Setback for expatriates? Delhi HC upholds mandatory EPFO membership; what this means for foreign staff – The Times of India

The Delhi High Court on Tuesday ruled that expatriates working in Indian companies must become members of the Employees’ Provident Fund Organisation (EPFO) and contribute to the fund regardless of their income levels.The court upheld amendments to the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, as well as the Centre’s 2008 and 2010 notifications that mandate international workers to contribute to the Employees’ Provident Fund (EPF).Under the ruling, international workers will be allowed to withdraw their full EPF balance only after retiring at or after the age of 58, or in cases of permanent and total incapacity. This is seen as a setback for expatriates who generally work in India for shorter periods of two to five years, reported ET. Indian workers, by comparison, are required to contribute if they earn below Rs 15,000 per month. Legal experts noted that many foreign employees have already left India, meaning employers will now have to bear their share of contributions.A division bench of Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela held that the distinction between foreign and Indian employees was justified. The court accepted the government’s position that international workers form a separate group because they contribute only during their limited time in India, unlike domestic employees who contribute throughout their service.“The classification made was reasonable and it also has an object sought to be achieved that the purpose of mandating an employee to be a member of 1952 scheme was to provide social security,” the court said, as quoted by ET.The court also upheld EPFO communications directing SpiceJet and LG Electronics India to deposit provident fund and related dues for their international staff. It dismissed SpiceJet’s challenge to summons issued in 2012 requiring it to produce records for determining liabilities, and similarly rejected objections raised by LG Electronics.The Delhi High Court’s ruling aligns with a previous judgment of the Bombay High Court, while the Karnataka High Court has ruled to the contrary. Due to the conflicting views, the matter is expected to reach the Supreme Court for final interpretation. Both companies are assessing the implications and are likely to move to the Supreme Court, according to legal sources.Atul Sharma, counsel for SpiceJet, said, “The entire basis of amendment to the scheme is implementation to certain treaties with countries who have similar provision for social security. And under the Constitution of India, this amendment could not be implemented as treaties have not been ratified by Parliament.” He said the issue requires further consideration.The companies had argued that the classification between foreign and Indian employees was discriminatory.