Article (June-2018)


Employee to be covered or not under Provident Funds Act

H.L. Kumar

Designation : -   Advocate, Supreme Court

Organization : -  New Delhi


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Section 2(f) of the Employees' Provident Funds & Miscellaneous Provisions Act, 1952, hereinafter referred to as Act of 1952, is very comprehensive, which defines an 'employee' as under, which says that any person who is employed for wages in any kind of work, manual or otherwise, in or in connection with the work of an establishment, and who gets, his wages directly or indirectly from the employer, and includes any person-
(i) employed by or through a contractor in or in connection with the work of the establishment;
(ii) engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961 (52 of 1961), or under the standing orders of the establishment.
Clause 2(v) of Employees' Provident Fund Scheme, 1952 states that "an apprentice means a person who, according to the certified standing orders applicable to the factory or establishment, is an apprentice, or who is declared to be an apprentice by the authority specified in this behalf by the appropriate government."
An excluded employee under clause (f) of paragraph 2 of the Employees' Provident Fund Scheme states that (i) an employee who, having been a member of the Fund, withdrew the full amount of his accumulations in the Fund under clause (a) or (c) of sub-paragraph (1) of paragraph (69), (ii) an employee whose pay at the time he is otherwise entitled to become a member of the Fund, +exceeds fifteen thousand rupees per month.
Sometimes the employers do not want to cover such employees under the Employees Provident Fund Act whereas the authorities insist they should be covered. There have been number of cases interpreting as to who is an employee to be covered under the Act. Therefore, it is necessary to have a look at some of the judgments on the subject in order to understand the legal implications. At the very outset reference is made to a landmark judgment of the Gujarat High Court in Satish Plastics vs. Regional Provident Fund Commissioner, 1982 (44) FLR 207, wherein it has been observed that :
(1) Was he doing the work of monetary payment?
(2) Was the work done by him the work of the establishment or has a nexus with such work?
(3) Was the payment made wages, in the sense of being remuneration for the physical or mental effort in connection with such work?
(4) Was the work such that it had to be done as directed by the establishment or under its supervision and control to the extent that supervision and control are possible having regard to the specialised nature of the work or the skill needed for its performance?
(5) Was the work of such a nature and character that ordinarily a master-servant relationship could exist and but for the agreement styling it as a contract, common practice and common sense would suggest a master-servant bond?
(6) Was the relation indicative of master-servant status in substance having regard to the economic realities irrespective of the nomenclature devised by the parties?
(7) Was he required to do the work personally without the liberty to get it done through someone else?
(8) Is such relationship any the less a master-servant relationship in case the person is allowed to work (1) at his own place, and/or (2) at the hours of his sown choice and/or (3) for someone else?"
It will thus be seen that the definition of employee under the Provident Funds Act, is an independent and comprehensive enough and cannot be borrowed from the other enactments as held by the Madhya Pradesh High Court in Orient Paper Mills vs. Regional Provident Fund Commissioner, 2006 LLR 177. Also in Delhi Public School, Ghaziabad vs. Enforcement Officer, U.P. (Employees') Provident Fund, Ghaziabad, 2007 LLR 1082 (All. HC) it has been held that under Employees' Provident Funds Act, 'employee' has been given wider meaning for coverage.