Written By: Apoorv Agarwal

ANALYZING WHAT IS THERE FOR CONTRACT LABOURERS UNDER THE OLD “CLRA” AND THE NEW “OSH CODE” 2020

India repealed its 55-year-old contract labour law in November 2025, promising to finally close the gap that let millions of workers be hired as “contractors” instead of employees. This piece traces that gap the undefined line between “core” and “non-core” work from its roots in 1970s case law to the new labour code, and asks whether the recodification actually closed it, or simply wrote it into statute with a keyhole shaped for gig work.

On 12 June 2026, the International Labour Organisation adopted Convention No. 193 the first binding international labour standard written specifically for platform and gig work. It passed 406 votes to 8. India didn’t vote against it. India abstained, one of thirty-six countries to do so, after spending the previous year arguing at the ILO that a binding convention was premature for a “nascent and rapidly evolving space.” The specific provision India couldn’t accept was a requirement that governments build a factual classification test to determine when a platform worker is, in substance, an employee regardless of what the contract calls them.

That objection only makes sense against one background fact: India had already answered that exact question, differently, at home. Seven months earlier, the country had repealed twenty-nine labour statutes and recodified them into four Codes and inside that recodification sits a specific, quotable illustration of “work that doesn’t require a full-time worker for the major part of the day”: a home-delivery rider. India didn’t abstain from Convention 193 out of caution. It abstained because its own freshly rewritten labour law had just gone in the opposite direction, and adopting the ILO’s test would have meant admitting that.

That contradiction a country that spent five years consolidating its labour codes, only to walk straight into an international standard-setting fight over the one classification question its new Code left deliberately unresolved is why this is worth writing about now, and not simply as legal history.

The term “Contract Labour” has been defined by the International Labour Organization as “work performed for a natural or legal person by a person pursuant to a contractual

arrangement other than a contract of employment” (International Labour Organisation, 1998). Here the former is referred to as the “user enterprise” and the latter is referred to as the “contract worker.” As per ILO’s (1998) interpretation, even though there exists no contract of employment with the user enterprise, there does exist conditions of dependency on or subordination to the user enterprise, these conditions being similar to characteristics of an employment relationship as per the laws of the country but where the contract worker is not considered to be an employee of the user enterprise.

Hence, two important elements can be drawn out which define contract labour: Firstly, the presence of a contractual agreement instead of a contract of employment. Secondly, there should be some form of subordination or dependency between the worker and the person for whom the work is to be done.

Contract labourers are persons who are employed on a contractual basis. There is a contractual agreement between the worker and the enterprise that enters into a contractual agreement with respect to the services. A contractor is an independent person who is self-employed; they perform special functions for an employer other than the direct employer. Contract labourers assist establishments by being cheaper or more economical than permanent employees, their terms and conditions are also flexible and they require less paperwork.

Moreover, by outsourcing labour management to contractors, the other responsibilities like payment, adherence to existing laws and regulations and welfare of the labourers become the responsibility of the contractors and this in a way helps the companies to easily concentrate on their operations without the worries of a constant workforce while benefiting from a cheap source of labour at the same time.

In India, under the ‘Contract Labour and Regulation Act 1970’ contract labour is defined under Section 2(b) which states that ‘a workman shall be deemed to be employed as “contract labour” in or in connection with the work of an establishment when he is hired in or in connection with

such work by or through a contractor, with or without the knowledge of the principal employer’ The principal employer of the establishment usually concerns himself with the final product and service and does not concern himself with the number of contract labourers engaged by the contractors and how and by whom the job was done.

The latest Code on Social Security 2020 expands on this definition of ‘contract labour’ by including “inter-State migrant worker” but further clarifies that it does not “include an employee (other than part time employee) who is regularly employed by the contractor for any activity of his establishment and his employment is governed by mutually accepted standards of the conditions of employment (including engagement on permanent basis), and gets periodical increment in the pay, social security coverage and other welfare benefits in accordance with the law for the time being in force in such employment.” This definition clearer understanding of who would and would not be considered a contract labour under the code

As per data consolidated by the International Labour Organization in their India Wage Report (International Labour Organisation, 2020), the share of contractual workers in the organised manufacturing sector has had a sharp rise from 14% in 1990-91 to 35% in 2016-17 (Rani & Sen, 2018). Whereas, in other sectors like mining and quarrying, contract labourers make, on estimate, up to two-thirds of the workforce (Chandrasekhar & Ghosh, 2018).

Similarly, according to data from the Annual Survey of Industries (ASI), half of the increase in total employment (from 7.7 million to 13.7 million) between 2000–01 and 2015–16 was due to the rise in the number of contract labourers. According to the latest findings in the Annual Survey of Industries (2021-22), every two out of five workers (i.e. 40.2% of the newly hired workers) were contractual hires. There has been an increase in contractualization in the labour force but the share of employer’s contribution towards the workers’ wages have been on a continuous decline (Rajora, 2024). This rise in the share of contract labourers along with the replacement of regular employees with contract labour has contributed to the widening wage gap in the labour market as has been noted by multiple authors (Sarkar & Mehta, 2020).

As recent as 2026, there have been instances in private enterprises in the state of Andhra Pradesh where the wages of permanent employees were fixed through collective bargaining but there was no recognition of unions for contract labourers and their wages were based on the minimum wage fixed by the statutes in the state. In the study that consisted of 30 enterprises

in the state, the wages of contractual workers were equal to the statutory minimum in 21 of them (Reddy, 2026).

In a survey conducted on 551 individuals in West Bengal, Uttar Pradesh, Haryana and Delhi during 2024-25, a substantial wage gap was observed between the contractual and permanent workers wherein the contract labourers earned 45.5% less than the permanent workers. Similarly, in a 2020 survey of contract labourers in Karnataka, it was found that as compared to the regular workers who earned a minimum of Rs. 6,000 a month, a majority of contract labourers earned less than Rs. 2,000, with some even earning less than Rs. 1,000 a month which falls below the minimum wage. (Rajeev Jain, 2020)

In a case study done in ten out of the thirty districts in Odisha, a total of 437 contract labourers were interviewed. Out of the 437 people, a majority of them, that is 374 were outsourced to other states. The researcher also visited the office of Odisha’s State Labour Commissioner to gather data on those districts. On inquiring, it was found that a total of 11,55,869 labourers were registered or had an employment card but the ground reality is different as there are also many non-registered people involved in contract labour. Out of the 437 labourers interviewed, a total of 191, i.e. 43.7% of them were unregistered and do not have an employment card. This does not align the provisions of the Orissa Contract Labour (Regulation and Abolition) Rules 1975, specifically Rules 74 and 75, as per which every contractor has the duty to register the

workers and issue an employment card to them within three days of employment (Bhattacharjee, 2019).

Hence, as gathered from the empirical data, one can gain some perspective with regards to the conditions of the contract labourers as well as the common issues faced by them. These include instances of non-registration of contract labourers. This non-registration can easily turn into other violations of their rights with respect to their wages, fines, overtime payments, etc. as their name would not be included in the Muster Roll. They also do not get to enjoy many perks enjoyed by permanent employees due to the temporary and casual nature of their employment.

FIFTY YEARS OF CLRA 

CLRA came about with a contradiction although it had a muti purpose angle to it. In the broader context, and as highlighted by the judiciary, the underlying and ultimate objective of the act was to abolish contractual labour altogether. But, in cases and establishments where it is not possible to abolish the same, such forms of labour were to be regulated by the provisions of the act to ensure fair payment of wages and other amenities including security and appropriate working conditions (Contract Labour Act, 1996).

In Gammon vs UOI (1974) it was held that it aimed to prevent the exploitation of contractual labourers while also introducing better working conditions for them. In Another case in ‘Sirpur Paper Mills Ltd Vs Commr of Labour’ the court observed that both the contractor and the principal employer are accountable for the condition of a worker which the principal employers are always in a mood to skip stating that we are not the one who hired them the contractors did. The above mentioned data though shows a completely different picture. On the paper it looks like the statue is meant to protect them but in reality the contract labourers are never issued any employment card, almost exactly in all cases the employers realize how much of their operation they can possibly argue was ‘non – core’.

The act applies to every establishment which engages or has engaged twenty or more workers on a contractual basis on any day in the preceding twelve months (CLRA, 1970, s 1(4)(a)). It is also applicable on every contractor who has employed twenty or more employees on any day in the preceding twelve months (CLRA, 1970, s 1(4)(b)). The number of minimum twenty workers may be relaxed by the appropriate government through a notification in the Official Gazette with a notice of not less than two months. Moreover, the act does not apply to establishments of an intermittent or causal nature (CLRA, 1970, s 1(5)).

Here, a “contract labour” is a worker who is deemed employed in the work of the establishment or in any work connected to any such work. They may or may not be in the knowledge of the principal employer (CLRA, 1970, s 2(1)(b)). A “contractor” is one who undertakes particular tasks of an establishment and gets them done through contract labour or who supplies contract labour to an establishment (CLRA, 1970, s 2(1)(c)). “Principal employer” is an inclusive term. In general, they are the person who has the responsibility of supervising and controlling an establishment. But they also include:

1. In case of an office or department of government or local authority: its head;
2. In case of a factory: its owner or occupier, and;
3. In case of a mine: its agent or owner (CLRA, 1970, s 2(1)(g)).

The benefits of CLRA provides contract labourers certain advantages including availability of clean drinking water, hygiene facility, washrooms, canteens and restrooms as well as, other facilities including first aid and timely payment of wages, section 16 to 21 of the 1970 act demarcates the duties that the principal employer and contractor are supposed to perform respectively so that there is no conflict of interest among them and each of their roles are properly decided. (Dubey, 2020) Section 20 of the act states that if the contractor fails to provide the basic amenities mentioned under section 16 to 19 then in that case the principal employer will be held liable, a position further confirmed by the Supreme court in the case of “People’s Union for Democratic Rights v. Union of India (People’s Union vs UOI, 1982).”

The safety net mentioned in the paper is of two layers. However, in practice an unregistered worker fell through both. The Latest Occupational Safety, Health and Working Conditions Code, 2020 has slightly changed this narrative. The coverage now extends to fifty contract labourers not twenty anymore. Lets say there is an establishment which employs say thirty – five contract workers inside the old regime, but now latest it falls entirely outside the Code’s contract labour provisions and hence you could say that the government did not close the actual loophole existing but instead widened the door straight out of the building.

Sham Contracts

In certain circumstances there can be absorption of the contract labour, in instances where the agreement between the employer and contract labour seems legitimate to show that the agreement is an independent contracting one but is actually just a camouflage to prevent the labourers from getting the benefit they otherwise would be entitled to if they were regular employers. (Saini D., The Contract Labour Act 1970 Issues & Concerns, 2010) This type of arrangement is called “Sham Arrangements.”

In the case of “Secretary, Haryana State Electricity Board v. Suresh & others” (Haryana Electricities vs State of Haryana , 1995) the statutory board who was the appellant used to set up electricity in the area, and they needed cleaners so the contractor got 42 cleaning workers

who were paid 32,000 per month, after completing 240 days of service the workers claimed permanency in the service of the board which the employer refused. The matter went to Supreme Court which held that the overall contract of these workers was with the board, the contractor was a mere name lender he did not even had the license nor did the board register itself as a principal employer which is an requirement under the CLRA in order to appoint contract labourers, supreme court held the situation to be that of a “sham contract” and worker’s plea was accepted by the court, when large public sector undertakings are engaged in such dubious act what can be expected from smaller establishments. It also laid down this principle that if an establishment is hiring contract labour for a perennial job without proper registration and license then that labourer would be absorbed into a regular worker in cases where they have been working for more than 240 days.

 What is Social Security 

In India one of the most significant problems that contract labourers face is the absence of proper social security (I Inian, 2018 ) there are other statues as well like ‘the Employees Provident Fund (and Miscellaneous Provisions) Act 1952’ and ‘Employee Pension Scheme 1995’ but does any of the contract labourers receive any pension under these acts. (Saini D. , The Contract Labour Act 1970 Issues & Concerns, 2010 ) In most cases the contractors never allows the workers to remain on rolls and even if the worker is working for a considerable period of time no gratuity is paid to them adding to the fact that the pay disparity between a regular worker and an contract labourer is also apparent even though they might work as much as or equal to an permanent employee and because of this apprehension of job security they are not able to fight for their rights and represent themselves as the legal framework in itself is very weak and does not support them

Provident Fund

Section 2(f)(i) of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 recognises contract labourers as employees on whom the provisions of the act apply. Moreover, the Employees’ Provident Fund Organisation has stated it to be the principal employer’s duty to ensure that the contractor discharges his duty with respect to provident fund payments. To keep a better track of this, it is preferable for the principal employer to make sure that all the contract workers have activated their Universal Account Number of UAN (Employees’ Provident Fund Organisation, n.d.). This can help in identifying the issue and any lapses at once.

But there have been issues with contractors hiding the PF accounts and UAN of the workers working under their contract. In such a case, the contract workers have to themselves check whether they have been allotted their Universal Account Number for their PF account or not by visiting the EPFO website or the concerned EPFO Field Office (EPFO, 2015).

Gratuity

Contractual labourers are not explicitly stated as beneficiaries under the Payment of Gratuity Act 1972 but due to the wider understanding of the term employee and due to judicial interpretation, the purview of the act covers even the contract labourers. In the case of Dhakshinamurthy S v. Deputy Commissioner of Labour (Appeals), Appellate Authority under Payment of Gratuity Act, 1972, Chennai & others,” where the labourers were contracted as home workers, the court ruled that the principal employer is liable to pay gratuity to the contract labourers.

Changing understanding of ‘Core Activities’

Every time there is a failure of a sham contract or lets say any unclaimed provident fund, or any equal pay dispute that arises all of the same traces back to the same upstream cause. The single most fight in the fifty years of CLRA that existed all this while was never about wages or gratuity it was about “what exactly is core activity”.

Employers have enjoyed all the incentives to keep the core activities of a contractor intact. whether it might be constructions, manufacturing, distribution or any other field. The whole architecture of CLRA was based on the presumption that contract labour belonged in peripheral work. It never defined core activity and how could it, the economic structure at that moment was not flexible enough to incorporate all those changes .

Employees demand regularisation of contract labourers by employing them in peripheral activities so that the “core” work of the establishment is left upon to them, this demarcation is important so that the technical activities can be carried out by regular employees.

However, some states like Andhra Pradesh at that time had made a progressive step in excluding certain activities from the term “core activity” in their state amendment, like cleaning, sweeping, canteen and catering services, courier services, guest houses and clubs, laundry service as a support service basically stating that even if the activity is a core activity of an establishment, if it is intermittent it will fall under “non-core” activity, in addition to including any other activity incidental to the core activity.

Many other states in India have changed the understanding of core and non-core activities under the act and have included certain core activities in non-core activities. The New Occupational, Safety, Health and Working Conditions Code, 2020 finally gave a definition to “core activity” an actual statutory definition. It states any activity for which the establishment was set up, plus what’s essential or necessary to it or lets say give effect to it . It also lists eleven specific non-core activities by name: sanitation, watch and ward, canteen and catering, loading and unloading, running of hospitals or educational institutions or guest houses as support services, gardening, housekeeping, laundry, and transport.

This Code prohibits contract labour in these core activities except in circumstances where the activity is ordinarily done by or through a contractor anyway let’s say an EPC Project, in these activities there is no requirement to employ a full time workers for most of the day. In one of the commentary upon the code the interpretation that was given to work that doesn’t require full-time workers for the major portion of the day” was that they could be home delivery guys also like gig workers, one could not possibly thought of incorporating the same in a 1970 year old statue. This new gig economy culture has been recodified in 2025 with an exception whose textbook like examples would be Swiggy or Zomato.

The vague standard that CLRA seems to provided seems to have given employers a way to argue their way around. 2025 Act has now supplied the definition and in the same line supplied with an argument.

CONCLUSION 

The scale of the 21 November 2025 consolidation is genuinely without precedent: twenty-nine separate labour statutes, some dating to 1923, folded into four Codes in a single notification, bringing a reported fifty crore workers under one statutory framework for wages, industrial relations, social security, and safety. For the first time, gig and platform workers received statutory social security cover, financed through a levy on the aggregator platforms that engage them.

But by early 2026, the picture on the ground was uneven at best. Maharashtra, Gujarat and Karnataka had notified rules under most of the four Codes; West Bengal, Tamil Nadu and Nagaland had not. On 12 February 2026, ten Central Trade Unions called a nationwide strike against the rollout, disrupting coal, banking, transport and agriculture a sign that “consolidation” and “reform” are not, in the eyes of the workers the Codes claim to protect, the same word.

The CLRA’s core failure was never a lack of ambition. It was the gap between what the statute said and what anyone checked was actually happening on the ground. Fifty-five years and one repeal later, that gap hasn’t closed. It’s been redrawn definitionally sharper, more precisely worded, and fitted, in at least one clause, with a keyhole shaped for exactly the kind of work India’s labour force is doing next.

Which is, in the end, the quiet subtext of that abstention in Geneva. A government doesn’t have to vote against a worker-classification standard to reveal what it thinks of one. It can simply decline to say Yes and let a delivery rider, cited as a textbook exception in its own labour code, answer the question instead.