Who Protects The Builders? Labour Law, Gig Work And Public Procurement In India

1. Introduction

Public projects in India today, from national highway corridors and renewable parks to Smart City logistics and digital field services rely on an increasingly fragmented workforce. The lines between contract labour, outsourced workers, and platform-based gig workers have blurred. What began as a strategy for cost efficiency has now become a test of legal and ethical accountability.

In ministries, PSUs, and state agencies, project delivery is typically executed through multiple contracting layers; a principal employer (the public authority), one or more EPC or service contractors, and several subcontractors or digital intermediaries. When a PSU or municipal authority uses a digital platform to deliver services such as sanitation tracking, smart logistics, or maintenance scheduling, it indirectly engages gig workers.

This structural outsourcing raises a recurring question, who bears the ultimate responsibility for wages, safety, and social protection?

While the Code on Social Security (2020) and Occupational Safety, Health and Working Conditions (OSH) Code (2020) was meant to modernise this accountability chain. Yet, five years after their passage, implementation remains partial. Meanwhile, the rapid expansion of gig and platform work within publicly funded programs has created fresh compliance blind spots.

The question in public sector contracts today is not just whether laws exist but whether the government, as India's biggest employer, can meet the standards it asks the private sector to follow.

2. The Legal Landscape – Labour Codes and Gig Worker Framework

India's labour law regime has undergone major reform through the four Labour Codes; the Code on Wages (2019), Industrial Relations Code (2020), Code on Social Security (2020), and OSH Code (2020). Together, these consolidate nearly thirty central statutes into a cohesive framework aimed at simplifying compliance and extending coverage to modern forms of work.

The Code on Social Security, 2020 is the first Indian statute to recognise gig workers and platform workers as distinct categories entitled to welfare measures.

1. Section 2(35) defines "gig worker" as one who performs work outside a traditional employer–employee relationship.
2. Section 2(61) defines "platform worker" as someone who accesses work through an online platform.

Moreover, Section 6(1) mandates the constitution of a National Social Security Board for Gig Workers and Platform Workers to recommend and monitor welfare schemes related to insurance, health, maternity, and old-age benefits. While the Board has been formally notified, operational rules are still awaited as of 2025.

Meanwhile the OSH Code, 2020 consolidates thirteen older statutes, including the Factories Act, the Contract Labour (Regulation and Abolition) Act, 1970 (CLRA Act), and the Building and Other Construction Workers Act. Sections 23, 24 and 25 of OSH Code specify that principal employers including government departments and PSUs must ensure that every worksite under their control provides safe working conditions, sanitation, medical facilities, leave with wages and other welfare facilities. Failure to do so can attract penalties under Section 94.

Pending OSH Code notification, the CLRA Act continues to apply. Under Sections 20 and 21 of that Act, the principal employer remains liable for amenities and for payment of wages if the contractor defaults. This provision is particularly important in public projects where contractors often change mid-stream.

3. The Public Sector Compliance Challenge and the Contractual Governance Gap

In India's public sector, labour law compliance has long been treated as a contractor's problem. Once a project is awarded, government authorities typically prioritise timelines, budgets, and output metrics, while assuming that contractors will handle wage payments, ESI and EPF remittances, and other welfare obligations. Yet, this assumption is increasingly untenable in light of India's evolving statutory and judicial landscape.

Public projects now operate through complex contracting chains, where accountability appears fragmented but legally remains unified. Under Section 21(4) CLRA Act, 1970; the principal employer must ensure wage payment if the contractor defaults, which is still applicable until the OSH Code (2020) is notified.

The Comptroller and Auditor General (CAG), in its Performance Audit on Labour Welfare in Public Works (2023), revealed a pattern of compliance failures: absence of labour welfare registers, unverified attendance rolls, and non-remittance of social security contributions. Contractors were often paid despite lacking valid labour licences or ESI/EPF returns, breaching Rule 25(2)(v)(a) of the Contract Labour Rules.

The deeper issue, however, lies in contract design. Most tender documents under the General Financial Rules (2017) or Manual for Procurement of Works (2023) include a cursory clause, "The contractor shall comply with all applicable labour laws", without specifying verification mechanisms or consequences for breach. Courts have consistently rejected such disclaimers, holding that ultimate accountability rests with the public authority benefiting from the work.

A few progressive departments have begun closing this gap. The Ministry of Labour & Employment's Advisory on Engagement of Contract Labour (2023) urges inclusion of explicit obligations such as submission of EPF and ESI contribution receipts, digital attendance records, and independent audits at quarterly intervals. These measures signal a shift from paper declarations to contract-embedded accountability, where labour protection becomes as measurable as cost or time and as central to governance as any financial metric.

The risk is not only administrative. Non-compliance in government projects can now invite constitutional and public law accountability. In People's Union for Democratic Rights v. Union of India (1982), the Supreme Court held that non-payment of minimum wages in public projects amounts to "forced labour" under Article 23 of the Constitution.

4. Judicial and Human Rights Lens

Over the decades, Indian courts have repeatedly reminded the State that efficiency and cost-cutting cannot override human dignity. Every large infrastructure project is, in a sense, a test of how far the government lives up to its own constitutional values when it acts as an employer.

The foundation was laid in People's Union for Democratic Rights v. Union of India (1982), where the Supreme Court, examining labour conditions at the Asiad Games construction sites, held that failure to pay minimum wages, unequal remuneration for women, and employment of children below 14 years were each found to breach not only statutory provisions but fundamental rights under Article 23. By interpreting forced labour under Article 23 to include work performed for less than the statutory minimum wage, the Court effectively constitutionalised basic labour standards. The court further held that the State and its agencies could not disown responsibility simply because the workmen were hired through contractors.

This precedent thus established that in any government-funded or government-supervised project, the State bears a continuing duty to ensure lawful and humane working conditions, irrespective of whether the workers are on its rolls or those of a contractor. The ruling transformed labour compliance from a mere administrative duty into a fundamental rights issue.

Two years later, in Bandhua Mukti Morcha v. Union of India (1984) the Court expanded this principle by recognising humane working conditions and rehabilitation of bonded labourers as part of the right to life under Article 21 and 23. The decision framed worker welfare as a constitutional duty rather than an administrative discretion.

In Nagar Nigam, Gorakhpur v. Labour Commissioner (2017), the Court clarified compensation liability under the Employees' Compensation Act, 1923, holding the municipal corporation responsible for a worker's death despite indirect engagement through a contractor. As the court put it, if the accident arises "out of and in the course of employment."

Parallel to these constitutional and statutory strands, new litigation is emerging around gig and platform labour. The Zomato Delivery Partners Union v. Union of India case, currently pending before the Delhi High Court, seeks recognition of gig workers as "employees" under the Code on Social Security, 2020 and challenges the absence of welfare implementation. Although focused on private platforms, the arguments have implications for public projects that increasingly rely on app-based delivery and data-collection models. If such workers perform state functions under state supervision, can the government truly deny social security protection? The Court's eventual view could reshape accountability frameworks across digitalised public service projects.

5. Integrating Labour and Social-Governance Compliance into Public Procurement Frameworks

Bridging the gap between law and on-ground enforcement demands a shift in how the State designs and monitors its contracts. The future of public procurement lies not merely in awarding the lowest bid, but in rewarding responsible performance; a principle increasingly recognised across both domestic and international frameworks.

In India, the Public Procurement (Preference to Make in India) Order, 2017 has already set a precedent for embedding policy priorities, such as domestic manufacturing into tenders. A similar approach is now emerging for social and labour compliance, guided by the Sustainable Public Procurement (SPP) Guidelines developed by the Ministry of Finance and pilot-tested in several central PSUs. These initiatives align with global trends like the EU's 2021 Directive on Socially Responsible Procurement and the OECD's 2022 Recommendation on Public Procurement both treat worker welfare and human-rights diligence as intrinsic to value for money.

For India's public sector, operationalising this vision requires clarity on how to assess and verify compliance. Self-declarations are no longer defensible; procurement manuals and bid documents must instead adopt structured compliance matrices that link statutory requirements to documentary evidence and verification mechanisms.

Leading PSUs like NHAI, Oil India Ltd., and NTPC Ltd. have already introduced such clauses, mandating quarterly compliance self-certifications and adherence to the Code on Social Security (2020) and OSH Code (2020). These innovations reflect a growing consensus that worker welfare is not an externality but a core metric of project sustainability.

Beyond compliance, this shift carries reputational and financial significance. Multilateral financiers such as the World Bank and Asian Development Bank already require adherence to their Environmental and Social Frameworks (ESF) in India. For domestic procurement to remain credible, it must internalise similar safeguards, ensuring that accountability, legality, and social responsibility converge.

6. Way Forward

Government agencies are no longer being evaluated solely on project delivery metrics but also on whether they uphold their constitutional obligation as "model employers."

At the policy level, several threads are beginning to converge. The Ministry of Labour and Employment's ongoing rollout of the e-Shram portal and the National Database for Unorganised Workers has made it possible to track contract and gig workers across projects. Similarly, the Department of Public Enterprises (DPE) has advised central PSUs to align their sustainability disclosures with labour-welfare and human-rights indicators under ESG frameworks (DPE Guidelines, 2024). Together, these developments signal a future where compliance will be data-driven, auditable, and tied directly to procurement decisions.

Going forward, the State's contracting ecosystem needs a pragmatic overhaul. The next revision of the Manual for Procurement of Works and PSU tender templates should incorporate structured compliance matrices linking each statutory requirement; minimum wage, social security, occupational safety, and welfare, to verifiable documents and periodic audits. Independent third-party verification, similar to environmental audits, can ensure credibility and reduce administrative burden. Moreover, convergence between central and state rules under the four Labour Codes will help standardise expectations and remove interpretive ambiguity.

Ultimately, India's public sector must view labour-law compliance not as a bureaucratic exercise but as an instrument of governance legitimacy. Every tender, every project site, and every contract worker reflects how the State values human dignity in public employment. Embedding social and labour governance in procurement design is therefore not an aspirational reform but it is a constitutional necessity. When compliance becomes measurable, enforcement becomes credible, that is when public projects truly serve both developmental and democratic ends.

In that sense, the future of public procurement will be judged not merely by how much it builds, but by how responsibly it builds it.

References:

1. Asian Development Bank (ADB) safeguards / ES policies.
2. Comptroller and Auditor General of India (CAG), Performance Audit on Labour Welfare in Public Works (2023).
3. Department of Public Enterprises (DPE), Corporate Governance Guidelines for CPSEs (2024 revision).
4. Directive (EU) 2014/24/EU & subsequent updates / EU Socially Responsible Public Procurement measures.
5. The Code on Social Security, 2020 (No. 36 of 2020), Parliament of India.
6. The General Financial Rules (GFR), 2017, Government of India (Department of Expenditure).
7. The Occupational Safety, Health and Working Conditions (OSHWC) Code, 2020 (No. 37 of 2020), Parliament of India.
8. Manual for Procurement of Works (Second/Latest Edition, 2023), Department of Expenditure / Ministry of Finance.
9. Ministry of Labour & Employment, Advisory on Engagement of Contract Labour (2023).
10. OECD Recommendation on Public Procurement (2022).
11. Public Procurement (Preference to Make in India) Order, 2017 (and amendments).
12. Sustainable Public Procurement (SPP) Guidelines / pilots, Ministry of Finance.
13. World Bank, Environmental and Social Framework (ESF), 2016 (with updates).

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