Are Workers stitching garments from Home, Employees under Provident Fund Act? SC answers

Women workers stitching garments with raw materials provided by the company and being paid directly by the company on a per-piece basis for every garment stitched would fall within the definition of employee under Section 2(f) of the Employees Provident Fund Act..The mere fact that the women workers stitched the garments at home using their own sewing machines would make no difference, a Bench of Justices AM Sapre and Indu Malhotra held..The case was an appeal against a decision of the Aurangabad Bench of Bombay High Court..The Respondent Company which is an undertaking of the Government of Maharashtra is covered under the provisions of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 with effect from 1979..The main objective of the Respondent Company was to encourage, promote, develop, set up or cause to be set up a ready-made garments industry in the Marathwada Region, with a view to provide gainful employment to people possessing skills in stitching, tailoring, and allied activities, especially to women from the economically weaker sections of the Society..To this end, the Respondent Company engaged women workers who were provided with cut fabric, thread, buttons, etc. to be made into garments at their own homes. The sewing machines used by the women workers were owned by them, and not provided by the Respondent Company..In 1991, the Officer-In-Charge, Sub-Regional Provident Fund Office, issued a Show Cause Notice to the Respondent Company calling upon it to pay the Provident Fund contributions for the women workers. The Balance Sheet of the Respondent Company for the year 1988 – 89, revealed large debits towards salary and wages for direct and indirect workers, but the Respondent Company made a false statement that it had only 41 employees..The Appellant then issued summons to the Respondent Company for a personal hearing under Section 7A of the EPF Act..Appearing before the Appellant, the representative of the Respondent Company contended that the women workers who were fabricating garments for the Respondent Company, were not their employees, and hence not covered by Section 2(f) of the EPF Act. Therefore, even though wages were paid to those women workers, the Respondent Company was not liable to pay Provident Fund contribution in respect of them..The Appellant, however, held that the women workers engaged for stitching garments were covered by the definition of “employee” under Section 2(f) of the EPF Act. An amount of Rs. 15,97,087/ was assessed towards Provident Fund dues of the Respondent Company..The Respondent Company challenged that order by way of a writ petition before the Bombay High Court..The High Court allowed the writ petition and held that the Respondent Company had no direct or indirect control over the women workers. The conversion of cloth into garment could be done by any person on behalf of the women workers. Hence, the Respondent Company did not exercise any supervisory control over the women workers..This led to the appeal before the Supreme Court..The Supreme Court at the outset noted that the definition of “employee” under Section 2(f) of the EPF Act is an inclusive definition. It is widely worded to include any person engaged either directly or indirectly in connection with the work of an establishment, the Court said..In the present case, the women workers employed by the Respondent Company were provided all the raw materials such as the fabric, thread, buttons, etc. by the Respondent – Employer..With this material, the women workers were required to stitch the garments as per the specifications of the Respondent Company. The women workers could stitch the garments at their homes, and provide them to the Respondent Company. The Respondent Company had the absolute right to reject the finished product i.e. the garments, in case of any defects..That being the case, the mere fact that the women workers stitched the garments at home would make no difference, the Court held..Further, the Court also noted that it was the admitted position that the women workers were paid wages directly by the Respondent Company on a per piece basis for every garment stitched..It, therefore, held that the women workers employed by the Respondent Company are covered by the definition of “employee” under Section 2(f) of the EPF Act..The Court placed reliance on the judgments in Silver Jubilee Tailoring House and Ors. v. Chief Inspector of Shops and Establishments and Ors [1974 (3) SCC 498] and Shining Tailors v. Industrial Tribunal II, U.P., Lucknow and Ors. which squarely applied to the present case..It therefore ruled,.“In the present case, the women workers were certainly employed for wages in connection with the work of the Respondent Company. The definition of “employee” under Section 2(f) is an inclusive definition, and includes workers who are engaged either directly or indirectly in connection with the work of the establishment, and are paid wages. In the present case, the women workers were directly engaged by the Management in connection with the work of the Respondent Company, which was set up as a readymade garments industry in Marathwada. The women workers were paid wages on perpiece basis for the services rendered. Merely because the women workers were permitted to do the work off-site, would not take away their status as employees of the Respondent Company.”.Thus, it allowed the appeal and set aside the judgment of the Bombay High Court..[Read Judgment]