High Court Rules Inclusion of Foreign Workers in PF Unconstitutional

In a significant development coming from Karnataka, the Karnataka High Court has held “PF” issued to foreign workers as unconstitutional. This move is set to impact many “expatriates” who have contributed to social security schemes or were part of them.

The Karnataka High Court has struck down the provision as “unconstitutional and arbitrary”, fifteen years after the law was amended to include ‘international workers” within the scope of employees’s provident fund and pension schemes.

Petitioner’s Contentions

The petitioners in this case, which comprises people from various sectors such as real estate, education, and technology, pleaded before the court that the provisions in question are in conflict with Article 14 of the Indian Constitution, an article that guarantees each citizen equality before law. The grievances of the petitioners were as follows:

1. Coverage Discrepancy: The petitioners are pointing out a disparity in the coverage of the PF scheme. They note that international workers, regardless of their salary, are included in the PF scheme, while domestic workers earning more than the statutory ceiling of Rs 15,000 per month are excluded.
2. International vs. Domestic Workers: The petitioners highlight the difference in treatment between international and domestic workers regarding PF contributions. International workers, who often work in India for a limited period, are required to contribute to the PF scheme based on their entire global salary, whereas domestic workers earning above Rs 15,000 per month are exempt from PF contributions.
3. Unfair Treatment: The petitioners argue that this disparate treatment is unfair. They contend that requiring international workers to contribute to the PF scheme based on their global salary rather than just their salary earned in India would cause them financial harm, as they work in India for only a limited duration.
4. Irreparable Injury: The petitioners assert that such a requirement would cause irreparable injury to international workers. They likely argue that this would impose a significant financial burden on international workers, potentially deterring them from working in India or causing them financial hardship during their stay.

Court’s Ruling

In the April 25 order, Justice Hemalekha emphasized that the primary objective of the EPF Act is to provide retirement benefits to employees, particularly those in lower salary brackets. The Act aims to ensure financial security for workers after their retirement by facilitating savings during their employment period. Justice Hemalekha clarified that the EPF Act is designed to benefit employees with lower salary levels and does not extend its provisions to employees earning higher salaries. Therefore, employees with higher salaries should not automatically be entitled to benefits under this law. Lastly, the judge held that it said that para. 83 of the EPF (dealing with international workers) “is in the nature of subordinate legislation” and cannot extend beyond the scope of the law.