That's an interesting piece by Dr. Ryan and as he also said the Supreme Court has indeed held that for coverage of an establishment under the ESI Act, there must be 20 "eligible" employees (ESIC vs MM Suri & Associates (P) Ltd., 1998 LLR 1105 (SC) - eligibility being the criterion for coverage. This analogy may be extended to the EPF Act as well. The present headcount method could be challenged.
As regards Kittu's query on employees located in Pune, Ahmedabad and Hyderabad, all would be held under the purview of the ESI Act. The Hon'ble Supreme Court has also held that different sales & service outlets will be clubbed for applicability of ESI Act even when none of these have employed 10 or more employees ( (southern Agencies vs Andhra Pradesh ESI Corp, 2001 LLR 191 (SC). The Calcutta High Court has held that ESI Act will be applicable upon employees working in sales depots and offices of Bata India since its factory is covered under the Act (Bata India Ltd., Calcutta vs ESI Corp, 2003 LLR 1018: 2003 (98) FLR 990: 2003 III LLN 1069: 2003 III LLJ 716 (Cal HC). In another case, it has been held that two units will be clubbed together for coverage under the ESI Act when there are common inter-dependability between the two units and as such the ESI Court has rightly come to the conclusion tha the ESI Act was applicable even as one unit has been dealing with retail class business and the other dealing with textiles. In another case, the Hon'ble SC has held that once a notification is issued by a State Govt. u/s 1(5) of the Act covering the particular establishment of the State, automatically the said notification would take in its sweep all branches of such an establishment situated even outside such State which have complete functional integrity with the main activity of the establishment. (Transport Corp of India vs ESI Corp of India, 2000 LLR 1 (SC). The fact of this case were that Andhra Pradesh State issued a notification u/s 1(5) of the Act covering Road Transport Undertakings. The appellant's head office was situated in Andhra Pradesh. Its undertakings in Maharashtra State were not covered by ESI Act.
The ESIC has though clarified that construction sites of the construction agencies will not be covered under the Act, but only the employees who are posted in the office are to be taken into consideration for the coverage under the Act.
ESIC has been known to accord exception to a lesser coverage by a Company on account of their territorial absence of centres.
The implementation of the ESI scheme is still teritorial in nature. New geographical areas are covered from time to time by the State/Central Govt, keeping in view the density of coverage industrial population within a given geographical area termed as a 'centre'. Thus, the extension of the Act at selective places will not be violative of the Constitution (Khem Chand Motilal CCJ Patel Tobacco & Kalr-Khan Mohd. Hanif vs Union of India, 1996 LLR 162 (MP HC).
As regards PF coverage, all employees are covered u/s 1 (3) (a)/(b), unless the establishment is an exempted establishment u/s17 (1) (a)/(b) under the EPF & MP Act. Essentially, by practice, the headcount (20 or more) is still considered for coverage under this enactment instead of the "eligibility" criterion. Even if the number falls below the minimum presribed for coverage (i.e. 20) subsequently, these Acts will continue to be applicable even to temp. workers (not being apprentices engaged under the Apprentices Act, 1961.
In brief, cover all eligible employees under ESI & PF as a safe option if the criterion of 20 or more employees are satisfied.
Rahul