Delhi High Court upholds constitutional validity of PF contribution for International Workers

In a significant judgement, the Hon’ble Delhi High Court (“The Court”) upheld the validity of Central Government Notifications issued in 2008 and 2010 mandating international workers (“IW”) to contribute to the Employees’ Provident Fund (“EPF”) irrespective of their salary levels.

Facts of the Case:

• SpiceJet Ltd. and LG Electronics India Pvt. Ltd. filed writ petitions challenging two notifications dated 1 October 2008 and dated 3 September 2010 through which Paragraph 83 was inserted into the Employees’ Provident Fund Scheme, 1952 (“Scheme”).
• The amendments extended the Scheme to IW and required all such workers (other than excluded employees under Social Security Agreements) to contribute to the EPF, irrespective of salary, unlike Indian employees who contribute only if their monthly pay is below INR 15,000.

The issue arose before the Court was whether Paragraph 83 of the EPF Scheme, mandating contributions from foreign employees irrespective of salary, is arbitrary and in violation of Article 14 of the Constitution.

Judgment:

The Court relied on principles of reasonable classification under Article 14. It reiterated that the State can classify persons if (i) on the basis of an intelligible differentia, and (ii) the differentia has a rational nexus with the object sought to be achieved. Therefore, mere inequality is insufficient to establish violation of Article 14.

Based on the above classification, Court found that “International Workers” form a distinct class separate from domestic employees. Foreign workers typically serve in India for short durations and are not subject to the same long-term financial commitments as Indian employees. The EPF Scheme's primary goal, according to the court, is to offer social security benefits to all workers in establishments covered by the Act; expanding the Scheme to IW encourages reciprocity and adherence to international social security standards.

Accordingly, the Court upheld Paragraph 83 as valid, holding that it does not violate Article 14 and is consistent with India’s treaty obligations.

Source:

SpiceJet Ltd. v. Union of India & Anr. and LG Electronics India Pvt. Ltd. v. Union of India & Ors., W.P.(C) 2941/2012 & W.P.(C) 6330/2021