EPF Act: Contractual Employees engaged by a company entitled to provident benefit fund: SC

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The in PAWAN HANS LIMITED v. AVIATION KARMACHARI SANGHATANA & ORS. (Civil Appeal No. 353 of 2020) has observed that contractual employees hired by a Company, who directly or indirectly draw their wages/salary from the Company, are qualified for the benefit of as per the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.

Pawan Hans Limited has 51% shareholding of Government of India and the remaining 49% shareholding of Oil and Natural Gas Company Ltd. (ONGC). A writ petition was filed by a trade union against the company in the Bombay High Court. The High Court held that the benefits guaranteed by the Act be extended to the members of the Union, and other employees at a similar position. It was held that a liberal view must be considered in extending the social security benefits to the contractual employees.

The company appealed in the apex court, where it said that it is excluded from the applicability of the provisions of the EPF Act and the scheme thereunder. Addressing the contention, the bench of and observed that the twin test needs to be satisfied to seek exemption from the EPF Act, 1952. The test is as follows:

  1. The company must be either ‘belonging to’ or ‘under the control of’ the Central or the State Government. ‘Belonging’ to means ownership of the Government; and the phrase ‘under the control of’ would signify superintendence, management or authority to direct, restrict or regulate.
  2. The employees of such establishment should be benefitted with the contributory provident fund or old age pension in accordance with any scheme or rule framed by the Central or the State Government governing such benefits.

If both tests are satisfied, an establishment can claim exemption/exclusion under Section 16(1)(b) of the EPF Act. However, the company did not qualify the second test because the workers were neither getting the benefits of the contributory provident fund under the PF Trust Regulations framed by the company nor in accordance to any scheme of State or Central Government.

With respect to the contention that contractual employees cannot be benefitted with the EPF Act, the bench said “As per Section 2(f) of the EPF Act, the definition of an ‘employee’ is an inclusive definition, and is widely worded to include ‘any person’ engaged either directly or indirectly in connection with the work of an establishment, and is paid wages.

In view of the above discussion, we find that the members of the Respondent Union and all others similarly situated contractual employees are entitled to the benefit of the provident fund under the PF Trust Regulations or the EPF Act.    

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