Can Pawan Hans Claim EPF Exemption? Understanding SC's Twin Tests for 840 Employees

EPF Rules 2020

Out of a total workforce of 840 employees, Pawan Hans, a government-owned aviation company, had engaged 570 employees on a regular basis, while 270 employees were engaged on a 'contractual' basis. Employees Provident Fund (EPF) Rules state that to seek exemption from the EPF Act 1952, a company/establishment with more than 20 employees must pass the twin tests set by the Supreme Court in the Regional Provident Fund Commissioner vs Sanatan Dharam Girls Secondary School case. The apex court reiterated this in the recent case of Pawan Hans Ltd vs Aviation Karmachari Sanghatana.

The two conditions are: First, the establishment must be either "belonging to" or "under the control of" the Central or State Government. Second, the employees should be entitled to the benefit of contributory provident fund or old age pension as per schemes framed by the Central or State Government. If both tests are met, an establishment can claim exemption/exclusion under Section 16(1)(b) of the EPF Act, as observed by the SC.

The case of Pawan Hans Ltd highlights the importance of meeting the twin tests for EPF exemption as laid out by the Supreme Court. In this scenario, despite having 840 employees, the company failed to provide the benefits of contributory provident fund to contractual workers, leading to a legal battle. To ensure compliance and avoid such issues, companies must carefully assess their eligibility for EPF exemption based on the criteria established by the SC. It is crucial to extend EPF benefits to all eligible employees, including those on contractual terms, to adhere to labor laws and maintain a harmonious employer-employee relationship.