Applicability of Employees Provident Funds & Miscellaneous Provisions Act 1952 on Trainees, Apprentice etc.
There has always been a discussion and confusion on applicability of EPF & MP Act 1952("Act") on Trainees, Apprentice, and Consultants etc. In this discussion we will try, by referring the Judgment of courts and departmental clarifications, to understand the legal position on the subject. The whole discussion will cover-
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Applicability of Act on Apprentice engaged as per Apprentice Act 1961.
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Applicability of Act on other trainees/Interns.
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Applicability of Act on Probationer trainees.
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Applicability of Act on Independent Consultants/experts.
Statutory Provisions
Section 2(f) of Act provides definition of employee.
“employee” means any person who is employed for wages in any kind of work, manual or otherwise, in or in connection with the work of an establishment, and who gets, his wages directly or indirectly from the employer, and includes any person-
(i) Employed by or through a contractor in or in connection with the work of the establishment;
(ii) Engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961 (52 of 1961) or under the standing orders of the establishment.
From definition of employee it is clear that each and every person who is receiving payment from an employer can be brought under the definition of employee. Though the definition of employee is wide enough, it excludes apprentice engaged as per provisions of Apprentice Act 1961 or under the standing orders of establishment.
Applicability of Act on apprentice engaged as Per Apprentice Act 1961
Apprentice engaged as per provisions of Apprentice Act 1961 or under the standing orders of establishment is not covered by Act. Apprentice Act 1961 covers trainees engaged by an establishment under Designated Trades or Optional Trades. The apprenticeship programme in India under Apprentice Act 1961 is implemented by Ministry of Skill Development and Entrepreneurship (MSDE) at the national level. Contract of Apprenticeship training is entered into between apprentice and Establishment and then it is registered by approving authority online. In case of optional trades Registration of contact of apprenticeship is not mandatory. These apprentices are paid stipend as per Govt. rules. All such apprentices, engaged as per Apprentice Act, are not covered by EPF Act.
Trainees covered by certified Standing orders of establishment are also kept out of definition of employees. All industrial establishment having 100 employees in preceding twelve months are required to issue Standing orders as per The Industrial Employment (Standing Orders) Act, 1946 and get them registered. Trainees employed by such establishments as per terms and conditions are also out of the coverage of EPF & MPAct1952.
Applicability of Act on other trainees/Interns
There are also instances where a person is engaged as a trainee, not as per Apprentice Act 1961 in any Designated Trade or Optional Trade, but due to requirement of Study curriculum he is pursuing. For example a student pursuing CA/CS etc. has to undergo compulsory training due to regulatory requirement of some Act governing that particular profession. Since such type of training is mandatory as per study curriculum and student attend training period for learning purpose and not in capacity of employee, such students cannot be treated as employee. Another example of student cum trainee may be of a student pursuing Nursing Course in which he simultaneously attend college for his education and on same time he register himself in a hospital as trainee and work in supervision and guidance of a medical practitioner.
EPF department came with a clarification on 12.10.2015 regarding the non applicability of Act on such students who are in receipt of stipend for their training period. Relevant portion of clarification is reproduced here for reference –
"It is a matter of common observation that now-a-days most technical, professional educational institutes impart industrial training/ practical on the job training to their students as an integral component of academic curriculum. During such training period, student-trainees are exposed to modern technical development and hands-on training of working on sophisticated equipments/ instruments etc. Stipend may also be provided to such student trainees, sometime. After such industrial on the job training, the student-trainee goes back to his respective institution for completion of the academic course.
In such cases, it is made clear that employer employee relationship does not exist between the industry and student-trainee, who is on industrial on the job training as an integral component of a recognized course of an educational technical institute recognized by the Central! State Government or any other authority constituted by the Central State Government. Therefore, the payment of stipend, if any, provided by the industry to such student trainees do not attract the provisions of the Employee Provident Funds & Miscellaneous Provisions Act, 1952. However for the students getting placement in companies and appointed as employees of establishment, Employee Provident Funds & Miscellaneous Provisions Act, 1952 will be applicable on such employees even during on the job training/induction/other trainings taken after becoming employee."
Applicability of Act on Probationer trainees
As per the law laid down by The Hon'ble Madras High court in Bharat Sanchar Nigam Ltd vs. Union of India (W.P.Nos.21520, 21782 and 21783), employees engaged as "Probationer trainee" will be treated as employees for purpose of EPF&MP Act 1952.
Question of law that arises for consideration, before High Court, was
"Whether the pre-induction training period undergone by the petitioners in the Bharat Sanchar Nigam Limited (for short BSNL) is covered for the purpose of deducting subscription towards Employees Provident Fund in terms of the Employees Provident Fund and Miscellaneous Provisions Act, 1952"
BSNL had file the writ petitions against order of Regional PF Commissioner by which probationer trainees were to be treated as employees from the very first day of employment and were eligible for EPF benefits. Aggrieved by the order, BSNL approached High court through writ petitions and Hon'ble High Court dismissed the all writ petitions filed by BSNL and upheld the orders passed by Regional PF Commissioner.
Applicability of Act on Independent Consultants/experts
There is a malpractice among some employers by showing some of employees as independent consultants and circumventing the liability to pay EPF. Law laid down by court is very clear in this regard, that if a person is engaged on full time basis with a single employer and not having an Independent establishment will not be treated as independent consultant and will be covered by Act. Some criteria that can be extracted from various rulings of court, to check whether a particular person is to be treated as employee or independent consultant, are as under (and may include many more criteria)-
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Whether such person is having separate establishment?
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Whether he is providing professional or technical service to one person or more than one person?
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Quantum of supervision and control exercised by establishment.
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Whether he is required to work personally or he is allowed to get it done from third person?
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Nature of work and contract entered into between person and establishment. Whether it is a 'contract of service' or 'contract for service'?
So whether a person is independent consultant/expert service provider can be known only after considering all the relevant factors and substance of terms of contract and not merely nomenclature/designation assigned to a job or a person.
