Mere Permission to do work from home not take away status as employees under EPF Act – SC

Mere Permission to do work from home not take away status as employees for the purpose of EPF Act – Supreme Court

ABCAUS Case Law Citation:
ABCAUS 3080 (2019) (07) SC

Important Case Laws Cited/relied upon by the parties:
M/s P. M. Patel & Sons and Ors. v. Union of India and Ors.  (1986) 1 SCC 32
Regional Provident Fund Commissioner v. The Hooghly Mills Company Ltd. and Ors., 2012 (1) SCALE 422
The Daily Partap v. The Regional Provident Fund Commissioner (1998) 8 SCC 90
C.E.S.C. Limited and Ors. v. Subhash Chandra Bose and Ors (1992) 1 SCC 441

The respondent company was a subsidiary of an undertaking of the State Government. It was covered under the provisions of the Employees’ Provident Fund and Miscellaneous Provisions Act,  1952 (the EPF Act).

The main objective of the Respondent Company, as per its Memorandum of Association was to encourage, promote, develop, set­up a ready made garments industry in the region, with a view to provide gainful employment to people  possessing  skills  in  stitching, tailoring, and allied activities, especially to women from the economically weaker sections  of  the  Society.

The Respondent Company engaged women workers who were provided with cut fabric, thread, buttons, etc. to be made into garments at their own homes. The sewing machines used by the said women workers were owned by them, and not provided by the Respondent Company.

The Appellant (Officer In ­Charge, Sub ­Regional Provident Fund Office), issued a Show Cause Notice to the Respondent Company calling upon it to pay the Provident Fund contributions for the women workers as the Balance Sheet of the Respondent Company for revealed large debits towards salary and wages for direct and indirect workers, but the Respondent  Company  stated that it had only 41 employees.

It was submitted that the women workers who were fabricating garments for the Respondent Company, were not their employees, and hence not covered by Section 2(f) of the EPF Act. Therefore, even though wages were paid to those women workers, the Respondent Company was not liable to pay Provident Fund contribution in respect of them.

The Provident Fund Officer held that the women workers engaged for stitching garments were covered by the definition of “employee” under Section 2(f) of the EPF Act. He assessed the amount of Provident Fund and the Respondent Company was directed to pay the said amount within 7 days.

The Respondent Company challenged the aforesaid Order before the Bombay High Court which set aside the Order passed by the Appellant   and it was held that the Respondent Company had no direct or indirect control over the women workers. The conversion of cloth into garment could  be done by any person on behalf of the women workers. Hence, the Respondent Company did not exercise any supervisory control over the women workers.

Aggrieved by the Judgment of the Hon’ble High Court the appellant Provident Fund Office had approached the Hon’ble Supreme Court.

The Appellant contended that contend that the women workers employed by the Respondent Company were covered by the definition of “employee” under Section 2(f) of the EPF Act. Hence, it was liable to pay Provident Fund contribution in respect of those women workers.

The Hon’ble Supreme Court observed that the definition of “employee” under Section 2(f) of the EPF Act 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.

The Hon’ble Supreme Court opined that the mere fact that the women workers stitched the garments at home, would make no difference. It was the admitted position that the women workers were paid wages directly by the  Respondent Company  on  per piece basis for  every garment  stitched.

The Hon’ble Supreme Court observed that in an identical case, where workers were provided with the cloth, and were instructed on how to stitch it, paid on piece­-rate basis. And the company was entitled to rejected the garment.  It was held that such workers fell within the  definition of “person employed” under State Shops  and  Establishments  Act,  1956.  

Further, it was noted that on the issue where payment is made by piece­-rate to the workers, would they be covered by the definition of “employee”, the Hon’ble Supreme Court had held them to be the workmen of the employer.

It was further noted in a case related to the manufacture and sale of bidis, the company had engaged contractors, who in turn engaged workers who rolled  the  bidis  at  their  own  homes  after obtaining the raw materials either directly from the company or through the contractors. The Hon’ble Supreme Court rejected the contention that those workers were not covered by the definition of “employee” under Section 2(f) of the EPF Act. In fact it was held that the right of rejection could constitute in itself an effective degree of supervision and control.

The Hon’ble Supreme Court observed that the EPF Act is a beneficial social welfare legislation which was enacted by the Legislature for the benefit of the workmen and therefore, the provisions under the EPF Act have to be interpreted in a manner which is beneficial to the workmen.

The Hon’ble Supreme Court held that the women workers employed were covered by the definition of “employee” under Section 2(f) of the EPF Act. The women workers were directly engaged by the Management in connection with the work of the Company, which was set up as a ready­made garments industry. The women workers were paid wages on per piece basis for the services rendered. Merely because the women workers were permitted to do the work off site, would not take away their status as employees of the Company.

Accordingly, the Hon’ble Supreme Court  set aside the judgment passed by the High Court being contrary to settled law and restored the order passed by the Appellant. 

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