily wage the contractor paid to worker is Rs 144 and this is in violation of the minimum

wages fixed and notified by Haryana Government for July 2010- December 2010, which is Rs

10 Under the piece rate system, such underpayment is less immediately evident, but is implicit in the evidence of comparably

low rates of take-home pay for piece-rate workers. 11 The reports contractors submit under the Act is half yearly 12 Total Wage bill/Total Man Days ; Rs19783287/141219 13 There are 6 different skill levels identified for industrial workers in Haryana, unskilled, semiskilled A, semiskilled B,

Skilled A, Skilled B and Highly Skilled. The difference between the highest level wage and the lowest level is maintained as

Rs 25 and also the difference from one level to the immediate next level is Rs 5. 14 Minimum wage 2010 January- June details

30

167.23. During the half year ending June 2011, the company worked 153 days and

Contractor A supplied 105,437 man days for a total wage bill of Rs 16,172,381 and the

average number of workers employed during this half year period was 689 and the average

daily wage paid to workers was Rs 153.38, which is less than the legal minimum wage Rs

173.19.

Table 1: Wage Theft by Contractor A in Company A

Half-year

period ending

Daily

minimum

wage rate

for

“Unskilled”

(in Rs)

Total man-

days of

work

reported

Total paid

wages

reported

(in Rs)

Average daily

wage paid

(in Rs)

Unpaid

daily

amount

per worker

(in Rs)

Total

wages not

paid

(in Million

Rs)

June 2010 162.08 141,219 19,783,287 140.1 21.99 3.1

December 2010 167.23 136,634 19,733,567 144.43 22.8 3.1

June 2011 173.19 105,437 16,172,381 153.38 19.8 2.1

Total 8.3

The table shows that according to the most conservative estimate, the contractor took away

Rs 8,309,478.37 from January 2010 to June 2011 from the workers’ wages. If we assume

that all workers are highly skilled, the theft from wage rises to Rs 6,635,963.52 for the half

year ending June 2010 and Rs 6,531,586.82 for the half year ending December 2010 and Rs

4,724,178.03 for the half year ending June 2011, thus giving a total of Rs 17,891,728.37 from

January 2010 to June 2011. Thus, the amount of money Contractor A did not pay to the

workers ranged from anywhere between Rs 8,309,478.37 to Rs 17,891,728.37 during

January 2010 to June 2011.

For the half year ending in June 2010, Contractor B supplied 132,751 man days to the

Company A. In the half year which ended on December 2010, the total man days increased

to 152,751 and the maximum number of workers employed on any single day through this

contractor increased to 5,713. In the half year ending on June 2011, the total man days

supplied by the contractor were 145,951, though this is slightly less than the previous half

year, this shows 10% increase over the first half year of 2010.

The average daily wage the contractor paid to workers is Rs 148.4, Rs 156.2 and Rs 146.3 for

the half years ending June 2010, December 2010 and June 2011 respectively where the

31

lowest level minimum wage to be paid to workers as per The Minimum Wages Act is Rs.

162.08, Rs.167.23 and Rs.173. 19 respectively15

.

Table 2: Wage Theft by Contractor B in Company A

Half-year

period ending

Daily

minimum

wage rate

for

“Unskilled”

(in Rs)

Total

man-

days of

work

reported

Total paid

wages

reported

(in Rs)

Total

social

security

deduction

(in Rs)

Average

daily wage

paid

(in Rs)

Unpaid

daily

amount

per

worker

(in Rs)

Total

wages

not paid

(in

Million

Rs)

June 2010 162.08 132,751 17,319,579 2,381,442 148.4 13.67 1.8

December 2010 167.23 152,751 20,976,834 2,884,314 156.2 11.02 1.7

June 2011 173.19 145,951 19,188,805 2,167,629 146.3 26.86 3.9

Total 7.4

The table shows that according to the most conservative estimate, Contractor B did not pay

a total of Rs 7,419,482 from January 2010 to June 2011 to the workers. If we assume that all

workers are highly skilled workers, the amount for the half year ending in June 2010 rises to

Rs 5,134,036, for the half year ending in December 2010 rises to Rs 5,502,176 and for the

half year ending in June 2011 increases to Rs 7,569,594, thus giving a total of Rs 18,205,807.

as against Rs 7,419,482 and thereby showing a 145% increase over the conservative

estimate. Thus, the amount of money this one contractor did not pay to workers ranges

from Rs 7,419,482 to Rs 18,205,807 for the time period from January 2010 to June 2011.

Contractor C supplied 24,031.5 man days in the company in the year 2009 and this

increased to 62,413.5 man days in 2010. In the half year ending June 2011, the contractor

supplied 17,667.5 man days to the company.

15

This average wage= (Total wage paid to workers + total deduction towards social security)/total man days ; for

example(17319579+2381442)/132751=148.4

32

Table 3: Wage Theft by Contractor C in Company A

Half-year

period ending

Daily

minimum

wage rate

for

“Unskilled”

(in Rs)

Total man-

days of

work

reported

Total paid

wages

reported

(in Rs)

Average daily

wage paid

(in Rs)

Unpaid

daily

amount

per worker

(in Rs)

Total

wages not

paid

(in Million

Rs)

June 2009 147.67 4513.5 616,111 136.5 11.16 0.05

December 2009 151 19518 2,688,154 137.7 13.27 0.3

June 2010 162.08 32568 4,716,177 144.8 17.26 0.6

December 2010 167.23 29845.5 4,492,821 150.5 16.69 0.5

June 2011 173.19 17667.5 2,871,151 162.5 10.67 0.2

Total 1.6

The total amount of wages this contractor extracted through under payment of wages

amounts to at least Rs 1,558,831.3 from January 2009 to June 2011. The amount increases

to Rs 4,161,643.8 for the same period if we assume that all workers are highly skilled

workers. The actual amount this contractor did not pay to workers is anywhere between Rs

1,558,831.3 and Rs 4,161,643.8

Contractor D supplied on average 295, 339 and 331 workers in the half years ending on June

2010, December 2010 and June 2011 respectively. The average daily wage the contractor

paid to workers during this time is Rs 148.4, Rs125.48 and Rs133.24 which is lower than the

legally mandatory wage of Rs 162, Rs 167 and Rs 173.On a conservative basis, the total

unpaid wage amounts to Rs 4,625,314.8 This increases to a total of Rs 8,203,564.8 according

to the assumption of total highly skilled workers. The actual amount not paid to workers can

be anywhere between Rs 4,625,314.8 and Rs.8, 203,564. 8

33

Table 4: Wage Theft by Contractor D in Company A

Half-year

period ending

Daily

minimum

wage rate

for

“Unskilled”

(in Rs)

Total

man-

days of

work

reported

Total paid

wages

reported

(in Rs)

Total

social

security

deduction

(in Rs)

Average

daily wage

paid

(in Rs)

Unpaid

daily

amount

per

worker

(in Rs)

Total

wages

not paid

(in

Million

Rs)

June 2010 162.08 45,138 5,889,003 809,738 148.4 13.67 0.6

December 2010 167.23 51,982 6,353,030 169,670 125.47 41.75 2.2

June 2011 173.19 46,010 5,389,562 741,071 133.24 39.94 1.8

Total 4.6

Table 5: The Collective Theft by 4 Contractors in Company A for January 2010 to

June 2011

Contractor's Name

Unpaid wages

(Unskilled estimate)

(in Rs)

Unpaid Wages

(Highly skilled

estimate)

(in Rs)

Contractor A 8309478.37 17891728.37

Contractor B 7419482.5 18205807.5

Contractor C 1249369.73 3251394.73

Contractor D 4625314.8 8203564.8

Total (in Million Rs) 21.6 million 47.5 million

The average amount of money these four contractors together took away from the workers’

wages per year can be calculated as anything between Rs 14.4 million 31.7 million assuming

that all the deduction towards the social security was deposited with the concerned

Provident Fund and the ESI departments16

.

16

Half year average= total for three half years(January 2010-June 2011) /3

34

The wage theft practiced by contractor A in Company B is depicted below.17

The table below

shows that from January 2009 to June 2011, the contractor did not pay wages worth Rs

1,366,011 to the workers assuming all workers are entitled for only the lowest skill level

wage. This unpaid wage increases to a total of Rs 4,533,111 for the same time period if we

assume that all workers are highly skilled workers. In this time, the contractor did not pay

anywhere between Rs 1,366,011 and Rs 4,533,111.

Table 6: Wage Theft by Contractor A in Company B from January 2009-June 2011

Half-year

period

ending

Daily

minimum

wage rate

for

“Unskilled”

(in Rs)

Total

man-

days of

work

reported

Total

paid

wages

reported

(in Rs)

Average

daily

wage

paid

(in Rs)

Unpaid

daily

amount

per

worker

(in Rs)

Total

wages

not

paid

(in

Million

Rs)

June 2009 147.67 30,670 4169619 135.95 11.74 0.4

December

2009

151 27,279

3859189 141.47 9.53 0.3

June 2010 162.08 27,005 4073136 150.83 11.25 0.3

December

2010

167.23 24,368

3782232 155.21 12.01 0.3

June 2011 173.19 17,362 2857550 164.59 8.60 0.1

Total 1.4

17 This is the same contractor as in the case of Company A

If the official statement the contractor submitted to the government admits

to this huge amount of non payment of minimum wages, the actual

‘benefit’ the contractor extracted by supplying workers to these companies

would probably be much higher than what the official data reveals.

35

The cases described above include some examples of wage theft. Wherever the data was

available and the wage was fixed under the salary system, a huge amount of theft is evident.

Moreover, all the above calculations are based on the assumption that whatever deduction

happened towards the social security is deposited with the concerned departments. As far

as the practice in Gurgaon goes, not all deducted contributions are deposited with the PF-

ESI departments.

8.3 Violation of Social Security Provisions

The wage theft detailed above that derives from not paying as much as the statutory

minimum wage, is further compounded by malfeasance on the part of employers through

practices relating to provisions for social security.

Actual payments made to workers are supposed to be reduced by certain amounts of

payment withheld on account of statutorily mandated deductions to be deposited in two

government-managed social security programmes. These are contributions to accounts to

be opened in the worker’s name; one being the Provident Fund (PF), which is a form of

compulsory retirement savings payable by a deduction of 12% from the employee’s gross

wages as per the Employee Provident Fund Act of 1952; the other is Employee State

Insurance (ESI), payable by deduction form wages at 1.75%, which provides the worker and

his/her family with access to government-run clinics and hospitals and monetary payments

in case of sickness and wage loss resulting from it as per the Employee State Insurance Act

of 1948. Both of these programmes require that all employees must be enrolled, and

further require that the workers’ contribution to the fund must be matched in equal amount

by the employer in the case of PF and 4.5% of gross wages in the case of ESI.

Moreover, the Contract Labour Act of 1970 requires that registration of companies is given

on condition of assurance to the ESI authorities that the employer is in compliance with the

36

requirement that all workers should be covered under ESI and identity card (smart card)

from ESI to be applied for within 7 days of issuance of the registration certificate to the

Company.

As far as the practice in Gurgaon goes, however, employers’ provision for the social security

of their workers is doubtful. In some cases, no payroll deductions are taken at all, while in

other cases less than the statutory amount is deducted from the employees’ wages. In

either case, the effect is to reduce the amount of what would then be due from the

employer. Beyond this, there is a question as to whether the workers’ and employers’

contributions are ever paid in at all to the accounts in the employees’ names that are

supposed to be maintained with the PF and ESI departments.

Contributions to social security that are not made entail dire consequences for workers.

When the withholdings taken from their wage are not deposited in their social security

accounts, they suffer not only the immediate monetary reduction in their take-home pay,

but also further negative impact on their lives through loss of the ESI benefit in case of need,

and further socio-economic implications when they retire with reduced Provident Fund

savings or none at all. In an economy where the savings of working class people is almost

nonexistent due to the low level of wages, the ESI and PF programmes provide a critical

measure of financial support in case of sickness and for retirement.

8.4 Loss to Workers and PF Department due to Non Compliance by 7 Contractors from

Three Companies

Contractor A from Company A did not enrol workers with EPF and subsequently no

employees’ contribution was deducted. The Contractor should have deducted an amount of

Rs 7,679,846 and should have submitted Rs 15,359,691.21 including his contribution

towards the EPF account. Moreover, the provident fund as important for the financing of

state development projects as it is for the individual worker herself /himself. Contractor B

from Company A should have deducted Rs 8,680,570 from workers’ wages towards PF, but

he deducted only RS 7,433,385 towards both PF and ESI and other welfare contribution

altogether. Contractor C did not enrol any workers with PF and did not make the deduction

of Rs 1,599,542 which he should have made. Contractor D deducted Rs 1,720,479 towards

PF, ESI and other welfare contribution when he should have deducted Rs 2,877,287 singly

towards PF.

The actual PF contribution these 4 contractors should have made towards the PF of workers

for a period from January 2010 to June 2011 is Rs 41,674,489.54 excluding administrative

charges.

Contractor A also supplies workers to Company B, as per the RTI information. According to

37

the EPF, the contractor should have deducted Rs 2,412,928 from the wages of workers and

deposited double of this amount, Rs 4,825,856.9 to the PF accounts of workers for a time

period of January 2009 to June 2011. However, no deduction and subsequently no

contribution had been made to the PF account.

Company C employs two major contractors, who disbursed a total wages of Rs 40,696,357

from January 2010 to June 2011. Both the contractors enrolled workers towards EPF and

also deducted workers’ contribution from wages. However, the total deduction including PF

and ESI, the contractors made from the wages is Rs 1,072,297 when the actual PF deduction

itself should have been Rs 4,883,563.

All major contractors from these three companies together were required to contribute a

total amount of Rs 54191764.61 towards the EPF including the deducted workers’

contribution. However the table below shows that the maximum amount the contractors

from these companies together must have submitted is Rs 17849299.2 assuming that the

contractors who have deducted the contribution from workers’ wages deposited the same

along with the same amount as contractor’s contribution. In the best case scenario, seven

contractors from these three major companies together caused a loss of Rs 36,342,465.41

to the government from January 2010 to June 2011. This is just an example of the revenue

loss the government underwent due to non compliance of provident fund contributions by

the companies and contractors.

38

Table 7: Loss to Workers and PF Department from Non Compliance with PF Act by 7

Contractors from three Companies18

Name of the

company

Total PF

contribution

to have been

made

(24% of total

wage)(in Rs)

Actual deduction

towards PF

(87.27% of the

total

deduction)(in Rs)

The total the

contractor

must have deposited

(Double of total PF

deduction)(in Rs)

The investment

loss to the PF

Department

(in million Rs)

Company A 41674489.5 7988826.8 15977653.53 26

Company B 9767125.7 935822.8 1871645.7 8

Company C 2750149.4 0 0 2.7

Total (in Million Rs)

54

17

36.7

It can be concluded from the data that contractors did not pay more than 67% of the

actual amount they should have paid in total towards the contribution of provident fund

of workers.

8.5 Loss to Workers and ESI Department from Non Compliance by 7 Contractors from

Three Companies

The table below shows that seven contractors from three companies together deposited

only Rs 4,825,498.2 instead of Rs 14,112,438.7 and thus cheated the ESI of Rs 9,286,940

from January 2010 to June 2011. That is, the contractors did not deposit over 65% of what

they should have deposited towards ESI of all contract workers they employed during this

time.

18 All PF and ESI calculations are made based on the Minimum Wages or the Actual wage paid whichever is higher.

39

Table 8: Loss to Workers and ESI Department from Non Compliance with ESI Act by 7

Contractors from Three Companies

Name of the

company

Total ESI

Contribution

to have been

made

( 6.25 %of total

wage)(in Rs)

Actual Deduction

towards ESI

(12.73% of the

total

deduction)(in Rs)

The total the

contractor

must have deposited

(2.57 times of total ESI

deduction) (in Rs)

The investment

loss to the ESI

Department

(in million Rs)

Company A 10852731.7 1165286.9 2994787.3 7.8

Company B 2543522 712338.9 1830710.9 0.7

Company C 716184.8 0 0 0.7

Total (in Million Rs)

14

4.8

9.3

Unfortunately, we have no information at this point as to whether contractors actually

deposited amounts deducted from workers’ payments, let alone whether the employers’

contribution was deposited. However, we do have data as to whether social security

deductions were taken from the employees’ take-home pay and can determine to what

extent this was the proper amount in terms of workers’ earnings.

40

9. Grievance Redressal and Freedom of Association

The role of management in relation to labour under a production system that is heavily

dependent on contract labour is largely reduced to assuring control of the workforce on the

shop floor through coercive and sometimes brutal means, with the sole object of meeting

production targets at the lowest possible cost.

9.1 Union Busting Role of Contractors with the Help of the Management

Garment and Allied Workers Union organisers described two incidents of how the

management used contractors to break down the trade union activities in two companies.

One of the two garment manufacturing companies which produces high end fashion

clothing for a celebrated global brand, after signing an agreement which would have

brought positive improvements in working conditions of regular workers who have been

working as daily wagers for over 10 years, the company management brought one of the

notorious contractors in the area to break down the negotiated agreement and to get the

workers out of the company. An international trade union federation was facilitating this

negotiated agreement between workers’ trade union and the company. After intense

negotiation of over a month, the agreement was signed in April 2010 which put forward

improvement in working conditions, wages and also a lump sum of compensation for

workers by the company for not enrolling them in the provident fund for over 10 years. The

agreement also included provisions for reinstating 6 of the sacked workers for unionising in

the company. After two weeks of signing the agreement, the company engaged a contractor

to break the trade union activities and thus the agreement in order to evade the monetary

liability of paying workers compensation and also to avoid improving working conditions in

the company. The contractor was brought in at supervisory level at first. Immediately after

hiring the contractor, with the help of the contractor, the company brought in a ‘yellow

union’ to bust genuine trade union activities. Slowly the ‘yellow union’ along with contractor

took over the genuine trade union struggle and got rid of as many of the union leaders as

possible using various illegal means and uprooted the union itself from the company.

The other incident narrated by GAWU is about a company which was solely producing for a

major European brand. The management of the company and the contractor made

concerted efforts to break the unity of regular and contract workers who were exercising

their freedom of association to stop the wage theft the management of the company had

been invariably practicing for a long time. The contractor engaged musclemen and resorted

to violence at the gate of the company. Furthermore, the contractor’s men kidnapped one

of the workers to give a warning to the union and terrorise the unionised workers and thus

restrain them from exercising their freedom of association. Later on, the company locked

41

out all regular and contract workers. However, the union and the workers are still engaged

in a determined legal struggle against the company and the contractor.

These are only a few examples of union busting through contractors in the garment industry

in Gurgaon.

9.2 Corporate Level Corruption

The contractor and contractor’s assistant the research team interviewed suggested that the

commission contractors get for supplying workers to companies has to be shared with

supervisors and managers sometimes since they help the contractors get a higher rate of

commission from the company. In some cases a negotiated ‘gratitude amount’ is set for

conniving with the violations of various labour laws on the premises of the company.

9.3 Non Performance of the Grievance Redressal Role of the Management/ Contractors

From the workers’ account of the contract labour system, it is very clear that the

management of the company performs no grievance redressal role at all as far as contract

workers are concerned. The contractors dislike performing any constructive role in dispute

resolution when it comes to the grievances of workers. The normal practice is that workers

who raise any grievance are illegally terminated from the job instantly. Instead of

constructively engaging with workers, they resort to violence for immediate solutions to

problems. In an interaction with a director of a company studied it was revealed that the

director has no idea regarding the number of contract workers engaged by the company,

the wages paid to them, or whether the principal employer/representative is present during

the wage disbursement. The company management ignores the existence of contract

workers though they are increasingly becoming the lifeline of the company.

The management has little idea about workers’ living situations. In an interview with the

director, it was clear that she had no concern about the working and living conditions of the

workers. In response to a question about what she knows about the life of workers, she

responded that,

‘Workers always come alone to Gurgaon and stay

with friends...They stay in rooms near the factory with

four or five other workers. They just sleep there, so

don’t need much more. There is a common bathroom

for them.’

42

However, the fact is that many workers prefer to bring their families with them and also

some of them do bring their families. Many of them are unable to bring the family due to

the low wage they earn and the unhygienic and unstable living conditions they have in

Gurgaon.

43

10. Conflicts existing in the Garment Industry in Gurgaon

The research team’s interactions with a supervisor and contractor revealed some of the

internal conflicts among various players in the contract labour system in the garment

industry in Gurgaon.

According to the supervisor and the contractor who were interviewed for the study, certain

tensions exist between the lower level management and the contractors. The lower level

management often dislikes the presence of contractors. They consider contractors to be

usurping their supervisory authority on the shop floor because contractors themselves (or

their staff) “manage” contract workers contract workers. The regular management

personnel see this role of the contractor as undermining their authority over workers.

Yet another area of conflict between the supervisors and managers is regarding the

outcome of buyers’ order placements. Supervisors, production managers and floor-in-

charges are not typically part of the decision making process about a buyer’s order. The

resultant gap between the decision making body that takes buyers’ orders and the

executing body which has to satisfy the orders, creates tension in the system. The lack of

consultation with the executing body leads to extremely short lead times which results in

compulsory overtime, over-work, and non-granting of the mandatory weekly day off for

workers. The supervisor who was interviewed for the study says that there are systemic

issues in the global supply chain; for example, the decision about the delivery of the order is

made at the higher level without consideration of the floor level situation. The supervisor

says that the manager calls the supervisors to the cabin and says ‘there is an urgent order

which has to be shipped next week. We have to make it somehow’. He continues,

“How the work can be done within a week is nobody’s concern. Then the

supervisors are forced to get the work done from workers and overtime

becomes unavoidable in such occasions. In some cases, the management

knows in advance that there is an order with a due date approaching. The

procurement of the raw materials and accessories is delayed; supervisors and

workers will not know why there is a delay in procurement, as they have no

role in that. However, when the raw materials arrive it is their duty to slog.

Supervisors do not prefer overtime work at all. First of all, they do not get

paid extra on a regular basis for overtime work.”

A common conflict area is between regular and contract workers. The contractor usually

keeps one or two “helpers” who ‘keep an eye on everything’. These “helpers’” work involves

assisting tailors (like usual helpers) but in addition, they also informally monitor workers and

44

supervisors and keep the contractors informed about the day to day functioning in the

company. These “helpers” are paid much more than the usual designation of helpers and

they are the ones who may later be upgraded to the level of sub-contractors. Tailors and

other workers see these “helpers” as facilitating their exploitation. Another different type of

tension exists between regular and contract workers in many companies, particularly in the

automobile industry. Here, regular workers treat contract workers as those who take away

their jobs and weaken their bargaining position. This tension is also promoted by

management which, in many of the recent struggles in the automobile industry in Gurgaon,

sought the assistance of contractors to break regular workers’ struggles.

45

11. Conclusion

Unchecked growth of the contract labour system in the garment manufacturing sector in

Gurgaon poses an enormous barrier to attaining enforcement of the legal rights of workers

in that sector. In spite of many stringent legal provisions that nominally protect the

livelihood and labour rights of contract workers, an examination of the contract labour

system as it operates in Gurgaon reveals that the government fails to protect the labour and

human rights of contract workers in the garment industry. The manufacturing and

contracting companies connive and collaborate in violating the law, with the responsible

government agencies at best oblivious, if not in active collusion.

The theft from the minimum wage of workers causes numerous socio economic problems to

workers including eviction from their homes, inability to buy food and resultant

malnourishment of younger generations, and discontinuation of their children’s education

etc. The non compliance with the Provident Fund poses long term problems to the

workforce and exerts enormous economic pressure on the next generation in terms of the

maintenance of the older generations. The lack of coverage of workers and their families

under ESI leads to the growth of numerous illegal and life threatening medical practices

among the working class of Gurgaon. The revenue loss to the Provident Fund and ESI

departments are also huge. This limits the economic capacity of the state to make effective

provisions for public assistance in cases of unemployment, old-age, sickness, disability, and

forced poverty as elucidated in the "Directive Principles of State Policy" of the Constitution

of India. The disregard of these issues by the State departments proves the connivance and

failure of the State in ensuring the welfare of the working class, in the context of burgeoning

contract labour in Gurgaon.

However, it would seem that only concerted collective action taken by workers’

organisations might curb the illegalities nurtured by the system and facilitate the

regularisation of the contract workers in Gurgaon across industries. Stringent enforcement

of the provisions of Contract Labour Act 1970 along with provisions of other applicable acts

is essential. Moreover, it is important to make necessary amendments which would include

any contractor/company which employs contract workers irrespective of the total number

of workers employed. Unless the contract workers are regularised and unionised, any

successful struggle for labour and human rights in the manufacturing industries will remain

unsuccessful. Needless to say, accountable and transparent governance is a necessary

condition to bring social and economic justice to workers in Gurgaon.

46

Society of Labour and Development

The Society for Labour and Development was founded in 2006. SLD believes that a

democratic and just society can only be built through economic development and

equitable sharing of the gains of development; through institutionalising the

democratic rights of workers' and marginalised peoples' organisations in sites of

production and governance; through national and International solidarity based on

mutual respect and equality; and through a democratisation of global economic and

political regimes.

Contact us:

C-23 (First Floor, Rear Portion),

Hauz Khas,

New Delhi,

110016

www.sldindia.org

[email protected]

+91 1126179806

47

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