Atul GuptaPartner
Parvathy TharamelCounsel
Tania GuptaAssociate
Key Developments
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Employees’ Provident Fund Organisation revises rates for computation of damages
The Ministry of Labour and Employment published three notifications on 14 June 2024 (collectively, Notifications) to reduce the rate of damages payable by employers who default on depositing contributions under the Employees’ Provident Fund Scheme, 1952 (EPF Scheme), Employees’ Pension Scheme, 1995 (EPS), and Employees’ Deposit Linked Insurance Scheme, 1976, and has made the rate of damages uniform across all three schemes, irrespective of duration.
With this change, the rate of damages has been reduced from a maximum of 25% of the arrears of contributions per annum for any delay beyond six months to 1% of the arrears of contribution per month. The maximum damages the Employees’ Provident Fund Organisation (EPFO) can levy are still limited to total amount of arrears.
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Karnataka government renews exemption for IT/ITES companies from applicability of standing orders in state
In 2019, the Karnataka government had exempted Information Technology (IT)/IT-Enabled Services (ITES) establishments from the applicability of the Industrial Employment (Standing Orders) Act, 1946 (SO Act) for five years until 24 May 2024. The state government recently renewed the exemption for another five years through a notification dated 10 June 2024.
Under this notification, IT/ITES establishments are exempted from the applicability of the SO Act subject to some key conditions set out below.
- Each establishment must constitute an internal committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013;
- each establishment must constitute a grievance redressal committee, consisting of equal number of persons representing employees and employers, to address complaints and grievances of employees; and
- each establishment must intimate information about cases of disciplinary action such as suspension, discharge, etc., of its employees to the Jurisdictional Deputy Labour Commissioner and Commissioner of Labour in Karnataka. The employer must also furnish any information about employees’ service conditions sought by the aforementioned authorities.
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Bombay High Court holds that nature of duties would determine whether employment is in a supervisory capacity
In the case of Jobi Joseph v Cadbury India Ltd., the Bombay High Court observed that merely because an employee supervises the activities of persons who are not direct employees of an establishment, it does not and cannot mean that such employee ceases to be employed in a supervisory capacity.
In this case, the petitioner contended that his main job was to supervise the activities of employees of distributors and accordingly, the petitioner was not employed in a supervisory capacity under the Sales Promotion Employees (Conditions of Service) Act, 1976 (SPE Act). The Court categorically stated that what is relevant under the SPE Act is that a person must not be employed or engaged in a supervisory capacity and whom he supervises is irrelevant. The Court held that even though the petitioner was supervising salesmen employed by a distributor, it would not mean that his role was not that of supervisory capacity.
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Calcutta High Court holds that terms of endearment may not always be sexually coloured and amount to sexual harassment
The Calcutta High Court, in the recent case of unnamed petitioner v Gender Sensitization and Internal Complaint Committee & Ors., observed that the use of expressions such as “baby” and “sweety” may be prevalent in certain social circles and need not always be sexually coloured.
In the present case, the petitioner alleged that her senior had sexually harassed her in various ways, including addressing her as “baby” and “sweety”. While the Internal Committee (IC) labelled the terms of endearment as inappropriate, the case was dismissed by the IC as the allegations of sexual harassment were not proven. The petitioner approached the Calcutta High Court after IC dismissed her complaint.
The Court dismissed the writ petition on the ground that there was no patent unreasonableness, arbitrariness or illegality evident on the face of the record. While adjudicating on the allegation that the respondent used expressions such as “baby” and “sweety” to address the petitioner, the Court observed that the use of these expressions need not be construed necessarily to be sexually coloured. The Court further held that the respondent did not repeatedly use these expressions once the petitioner expressed her discomfort regarding them which shows that these expressions could not have been intended to sexually harass the petitioner.
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Karnataka High Court strikes down special provisions relating to international workers as unconstitutional and arbitrary
On 25 April 2024, in the case of Stone Hill Education Foundation v Union of India, the Karnataka High Court struck down the special provisions for international workers under the EPF Scheme and EPS as arbitrary and unconstitutional.
The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 (EPF Act) aims to provide social security to employees through various schemes, including the EPF Scheme and EPS. It mandates employers to pay a percentage of an employee’s wages as the employee’s contributions to the EPFO. The employer is required to match this amount as the employer’s contribution to EPFO. Domestic workers drawing salaries in excess of INR 15,000 per month are outside the purview of the EPF Scheme and, therefore, contributions are not mandated for such workers but can be made voluntarily. Further, contributions for domestic workers (earning basic salary of INR 15,000 and above) can be capped at INR 1,800.
Para 83 of the EPF Scheme and para 43A of the EPS, i.e., special provisions relating to international workers, do not provide any ceiling. This means contributions for international workers are to be made under both schemes irrespective of the amount of salary drawn by them. It was argued that international workers do not work in India till retirement and therefore requiring provident fund contributions on their entire global salary would cause irreparable injury.
The Karnataka High Court highlighted that para 83 of the EPF Scheme was introduced to protect Indian employees who were going abroad to work from being subjected to unfavourable social security and retirement clauses in their host country and to motivate reciprocal social security agreements with the host countries.
The Karnataka High Court observed that para 83 was in the nature of subordinate legislation and cannot travel beyond the scope of the parent Act. It held that the EPF Scheme, as subordinate legislation, could not override the ceiling of INR 15,000 for EPF contributions for domestic workers and require contributions related to international workers on their entire wages.
The Court struck down para 83 of the EPF Scheme and para 43A of the EPS as violating Article 14 of the Indian Constitution. The Court held that there was no commonality of interest in the aims and objectives of the EPF Act with that of para 83 of the EPF Scheme and para 43A of the EPS. The Court also observed that non-citizen employees working in India and employees who are citizens of India cannot be treated as two different classes when working in India. Since the EPF Scheme treats equals unequally, it violates the right to equality under Article 14. The Court held that Article 14 is also applicable to foreigners and differential treatment of international workers is unreasonable since there is no intelligible differentia (reasonable or logical grounds for different classification) or nexus between the object of the EPF Act and the basis of the different classification.
This judgment has been challenged by the EPFO before a larger bench of the Karnataka High Court. There is also an earlier contrary ruling of the Mumbai High Court which had upheld the validity of the provisions relating to international workers. In light of this, employers in Karnataka must be cautious about discontinuing contributions towards international workers, since that may expose them to liability for arrears, interest and damages.
With the central government assessing the preparedness of states and union territories with respect to the finalisation and publication of draft rules under the Labour Codes, employers must start gearing up for the implementation of the Labour Codes. It will also be interesting to follow the publication of other legislations in the coming months, such as the recently introduced Karnataka Platform based Gig Workers (Social Security and Welfare) Bill, 2024.
