The working class of society is the most vulnerable to economic injustice, and it is also the most vocal about it. For the working class to attain their socio-economic objectives, the Indian Government has enacted several beneficial statutes for their welfare and protection, including The Payments of Wages Act of 1936; The Industrial Disputes Act of 1947; The Payment of Gratuity and Bonus Act of 1972 and 1965; The Employees Provident Fund and Miscellaneous Provisions Act of 1952; and the Payment of Bonus Act of 1965. The Employees Provident Fund and Miscellaneous Provisions Act 1952, which serves as a pension fund for old age security for the organized labour sector, is the most advantageous of the enactments listed before.
In 1952, the Employees' Provident Funds and Miscellaneous Provisions Act (EPFA) was passed to preserve the interests of employees once they retire and the interests of their dependents after the employee's death. The Act covers workers and their relatives against the hazards of old age, retirement, dismissal, reduction, and death.
Applicability of the Employees Provident Fund and Miscellaneous Provisions Act
Employees' Provident Fund is a statutory benefit available to all Indian employees. The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 ("Act") is enforceable across India. The Employees' Provident Fund (EPF) is administered and managed by the Central Board of Trustees (CBT), founded by the Central Government and consisted of members from the Government, employers, and employees. The Employees' Provident Fund Organization (EPFO) supports this Board's operations. Both the employee and the company contribute to this plan, but the employer deposits the entire amount. The employer cuts the employee share from the employee's salary. Interest gained on this investment is likewise credited to the employees' accounts. When an employee retires, the accrued funds are distributed to them if specific requirements are met.
The Act applies to:
- Any factory engaged in any industry specified in Schedule 1 that employs 20 or more people;
- Any other establishment having employees upto 20 or more people or a class of such establishments that the Central Government may notify; and
- Any other establishment so notified by the Central Government, even if it employs fewer than 20 people. Each employee, including those hired via a contractor (but excluding apprentices employed under the Apprentices Act or the establishment's standing orders and casual workers), earns up to Rs.6,500 per month and is entitled to join the funds. Three months of continuous service or 60 days of actual labour is required for membership in the plan.
EPF funds can be withdrawn incomplete settlements at the age of 58 years or at the time of retirement, if an employee is unemployed for two months or more, or if the employee dies while in service before reaching retirement age, in which case the nominees or legal heirs are entitled to the accumulated fund. If an establishment/factory closes, a natural disaster or an employee is unemployed for more than a month; the EPF can be partially withdrawn for educational opportunities, medical treatment, repayment of home loans, marriage, the purchase of land/house/flat, and the purchase of land/house/flat if the establishment/factory is closed.
Types of Schemes under the Act
Employees' Provident Fund Scheme, 1952: The Act established the Employees' Provident Fund Scheme to provide a post-retirement benefit to employees or a class of employees or their legal heirs in the event of death employed by an organization. This Act applies. It applies to all establishments employing 20 or more individuals, and some organizations, subject to specific requirements and exclusions, are included even if they employ less than 20 people. Employees contribute a set amount to the EPF plan, and the employer contributes an equal amount. On retirement, the individual receives a lump sum payment that includes both personal and employer contributions and interest on both.
Employees' Pension Scheme, 1995: The Employees' Pension Scheme was established under the Act to provide a superannuation pension, retiring pension, or permanent total disablement pension to employees of any establishment or class of establishments to which this Act applies, as well as a widow or widower's pension, child pension, or orphan pension to such employees' beneficiaries. The benefits include pension on retirement at the age of 58 years, pension on leaving service before becoming eligible for a monthly pension, total disablement pension during service and pension for the member's family in the event of death
Employees' Deposit-linked Insurance Scheme, 1976: Employees Deposit Linked Insurance Scheme, or EDLI, is an insurance offered by the EPFO (Employees Provident Fund Organization) to paid employees in the private sector. In case the insured person's death occurs during the term of the service, the registered nominee receives a lump-sum payout. All organizations registered under the Employees Provident Fund and Miscellaneous Provisions Act, 1952, are subject to EDLI. All such organizations must join the system and provide life insurance to their employees. This system is designed to function in conjunction with EPF and EPS. The benefit amount is determined by the employee's most recently received salary. The Act established the Employees' Deposit-linked Insurance Scheme (EDLI Scheme) to provide insurance benefits to employees of an establishment or a class of establishments to which this Act applies in the event the employee dies while on duty.
Adjudication of Disputes under the Act:
- Section 7A of the EPF Act provides recourse to an aggrieved party to approach the Central Provident Fund Commissioner appointed by the Central Government ("PF Commissioner")f to inquire about and resolve. Under Section 7A of the EPF Act, the PF Commissioner has the authority to issue a composite assessment order ("Assessment Order"). The PF Commissioner may decide this question as part of the adjudication procedure. For example, suppose the dispute concerns an employer's obligation to make PF Fund contributions, and the PF Commissioner determines that the employer is obligated to make the PF Fund contribution. In that case, the employee is not compelled to file a separate application for adjudication of the employer's contribution quantum.
- To investigate the disputes, Section 7A (2) of the EPF Act vests the PF Commissioner with the powers of a Civil Court, including the authority to compel attendance or examination of any person or to order examination and production of documents, to receive evidence on affidavit, and to issue commissions for examining witnesses. Before commencing an investigation, the PF Commissioner must send a notice to the employer outlining the complaints levelled against the employer. When adjudicating a disagreement under Section 7A, the PF Commissioner must adhere to natural justice principles and provide the employer with a reasonable chance to be heard. Additionally, the PF Commissioner must issue a justified Assessment Order. However, the PF Commissioner has the authority to address abstract legal matters and is limited to resolving factual discrepancies in the payment of PF contributions and other dues.
- The aggrieved party has the following two remedies for each Assessment Order issued under Section 7A of the EPF Act: Examination pursuant to Section 7B of the EPF Act; or Representation in accordance with Section 7I of the EPF Act. After exhausting these two options, the aggrieved party may file a petition with the appropriate State's High Court.
Consequences of delay in payment of contribution:
- Section 7Q: According to the preceding provision, if any amount is due under the EPF & MP Act, interest is payable from the day the amount is due until it is paid. The prescribed rate of interest is simple interest at 12% per year. It is expressly stated that the employer is accountable for interest. It specifies that interest at the appropriate rate must be paid in the event of late payment of certain dues under the EPF and MP Acts. Whenever there is a delay, it inevitably attracts attention. There is no mechanism for a hearing on the imposition of interest, and the EPF Organization has no discretion in the issue.
- Section 14B: The preceding section authorizes the ESI (Employees' State Insurance) Corporation to levy damages against an employer who fails to make required contributions or payments. The term 'may' is used. It is a discretionary authority that does not have to be used in all default situations. In all instances of delay, damages will inevitably be imposed.
Regardless of the above, if the EPF Organization wants to levy and collect damages, the employer in question should be given a fair chance to be heard. Employers may take advantage of this chance to explain how the default or delay occurred and to request a reduction or waiver of damages. The EPFO has complete discretion in determining the appropriate level of damages based on the facts and circumstances of the case. The amount of the fine shall not exceed the amount of the arrears.
In light of the above, it is suggested that the authority exercising jurisdiction under Section 14B of the EPF and MP Act has the authority to waive or decrease damages based on the facts and circumstances of the case.
Remedies available to Employees for Delay/Default in Payment
The Employees Provident Funds and Miscellaneous Provisions Act, 1952, applies to the following groups of people:
- to every establishment that is a factory engaged in any industry specified in Schedule I and in which twenty or more people are employed, as well as;
- By notification in the Official Gazette, the Central Government can state that it will apply to any other establishment that employs twenty or more people or a group of such establishments. The Central Government must give at least two months' notice before doing so.
For this reason, every institution (which may also be a corporation) that has more than 20 employees falls under the ambit of the aforementioned Act.
Section 7A of the Act determines payment due from employers, and Section 7B provides for the review of orders passed under Section 7A. Even though the employer is at fault, Section 7A and Section 7B of the Act provide that the employee must be made aware if he is exposed to non-payment or a delay in obtaining Provident Fund amounts. Another section that focuses on the remedy provided to the employee if a corporation employs them is Section 14A, which includes offences by corporations.
Therefore, an employee has recourse under the Employees Provident Funds & Miscellaneous Provisions Act, 1952, in the event of non-payment or delay in the payment of Provident Fund amounts. This social legislation is intended to provide financial security to employees after they have completed their service.
It is concluded that every employee who has contributed to the Provident Fund has the right to obtain a Provident Fund amount from the company by pursuing the remedies provided by labour law legislation as discussed in this article. Additionally, the Supreme Court's recent judgment analyzed in this article establishes the principle that neither mens nor actus reus must be proved for a cause of civil remedy upon delay/default in payment of provident fund amount by the employer. This substantially increases the burden upon employers, who will now have to be vigilant and prompt in completing provident fund payments without any default/delay. Employees should exercise their legal rights to seek redress under the provisions of the aforementioned legislation, and only in this way can the socio-economic goals outlined in the Constitution be accomplished with complete fairness for the working classes.
 Arpita Kulkarni, “What to do if the Company does not pay or delays in PF Amount”, iPleaders, published on February 15, 2017, available at: https://tinyurl.com/ytp4xkfk