Pawan Hans Limited & Ors. v. Aviation Karmachari Sanghatana & Ors.
Background
Pawan Hans Limited, a government helicopter-services company, ran its own Provident Fund Trust Regulations defining "employee" broadly enough to cover anyone paid directly or indirectly by the company, but in practice extended PF benefits only to its "regular" employees, excluding around 270 contractual workers even though they were paid directly without any contractor. A trade union representing these contractual employees petitioned the Bombay High Court, which ruled in their favour and directed the company to enrol them under the EPF Act.
Decision Breakdown
The Supreme Court held that Pawan Hans could not claim exemption from the EPF Act under Section 16, since its own PF Trust Regulations were not extended to all employees as required for that exemption, and that the company's definition of "employee" in its own Regulations already covered the contractual workers because they were paid directly, not through a contractor, and did perennial work. The Court affirmed that the contractual employees were entitled to provident fund benefits, but modified the High Court's order to place them under the company's own PF Trust Regulations (for uniformity with regular employees) rather than directly under the EPF Act, and limited the back-benefit period to January 2017 (when the writ petition was filed) through December 2019, with the company paying 12% interest on its share and employees contributing their share with 6% interest; employees who had already left the company by the date of judgment were excluded.
Lesson Learnt
Long-serving contractual employees who are paid directly by an employer (not through a contractor) cannot be denied provident fund benefits merely because their appointment letters label them "contractual": courts will look at the real nature and continuity of the employment relationship.