On April 25, 2024, a significant judgment was delivered by the Hon’ble High Court of Karnataka, impacting the provisions for ‘international workers’ under the Employees’ Provident Funds Scheme, 1952 (Provident Fund Scheme) and the Employees’ Pension Scheme, 1995 (Pension Scheme). The court, in W.P. No. 18486/2012 and others, deemed these provisions unconstitutional and arbitrary.
The crux of the matter lay in the question: “Whether the introduction of para 83 of the Provident Fund Scheme and para 43A of the Pension Scheme is unconstitutional and violates Article 14 of the Constitution of India?”
Petitioners argued that these provisions were discriminatory, as they mandated international workers to contribute to the Provident Fund regardless of their salary, while domestic workers earning above INR 15,000 per month were exempt. Additionally, they contended that international workers, often employed temporarily in India, would suffer undue financial burden by contributing based on their global salary.
The Karnataka High Court’s decision rested on several key points:
Objective of the Provident Fund Act: The Provident Fund Act, enacted in 1952, aimed to provide social security to workers, particularly those in lower income brackets, by ensuring they have retirement benefits. The Karnataka High Court emphasized that this legislation was designed to support employees with limited financial means, indicating that extending the same benefits to employees with higher salaries may not align with the original intent of the law. This interpretation suggests that while the Act serves the broader goal of social security, it may not necessarily apply uniformly to all income levels.
Equality before the Law: The principle of equality before the law, enshrined in Article 14 of the Indian Constitution, mandates that all individuals are equal before the law and are entitled to equal protection of the law. The court highlighted that treating non-citizen employees differently from Indian citizens when they are working in India violates this fundamental principle. This underscores the importance of ensuring that legal provisions apply uniformly to all individuals, regardless of their nationality or citizenship status.
Threshold Discrepancies: The court also examined the disparity between the thresholds set for Indian workers and international workers under the Provident Fund Scheme. While for Indian workers there is a salary threshold of INR 15,000, international workers were subject to no such limit. The unlimited threshold for international workers under Para 83 of the Provident Fund Scheme contradicts the ceiling set for Indian workers.
Global Salary Contributions: One of the contentious aspects of the provisions struck down by the court was the requirement for international workers to contribute to the Provident Fund based on their global salary. The court deemed this practice arbitrary and discriminatory, as it imposed financial burdens on international workers for income earned outside of India. This ruling highlights the need for fair and equitable treatment of international workers in terms of their contributions to social security schemes.
This ruling prompts a re-evaluation of compliance measures for international workers. While the Employees’ Provident Fund Organization (EPFO) is considering its legal options, employers must assess the ruling’s impact on their compliance approach. It’s worth noting that similar cases are pending in other High Courts across the country.
Though this judgment not only addresses the immediate concerns regarding international workers’ Provident Fund contributions but also underscores broader principles of equality and fair treatment under Indian law, it is likely that the EPFO may challenge the ruling. As businesses navigate these developments, staying informed and adapting to legal changes is paramount.
