Is an Independent contractor an ‘Employee’ under the EPF Act? – Karnataka HC Judgement Review

Karnataka High Court 2

It is an industry practice to engage persons on a contractual basis, particularly where the work is clearly delineated and the relationship is closed-ended, with a consolidated payout made to such person(s), conditional upon the deliverables, quality, timelines and other associated objectives. Such arrangements also envisage non-exclusive freelancer-like engagements, with the person so engaged being free to enter into other contracts and serve several clients/organizations simultaneously.

A legal conundrum arises as to the applicability of Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (“EPF Act”) and the Employees’ Provident Fund Scheme, 1952 (“EPF Scheme”) to such persons on the question of whether or not the individual concerned is an employee or a contractor. There have been few precedents governing the aforesaid aspect in recent years and this piece attempts to decipher the determining parameters for the applicability of the provisions of the EPF Act to such arrangements. A recent judgment of the High Court of Karnataka seems to create more confusion in the matter, potentially affecting contracts between companies and individual contractors who are engaged to provide specific services, either one time or on an ongoing basis.

Pawan Hans Ruling: Supreme Court Judgment of 2020

The Supreme Court of India in its 2020 judgment titled Pawan Hans Ltd and Ors vs Aviation Karamchari Sanghatana and Ors (“Pawan Hans decision”) dealt with the question of whether the company was under a statutory obligation to provide the benefit of provident fund to its contractual employees where the term “employee” had been defined to include “any person” employed “directly or indirectly”. On the basis of the definition, the Court held that the work of the employees being of a perennial and continuous nature, their relationship could not be termed to be ‘contractual’ in nature. Accordingly, the EPF Act was held to cover all contractual employees who have been engaged by the Company and drew their wages directly or indirectly from the Company. (Read our analysis here)

Express Publications Ruling: Karnataka High Court Judgment of 2022

A related issue involving applicability of the EPF Act to contractors, more recently came up before the Hon’ble Karnataka High Court on 21st October 2022 in Express Publications (Madurai) Private Limited vs. Union of India and Ors. (“Express Publications Ruling”). One of the substantive issues for consideration before the Court was whether, insofar as the EPF Act is concerned, there is a requirement for an employer-employee relationship to exist, and for the employer to have supervision and control over the employee. Interestingly, the bench examined the issue and rendered its finding without examining the applicability or non-applicability of the Pawan Hans decision to this case, apparently on the reasoning that since the Pawan Hans judgment operated prospectively it did not apply in the facts of the present case.

In this case, Express Publications had entered into a contract with a photographer to do some photography work, which was contended to be neither exclusive nor full time. The photographer not having been enrolled under the EPF Scheme, raised this issue before the Regional PF Commissioner, Bengaluru (“RPFO”). The RPFO, by an order dated 29th October 2020, held that the photographer is an employee of the company and directed the company to enroll him under the Scheme. The Company approached the Hon’ble Karnataka High Court seeking the quashing of this order.

On the question of whether an employer-employee relationship, with the employer having supervision and control over the employee is required, the company argued that a regular employee would be subject to both supervision and control, as well as disciplinary proceedings, but a person on contract would not be. As such, a contractual employee would not be covered under the EPF Act. Further, in the present case, the photographer was not offering services exclusively to the company.

What the Court said

At the outset, the High Court observed that it is clear that the state has encouraged contribution to the provident fund so as to provide security to an employee upon retirement, more so taking into account that there is no formal pension scheme available in the private sector. It further held that the definition of an ’employer’ in terms of Section 2(e) of the EPF Act is only for the purpose of identifying as to whom the responsibility lies to comply with the requirements of the EPF Act. The definition of employee under the Act is to identify who an employee is, as being someone who accepts his wages directly or indirectly from the employer and includes any person employed by or through a contractor in connection with the work of the establishment.

Answering the issue in question, the Hon’ble Court observed as follows:

“Thus, in terms of Subsection (f) of Section 2 of EPF Act, even a person who is engaged through a contractor being covered under the EPF act, in my considered opinion that (sic.) if an employer were to employ a person directly on a contractual basis, the EPF Act would apply to such a relationship also more so when there is no exemption issued under sub-section (ff) or (fff) of Section 2”.

Analysis by the Hon’ble Court:

The rationale the Court gave was as under:

  • Given the definition of ‘employee’ in the EPF Act, if an employee were to get wages for work done for the employer or the establishment or in connection with the work of an establishment, whether directly or through a contractor, such person would qualify as an employee under the EPF Act.
  • The EPF Act does not require the employer to exercise supervision or control over an employee, what is alone required is that wages are to be paid by the employer to such employee.

The Court also opined that in view of the pay structure and engagement model devised by the Company, it was clear the contract was used by the Company as a subterfuge to cover the employment and to organize its business to minimize its pay outs, which was not permissible. The Court held that the impugned order of EPFO did not suffer from any legal infirmity and the Photographer is required to be enrolled under the PF Scheme.

Why is the Karnataka High Court Express Publications Ruling, 2022 Significant?

This judgment is significant, in that it deviates from settled law laid down by various other High Courts.

In M/s. Satish Plastics v. Regional Provident Fund Commissioner (“Satish Plastics Judgment”), the position of an Accountant employed for writing accounts on a contractual basis who had the option to work likewise for others and also to work or write the accounts in his house, was considered. The Gujarat High Court laid down a detailed 7-point criteria for determining whether a person qualifies as an ’employee’ within the meaning of the EPF Act. To sum them up, work for monetary payment, in connection with the establishment under its supervision and control, and the existence of master-servant relationship, irrespective of the label of the contract were held to be critical determinants in considering whether a person is covered under the EPF Act. Basis this, it was held that the Accountant was covered under the EPF Act, despite the fact that he was permitted to work at his own establishment.

In fact, the Satish Plastics Ruling was later followed by Hon’ble Bombay High Court in Swift Couriers vs. The Assistant Provident Fund Commissioner (decided on 01.08.2016), wherein the tests laid down in the former were relied upon to hold that two pilots and two commission agents, though self-employed persons were ’employees’, under the EPF Act.

Though the Express Publications ruling did not examine the aforesaid decisions, the ruling becomes significant, inasmuch as it broadly holds that there is ‘no requirement’ of a master-servant relationship with the master exercising supervision and control for the purpose of coverage of a person under the EPF Act. Hence, the ratio in Express Publications seems to go against the judgments of the other High Courts.


What seems clear from the Express Publications ruling is that an employer-employee relationship and supervision or control by an employer is not a pre-requisite in the matter of coverage of a person under the EPF Act, and even a consultant- freelancer who has freedom to work under a contract for various establishments simultaneously would be required to be enrolled under the EPF, provided one is paid wages in connection with the work of such establishments.

Given that this is a judgment of a High Court, applicability of the judgment will be a question and it is possibly worth having the matter adjudicated by the Supreme Court for a final say.  This judgment has the potential to create uncertainty where contractors are engaged for a specific task for periodic payment.

As on the date of publication of this piece the Registry of the Karnataka High Court has received an appeal against the Express Publications Ruling. It would be worth awaiting the outcome of the appeal in this matter.

-Sunil Arya, 
Advocate & Senior Principal Associate

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Archana Madan – POSH Specialist & Advocate

Archana Madan Kohli is an advocate with close to 15 years experience in in-house and law firm roles. At BCP Associates, she specialises in providing various services to clients under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (“POSH Act”). Archana is the External Member of the Internal Committee of multiple organizations across sectors and is well versed in handling POSH inquiries. She also handles POSH queries, including drafting and reviewing policies and assisting in setting up Internal Committees.

Archana is also a trainer, delivering specialised sessions for Managers and Senior Management, Employee General Awareness sessions for all employees and Internal Committee training. Apart from English, Archana is fluent in delivering training sessions in Hindi, and Punjabi.

Archana started her career with Bharti Infratel Limited moved on to Wipro Limited, Adecco India Private Limited, Cloudnine Hospitals, Virinchi Limited and Medicover Hospitals in different capacities.

Archana holds a Bachelor of Law (LL.B.) degree from Himachal Pradesh University, Shimla. She has earned her Post Graduate Diploma in Drafting, Negotiation and Enforcement of Contracts from NALSAR University of Law, Hyderabad with distinction.

B. Chandrashekar Shetty - Advocate

Mr. Chandrashekar Shetty is a Senior Labour Law Compliance Auditor at BCP Associates and has audited multiple client companies across India. He is also a member of our senior legal advisory practice. Previously he has worked as Deputy Controller, Manager-Industrial Relations and Industrial Relations Officer in KPTCL, Bangalore for more than 30 years. Prior to this, he has dealt with Legal, Personnel and IR matters including Wage Settlements, Grievance Machinery, Manpower Study and Social Security Compliances for about 10 years. He is a Faculty member of Labour Law, HRD Centre, KPTCL Bangalore.

Mr. Shetty holds a B.Com. and L.L.B. degree, Post-Graduate Diploma in Business Administration, Diploma in Public Relations from Bangalore University and PG Diploma in Industrial Relations & Personnel Management from Bharatiya Vidya Bhawan. He is enrolled as Advocate in Karnataka Bar Council and is a Govt. Arbitrator of Chit Funds in Karnataka.

S Venugopal Rao

S Venugopal Rao is an experienced labour law and service matters expert and is a member of the senior advisory team at BCP Associates. Having joined the chambers of Mr. B C Prabhakar in 2012, he is knowledgeable and well versed in multiple employment and labour law topics.

S Venugopal Rao holds a Bachelor’s degree in Science from Karnataka University, Dharwar and Bachelor of Law from Bangalore University. He enrolled as advocate in Karantaka State Bar Council in 1976. He joined the chamber of Sri. Kolachalam Srinivasa Rao a leading civil advocate. After practicing for 6 years at Ballari, he joined Orient Paper Mills, Orissa (of G P Birla Group). He was designated as Manager (Law) under the Factories Act in 1995. In 1999, he joined Andhra Pradesh Paper Mills Rajahmundry as Manager Legal and was subsequently elevated as Dy. General Manager (Legal). As Factory Manager & Legal Head, he oversaw compliance of Factories Act and Rules there under towards safety, health and welfare, including compliance under Pollutions and Environmental laws and Explosives Act, etc. Additionally, he is well acquainted with Environment Management System ISO 14001: 2004, Occupations, Health and Safety Series 18000:1999. As Legal head in APPM he has briefed and appeared along with Senior Advocate before Appellate Authority constituted under Water (Prevention & Control of Pollution) Act. He retired from the services of Andhra Pradesh Paper Mills in 2011.

As legal head he has handled important cases both in Labour and Civil and has experience in drafting and vetting Contracts, Agreements, Lease Agreement, Conveyance Deeds, , Affidavits and scrutiny of several legal and other documents, Preparing and settling Petitions, Appeals, Plaints, Written Statements, Rejoinders, Affidavits and Written Arguments etc. for submission/pleadings for various legal proceedings.

C K Devappa Gowda - Advocate

C.K. Devappa Gowda (CKD) is an Advocate and Labour Law expert. He holds a Bachelor’s Degree in Science from the University of Mysore and a Degree in Bachelor of Law from Bengaluru respectively. He also holds a Diploma in Social Service Administration from the National Institute of Social Science, Bengaluru. After completing his studies, he had enrolled as a Advocate and initially practiced in the Civil Code attached to the office of BCP. He then worked as Personnel Officer in Chemicals and Textile Manufacturing Industries for 5 years. Thereafter took up employment in one of the largest Public Sector Bank. He has worked in different parts of the country and has extensive experience in the cross country IR domain. The significant part of his service was at corporate level overseeing and implementing HR policies and practices and management of IR. He has been a member of personnel committee of Indian Bank Association.

After retirement from service, Mr. Gowda has been working with Mr. BC Prabhakar’s firm for the last 12 years. He has expertise in all areas of people management, drafting of documents relating to service matter including the settlements under the ID Act. He has dealt with all employment laws including appearance before the Courts, Tribunal and Authorities under the different Labour Laws. Mr. Gowda is one of the senior Labour Law experts at BCP Associates.

Srijatha Ghosh - POSH Specialist & Advocate

Srijata Ghosh serves as external member on the Internal Committee of several Companies across various sectors. She handles all kinds of POSH related matters including investigations and inquiries. She provides Training on Sexual Harassment across all verticals for Managers and Senior Management, General Awareness for all employees and Internal Committee members on the legislation (The Sexual Harassment of Women at Workplace Prevention, Prohibition and Redressal Act, 2013). She also formulates Policies for Prevention of Sexual Harassment at Workplace (“POSH”) and advises Companies on setting up of their Internal Committees. Srijata is involved in providing Legal Advisory services on POSH and other labour law matters for various clients.

In her previous experience, she has extensively dealt with End-to-End Contract Management, Due Diligence, POSH Compliances, Legal Advisory, etc. Srijata worked with Companies like Accenture India Private Limited, Quess Corp., Capgemini Business Services (India) Limited and Pramata Knowledge Solutions Private Limited. Srijata has handled varied legal issues including drafting, vetting and negotiation of contracts, drafting policies of various organizations. She has resolved issues relating to employment laws and has worked closely with the HR teams. She has provided legal advisory services to senior management. She was also associated with Kolkata High Court in counselling clients with legal matters such as Property, Due Diligence etc. Srijata has worked in an LPO Service Firm, Manthan Legal Services Private Limited for Legal Research, depositions, medical summaries, demand drafting etc.

Srijata completed her B.A.LL.B from M. S. Ramaiah College of Law, Bangalore University in 2009. Srijata is a member of the Karnataka Bar Council since 2010. She is also a member of the Gender Sensitivity Sub Committee of Karnataka Employer Association (KEA).

Caroline Lobo - POSH Specialist & Advocate

Caroline Lobo has been with BCP Associates for the past 2+ years. She has been handling matters and Inquiries related to the POSH Act including conducting inquiries and trainings/awareness programmes for Senior Management, employees as well as members of the Internal Committee on the POSH Legislation (The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (“Act”) to address Workplace Harassment of Women. She is a member of the Internal Committee for many varied companies and organisations and has reviewed and scrutinized numerous hearings and inquiries on matters relating to sexual harassment at workplace.

She has also handled matters relating to employer-employee related Enquiries, wherein she has reviewed and conducted hearings and enquired into the matters and has guided the Internal Committee and provided guidance in providing recommendations to the management. She is also a Member of the Gender Sensitivity Sub-committee of Karnataka Employer Association (KEA).

Prior to joining BCP Associates, Caroline has has a wide range of experience in corporate, commercial and contract law, mergers and acquisition and has undertaken drafting, vetting, negotiating and finalizing legal and commercial transactions. She started her career in litigation then moved onto the Corporate sector. In the span of 13 years, she has worked at Chambers of Advocate Jayashree Murali, Krishnamurthy and Co. Legal Consultants, Colt Technology Services and Oracle India Pvt. Ltd. She always had a keen interest in Women and Child related issues. She has worked with Child Welfare Committee and NGOS’s. In addition, she has worked with Swasthi Health Resource and Centre, where she was the External member to the Internal Committee (IC). She worked closely with the committee in strategizing, planning, reviewing and implementing the assigned tasks, which included building material to raise awareness against sexual harassment at workplace. Further, she has been involved in conducting inquiries into matters related to sexual harassment at workplace.

Caroline earned her Law degree from University Law College, Bangalore, from where she graduated in the year 2005.

Manoj Kumar – Senior Associate

At BCP Associates, Manoj Kumar is involved in managing and conducting labour law compliance audits of principal employer and contractors. He is also involved in client co-ordination and conducting labour law training programs for vendors. He has conducted on-ground labour law audit for factories. Manoj also provides support in advising vendor clients on labour law queries. He completed B.A., LL.B. from BMS College of Law, Bangalore in 2016.

Rashmitha Venkatachalam Das - POSH Specialist & Advocate

Rashmitha Venkatachalam Das is an advocate with more than 15 years’ varied experience including both law firm and in-house roles. As an expert on BCP Associates’ POSH team, she specialises in providing a broad range of services under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (“POSH Act”). Currently, Rashmitha is the External Member of the Internal Committee of multiple organizations across sectors and has deep expertise in handling POSH inquiries. She also supports these organisations on a regular basis with queries related to sexual harassment, including drafting and reviewing POSH policies and assisting in setting up Internal Committees.

Rashmitha is also a seasoned POSH trainer, having delivered a multitude of specialised sessions for Managers and Senior Management, Employee General Awareness sessions, and focused training for Internal Committee members. In addition to English, she is fluent in Hindi and Kannada, ensuring meaningful training sessions and effective inquiries.

Having started her career at law firm of Krishnamurthy and Co, Rashmitha moved to in-house roles with Biocon Limited, Columbia Asia Hospitals Private Limited and Adecco India Private Limited. 

Rashmitha holds an LL.M. in Labour and Employment Laws from University Law College, Bangalore, graduating in the year 2018 with Two Gold Medals. She is also a Rank Holder at the University. She obtained her BA, LL.B. degree from Bangalore Institute of Legal Studies, Bangalore University in 2009. Rashmitha is registered with the Karnataka Bar Council since 2009 and is also a member of the Gender Sensitivity Sub Committee of Karnataka Employer Association (KEA), an industry association of employers with over 700 members.

Manisha Vidyadhar – Senior Associate

At BCP Associates, Manisha Vidyadhar is involved in managing and conducting labour law compliance audits of principal employer and contractors. She is also involved in client co-ordination and conducting labour law training programs for vendors. She has conducted on-ground labour law audit for factories. Manisha also provides support in advising vendor clients on labour law queries.  She completed B.A., LL.B. from BMS College of Law, Bangalore in 2016.

Amrutha Ananth – Principal Associate

At BCP Associates, Amrutha is a part of the Legal Advisory practice, Legal Audit practice and Labour Code Alignment Programme (LCAP). Amrutha specialises in Labour and Employment Laws and compliance having advised some of India’s leading companies for some of their most complex labour law matters.

Amrutha has more than seven years of experience in labour and employment law and has conducted several audits for both, principal employer and contractor for various leading IT/ITES companies, manufacturing sectors like pharma, automobile, construction and start-ups.

She is actively involved in drafting and reviewing employment contracts, HR policies, Employee Handbook, show cause notice, etc. for various organizations spread across diverse sectors. As a part of the Labour Code Alignment Program, she assists companies in review and alignment of their existing wage and employment policy with the provisions of the Labour Codes.

Sunil Arya – Principle Associate

At BCP Associates, Sunil Arya is part of the labour and employment law advisory and HR Policy practice and is actively involved in drafting and reviewing of employment contracts, opinions, HR policies, employee handbook, show cause notice, etc. for various clients spread across diverse sectors. He conducts training on labour and employment laws. Sunil is also involved in labour law compliance audits of principal employer and contractors and has conducted on-ground labour law audit for factories. In addition, he is engaged in knowledge creation and management of the firm and keenly writes on developments in labour and employment laws.

Prior to joining BCP Associates, Sunil has 10 years of post-qualification experience in diversified portfolios of advisory, drafting, policy analysis and dispute in the domains of contracts, general civil matters, employment law, competition law and construction arbitration matters. Sunil started his career as a Law Researcher in Delhi High Court. He moved on to be part of regulatory analysis team of CIRC, a unit of CUTS International. In addition, Sunil has been part of legal team of Jindal India Thermal Power Limited. He has also taught competition law, tax law and investment law at VIPS, Delhi.

Sunil holds LL.M. from The Indian Law Institute, Delhi. He is First Rank Holder in his thesis. He completed B.A, L.L.B. (Hons.) from I.P. University, Delhi. He also holds First Rank in P.G. Diploma in Competition Policy and Laws from The National Law University, Delhi.

Chandrakala K A – Principle Associate

At BCP Associates, Chandrakala has 12+ years of experience in conducting and managing labour law compliance audits of principal employer and contractors. She is also involved in co-ordination with many clients. She has conducted on-ground labour law audit for factories. She also provides support in advising vendors on labour law queries. Chandrakala is actively involved in research and providing valuable inputs to the firm pertaining to updation in labour law audit function.

Chandrakala started her career in litigation in chamber of Sri. Ashok where she was involved in drafting, pleading and appearance before Karnataka High Courts and lower courts on the criminal side.

Chandrakala completed B.A in Arts from Kuvempu University, Shimoga in 2003 and LL.B. from Mangalore University in 2006.