Picture this: A manufacturing plant hires a third-party contractor to execute a pipeline repair in a hazardous processing zone. The contractor holds a valid licence, briefs their team, and provides top-tier Personal Protective Equipment (PPE).
However, mid-operation, a corroded overhead structural beam wholly maintained by the factory management collapses. A contract worker is severely injured. The contractor did everything by the book; the hazard stemmed entirely from the unsafe premises of the factory.
Who faces the legal music? Is it the contractor who directly employed the worker, or the principal employer who owns the hazardous facility?
This question is more relevant than ever. The entire landscape of workplace safety in India changed on 21 November 2025, when the government brought the Occupational Safety, Health and Working Conditions (OSH) Code, 2020, into full force. This new law has replaced and repealed 13 old central labour laws, including the Factories Act, 1948, and the Contract Labour (Regulation and Abolition) Act, 1970, fundamentally shifting how liability is assigned.
Let’s untangle the legal knot by examining this new legal framework.
The New Legal Framework: The OSH Code, 2020 (Fully Operational)
Status update: Effective 21 November 2025, the central government formally operationalised the OSH Code, 2020, replacing a multitude of previous laws. The provisions of the OSH Code have been notified in full, and the central rules have since been published, making the code the binding statute for workplace safety.
The OSH Code consolidates 13 legacy labour laws including the Factories Act and the CLRA into a single, 143-section unified legal framework. It now governs safety, health, and working conditions for all types of establishments across the country, not just factories.
1. The Principal Employer’s Non-Delegable Duty (Section 6)
This is the most critical change. The code explicitly broadens the definition of “employer” and places a direct, unconditional, and non-delegable duty on the principal employer.
Under Section 6 of the OSH Code, every employer is mandated to provide a workplace free from identifiable hazards that can cause injury or occupational diseases.
This duty now unequivocally extends to contract labour. The code states that for contract labour, the principal employer (the person responsible for the supervision and control of the establishment) is primarily liable for the safety of all persons on the work premises, regardless of whether they are hired directly or through a contractor. You cannot contract this liability away.
Judicial precedent: This principle is not new but is now embedded in the code. In the landmark case of R. Subramanian v. State of T.N. (2006), the Madras High Court held that the Manager and Occupier of a factory can be held liable under the Factories Act for accidents caused to contract workers employed by contractors. The court firmly established that negligence of contract workers cannot be diverted from the principal employer who engaged them, as contract workers are deemed “workers” for the purpose of safety statutes.
2. Principal Employer’s Liability for Welfare (Sections 16-18)
Under the OSH Code, the principal employer is directly responsible for providing basic welfare facilities to contract labour, including:
- Drinking water facilities (Section 16)
- Canteen facilities where 100 or more workers are employed (Section 17)
- Rest rooms, first-aid boxes, and other basic amenities (Section 18)
Unlike under the legacy CLRA regime, these welfare obligations are now the primary and non-transferable responsibility of the principal employer. You can no longer draft a clause in a vendor agreement to bypass these core obligations or pass the costs back to the contractor.
3. Liability for Wages and Experience Certificate
Payment of wages (Section 56): The principal employer bears statutory liability for wage payment to contract labour. If the contractor fails to pay wages, the principal employer shall be liable to pay the same and may recover the amount from the contractor.
Experience certificate (Section 56[2]): Contractors are now mandated to issue an experience certificate on demand to contract labour in the prescribed format; a new protection for workers changing employment.
4. Consequences of Engaging an Unlicensed Contractor
If a principal employer employs contract labour through a contractor who is required to obtain a licence under the OSH Code but has not done so, such employment is deemed to be in contravention of the Code. This triggers the principal employer’s liability to perform all duties of the contractor, including providing all basic amenities to contract labourers in the establishment.
5. Escalated Penal Risks (Section 94)
The penalties for non-compliance have increased dramatically:
- General Penalty (Section 94): For a general contravention, the employer or principal employer is liable to a penalty of not less than ₹2 lakhs, extending up to ₹3 lakhs, with additional daily fines of up to ₹2,000 for continuing violations.
- Penalty for Death: If an offence leads to the death of an employee, it is punishable with imprisonment of up to two years, a fine of up to ₹5 lakhs, or both.
- Victim Compensation: Furthermore, judicial authorities can now direct that at least 50% of the fine imposed on the guilty party be paid directly as victim compensation to the worker’s legal heirs—separate from any insurance payout.
6. Single Registration via Shram Suvidha Portal
The OSH Code introduces a unified registration system through the Shram Suvidha Portal, replacing the separate licences and registrations previously needed under the CLRA and Factories Act. Contractors must apply for licences online through this portal.
Summary Table: Legal Liability Under the OSH Code, 2020
| Aspect | Responsible Party | Legal Basis |
| Criminal prosecution for unsafe premises | Principal Employer / Occupier | Section 6 (Duties of Employer) |
| Welfare facilities on premises | Principal Employer (non-transferable) | Sections 16-18, OSH Code |
| Wage payment liability | Principal Employer (if contractor fails) | Section 56, OSH Code |
| Effect of employing unlicensed contractor | Principal Employer becomes directly liable | Section (Deemed contravention), OSH Code |
| Penalty for general contravention | Employer / Principal Employer (₹2-3 lakh + daily fine) | Section 94, OSH Code |
| Penalty for causing death | Employer / Principal Employer (Up to 2 years imprisonment + ₹5 lakh fine) | Section 94, OSH Code |
Practical Checklist for Compliance and Risk Mitigation – FREE
To safeguard your organization against cascading liabilities, use this tactical compliance checklist.
For Principal Employers (Factory Owners / Occupiers)
| Action Item | Legal Basis |
| Immediately audit all manpower agreements – Remove any clause that attempts to transfer structural safety liability onto a contractor. Such clauses are void. | Section 6, OSH Code |
| Verify contractor licences – Ensure every contractor you engage has a valid licence under the OSH Code. | Chapter V, OSH Code |
| Undertake a unified registration for your establishment on the Shram Suvidha Portal, covering all operations and contract labour. | Chapter II, OSH Code |
| Establish a joint Safety Committee – Under the OSH Code, this is mandatory for establishments with 250 or more workers. | |
| Document all site safety handovers – Obtain written acknowledgment from contractors that they have been warned of known structural hazards and have provided the required safety training. | |
| Maintain records of welfare facilities – Document provision of drinking water, canteens, rest rooms, and first-aid for contract workers. | Sections 16-18, OSH Code |
Practical Checklist for Contractors (Manpower Suppliers) – FREE
| Action Item | Legal Basis |
| Secure your own licence – A valid contractor’s licence is your only protection against the principal employer being deemed directly liable and all duties transferring to them. | Chapter V, OSH Code |
| Maintain meticulous digital compliance trails – Document safety training logs, appointment letters, hazard notices, and PPE distribution in real-time. | |
| Conduct and log pre-work inspections – Before deploying personnel, document the physical condition of the site. Issue a formal written notice to the principal employer highlighting any visible infrastructure hazards (e.g., faulty wiring, structural cracks). This is your primary defence against indemnity claims. | |
| Issue experience certificates – Provide experience certificates to contract workers on demand in the prescribed format. | Section 56(2), OSH Code |
Final Takeaway
Under the OSH Code, 2020, which is now fully in force:
- The principal employer bears the primary, non-delegable liability for the safety, welfare, and wage payment of all workers on their premises, including contract workers.
- You cannot transfer liability for structural safety and basic welfare through contractual clauses.
- Employing an unlicensed contractor makes the principal employer directly liable for all duties of the contractor.
- Penalties for non-compliance, especially in the event of death, are severe, including heavy fines and imprisonment.
- Contractors must maintain valid licences and impeccable safety records to avoid triggering the principal employer’s direct liability.
Action now: Audit your vendor contracts, verify contractor licences, secure your unified registration on the Shram Suvidha Portal, and document every site safety interaction. The cost of prevention is always less than the cost of prosecution.
Disclaimer- This content is provided for general informational and educational purposes only and does not constitute legal advice, professional counsel, or an attorney-client relationship. The Occupational Safety, Health and Working Conditions (OSH) Code, 2020, has been in force since 21 November 2025; however, the full operational effect of certain provisions depends on the finalisation and notification of state-level rules. The information provided herein is based on the central legal framework and may vary depending on your specific jurisdiction within India. You should not act or refrain from acting based on any information herein without obtaining independent legal advice from a qualified advocate familiar with the specific facts of your situation, applicable state rules, and the current enforcement status of the relevant legislation. Liability scenarios depend heavily on specific contract terms, factual circumstances, judicial precedent, and insurance coverage. Past outcomes do not guarantee future results. No warranty (express or implied) is made regarding the accuracy, completeness, timeliness, or applicability of this information to your specific circumstances. The author and publisher disclaim all liability for any loss, injury, claim, penalty, or damage arising from the use or reliance upon this content. Always consult your legal and compliance teams before implementing any workplace safety or contractual risk allocation strategy.