After the Labour Codes: What Happens to the Contract Labour Rules? The 2026 Central Rules and the Transition

For half a century, contract labour in India was governed by one Act, one set of Central Rules and a family of State rules. That framework has been replaced, in stages, and many contractors and principal employers have not yet mapped what survives. This article follows the labour codes contract labour rules transition from the repeal clause to the 2026 rules, and flags where the law is still unsettled. It builds on our earlier piece on contract labour wage parity, and does not repeat its case law.

Step One: The Repeal and the Savings Clause

The OSH Code was brought into force on 21 November 2025 by notification S.O. 5321(E), which appointed that date for the commencement of its provisions. We accessed the notification on the Ministry of Labour website. Section 143(1) of the Code identifies the enactments repealed upon its commencement, including the Contract Labour (Regulation and Abolition) Act 1970 under item (h). This repeal marks the shift from the CLRA Act to the OSH Code’s contract labour provisions. Unlike the Industrial Relations Code, where a separate notification and subsequent amendment were required to clarify the repeal, the repeal under the OSH Code took effect directly upon its commencement.

Section 143(3) is the transition provision. Actions taken under the repealed laws, including rules and notifications, are deemed to have been taken under the corresponding provisions of the Code and “shall remain in force to the extent they are not contrary to the provisions of this Code till they are repealed by the Central Government”. Section 143(4) applies section 6 of the General Clauses Act 1897 to the repeal. In practice, that meant the 1971 Central Rules continued, subject to the Code, from 21 November 2025 until replaced.

Step Two: The 2026 Central Rules Replace the 1971 Rules

The Occupational Safety, Health and Working Conditions (Central) Rules 2026 were published as G.S.R. 345(E) on 8 May 2026, after a draft of 30 December 2025 (G.S.R. 934(E)). The preamble supersedes fifteen sets of rules, including the Contract Labour (Regulation and Abolition) Central Rules 1971 and the Inter-State Migrant Workmen Central Rules 1979, except as respects things done before supersession. Under rule 1(3) they came into force on publication. We read a scan of the gazette hosted on a third-party website, so confirm the text against the official gazette before relying on it in a filing.

The effect is that, for establishments where the Central Government is the appropriate government, the savings bridge in section 143(3) covered a period of about five and a half months. For establishments under State governments, the position depends on the State’s own rules. Gujarat has made the Gujarat Occupational Safety, Health and Working Conditions Rules 2025, dated 6 June 2025, which supersede the Contract Labour (Regulation and Abolition) (Gujarat) Rules 1972, among others. We have not verified the commencement mechanics of those rules, since they pre-date the Code’s commencement.

What the New Rules Say about Wages and Conditions

Rule 86(1) of the 2026 Central Rules makes payment of wages in accordance with the Code on Wages 2019 a licence condition. Rule 86(2) allows the Chief Labour Commissioner (Central) to recover unpaid minimum wages from the contractor’s security deposit or bank guarantee. Rule 90 fixes the security deposit at ₹1,000 per contract worker, subject to caps for very large workforces. The fee table also provides that no licence is required for up to 49 contract labour, consistent with the fifty-worker threshold under section 45(1) of the Code. Together, these provisions define the revised framework for contract labour wages under the OSH Code.

The Parity Question: A Changed Wording

The old rule is summarised in our earlier article: where contract workers do the same or similar work as directly employed workmen, their wages and conditions are to match. In the form quoted by the Andhra Pradesh High Court from the State rules, which are in the same terms as the Central rule, the sentence reads: “the wage rates, holiday, hours of work and other conditions of services of the workmen of the contractor shall be the same as applicable to the workmen directly employed by the principal employer” (Investigation and Security Services v. Commissioner of Labour, Andhra Pradesh High Court, 17 November 1995). The Supreme Court treated such a rule as a licence condition, enforceable before the prescribed authority and not through the Minimum Wages Act (Steel Authority of India Ltd v. Jaggu, (2019) 7 SCC 658).

Rule 93(2) of the 2026 Central Rules keeps the structure but, on the text we read, omits the words “wage rates”. It provides that holidays, hours of work and other conditions of service of contract labour are to be the same as those applicable to directly employed workers on the same or similar kind of work. Two readings are possible.

• Parity has been narrowed. Wages are now dealt with separately, through the floor in rules 89(2)(iv) and 93(1), which refers to the Code on Wages. On this reading the omission is deliberate, and contract workers can no longer claim the regular workmen’s pay scale as a licence condition.
• Parity survives. “Other conditions of service” is wide, and the principle of equal pay for equal work informed Jaggu’s treatment of the old rule. On this reading, wages remain within the parity duty.

No court decision on rule 93(2) has been found, and we have not verified the Gujarat rules on this point. Practitioners acting for workers should plead both readings; those acting for employers should not assume the narrow reading will be accepted. Section 143(3) adds a further argument: rules not contrary to the Code are saved, but the Central Rules of 1971 have in any case been superseded for Central establishments.

Liability for Unpaid Wages

Under section 21(4) of the repealed Act, the principal employer was the back-stop for unpaid contract labour wages. In Hindustan Steelworks Construction Ltd v. Commissioner of Labour, (1996) 10 SCC 599, the Supreme Court held that the parity differential was a licence condition and not “wages” for the purpose of that back-stop. Section 55(3) of the OSH Code makes the principal employer liable to pay “wages in full or the unpaid balance” if the contractor fails, with recovery from the contractor, and rule 98(8) provides that if the contractor does not pay within seven days, the principal employer is to pay within fifteen days. Whether a parity differential counts as “wages” under section 55(3) is untested. A principal employer may continue to rely on Hindustan Steelworks, but the Code’s wording is not identical to the earlier section.

Core Activities and the Pending-Proceedings Proviso

Section 57(1) prohibits contract labour in the core activities of an establishment, subject to three provisos. Rule 101 lets the question be decided on application to the Central Government, which may refer it to a designated authority, and provides that no adverse action is to be taken during the pendency of proceedings so that the operation of the activity is not affected. For the contractor and the principal employer, that proviso is a significant operational protection; for workers, it means the prohibition does not bite quickly. We found no court decision on section 57 or on the definition of core activity, and the carve-outs from that definition were not read in full.

What the Courts have Said so Far

The reported Labour Code litigation has concerned the Industrial Relations Code. The Calcutta High Court held that section 104 of that Code, as it stood on 12 December 2025, had not repealed the Industrial Disputes Act (Commerce House Owners Association Ltd. v. State of West Bengal, WPA 4452 of 2026, 24 March 2026). The Kerala High Court Division Bench then upheld the new section 104(1A), which lets tribunals under the old Act continue until those under the Code are set up (M.K. Suresh Kumar v. Union of India, Writ Appeal 1051 of 2026, 22 May 2026). Neither decision deals with contract labour, but both show that courts look for formal repeal machinery. The OSH Code, which repeals on commencement, avoids that particular argument.

A Practical Map for Establishments

These OSH Code compliance requirements should be reviewed by principal employers and contractors during the transition.

1. Identify the appropriate government: Central Rules or State rules.
2. Check licence validity and the five-year term under section 48 of the Code.
3. Reconcile wage payment with the Code on Wages and the rule on payment periods.
4. Audit activities against the core-activity definition before relying on the provisos.
5. Keep a record of comparators if parity may be claimed.

For related reading in this series, see recovery of excess payment from an employee and departmental appeals in bank disciplinary proceedings.

Glossary

Appropriate government: the Central or State Government that has authority over the establishment. Savings clause: a provision keeping earlier acts and rules alive after repeal. Supersession: replacement of one set of rules by another. Core activity: an activity for which the establishment is set up and those essential to it, as defined in the Code. Principal employer: the establishment for which the contractor supplies workers.

Frequently Asked Questions

Is the Contract Labour (Regulation and Abolition) Act 1970 still in force?

No. The Occupational Safety, Health and Working Conditions Code 2020 was brought into force in full from 21 November 2025 by S.O. 5321(E), and section 143(1) of the Code repeals the 1970 Act. Section 143(3) keeps earlier rules and actions alive only to the extent they are not contrary to the Code and until the Central Government repeals them.

Are the 1971 Central Contract Labour Rules still in force?

For establishments where the Central Government is the appropriate government, they were expressly superseded by the Occupational Safety, Health and Working Conditions (Central) Rules 2026, G.S.R. 345(E) dated 8 May 2026, which came into force on publication. Between 21 November 2025 and that date the savings clause in section 143(3) was the bridge. Check the gazette text before relying on this.

Do contract workers still get the same conditions as regular workers doing similar work?

Rule 93(2) of the 2026 Central Rules says that where contract labour does the same or similar kind of work as directly employed workers, holidays, hours of work and other conditions of service are to be the same. The rule does not name wage rates. Whether wages are included in conditions of service is open, and no court decision on the point has been found.

Is the principal employer liable if the contractor does not pay wages?

Yes, on the text. Section 55(3) of the OSH Code makes the principal employer liable to pay the wages in full or the unpaid balance if the contractor fails, with a right to recover the amount from the contractor. Rule 98(8) of the 2026 Central Rules sets out a seven-day and fifteen-day sequence.

Can a principal employer use contract labour in a core activity?

Section 57(1) of the OSH Code prohibits contract labour in core activities, subject to three provisos: the activity is ordinarily done through contractors, it does not need full-time workers for the major part of the day, or there is a sudden increase in work. Rule 101 of the 2026 Central Rules says no adverse action is to be taken while a core-activity question is pending.

Sources

1. Ministry of Labour and Employment, notification S.O. 5321(E) dated 21 November 2025 bringing the Occupational Safety, Health and Working Conditions Code 2020 into force — notification.
2. Occupational Safety, Health and Working Conditions Code 2020 (Act 37 of 2020), ss.2(1), 45-57 and 143 — India Code.
3. Occupational Safety, Health and Working Conditions (Central) Rules 2026, G.S.R. 345(E), 8 May 2026, rules 1, 85-86, 89-90, 93, 98 and 101 — gazette copy.
4. Gujarat Occupational Safety, Health and Working Conditions Rules 2025, rules 46 and 48 — text.
5. Code on Wages 2019, ss.17 and 69 — text.
6. Steel Authority of India Ltd v. Jaggu, (2019) 7 SCC 658 (5 July 2019); Hindustan Steelworks Construction Ltd v. Commissioner of Labour, (1996) 10 SCC 599.
7. Investigation and Security Services v. Commissioner of Labour, 1995 (3) ALT 622; (1996) ILLJ 1049 AP (17 November 1995) — text.
8. Ministry of Labour and Employment, notification S.O. 465(E) dated 2 February 2026 under the Industrial Relations Code 2020, s.104.
9. Commerce House Owners Association Ltd. v. State of West Bengal, WPA 4452 of 2026, Calcutta High Court (24 March 2026); M.K. Suresh Kumar v. Union of India, Writ Appeal 1051 of 2026, Kerala High Court (22 May 2026) — text.