Govt suggests tougher penalties for employers violating PF rules

Under the present law, the Employees' Provident Funds Appelate Tribunal has only one member who is either a high court judge or a district judge

The Union government has suggested stringent penalties for violation of  Provident Fund rules,  including non-payment of contribution to the Fund despite deducting it from employees.

While the proposed Act will retain the condition of imprisonment of at least one year, it has enhanced the penalty limit on establishment to be paid along with serving the jail term.

Under the new rules, employers might have to pay Rs 70,000 as penalty, a sevenfold increase from the current Rs 10,000 if they do not deposit employees' money in the Fund despite receiving it from them, according to a proposal by the Union labour ministry. The ministry has proposed amending the Employees' Provident Fund and Miscellaneous Provisions Act, 1952, for this provision, among other changes.

In case of other violations, such as false representation of facts to avoid the payment of provident fund amount, a penalty of Rs 35,000 has been proposed, up from the current Rs 5,000.

However, a clause has been included to allow compounding of offence in case a court orders imprisonment for violation of norms. But in case of repeated offence, an employer might have to necessarily face imprisonment of up to two years along with a penalty of Rs 2,00,000. At present, the law provides for only imprisonment without any penalty. In this case, there will be no compounding of offence.

“No compounding provision has been proposed since the employer is making a repeated contravention of the provision of the EPF and MP Act,” an official said. Another proposal dilutes the judicial power of the Employees’ Provident Funds Appellate Tribunal (EPFAT) by permitting a bureaucrat to become part of the panel. According to the proposed Bill, an appellate tribunal will now have two members – either a high court judge or a district judge and a union government official of the joint secretary level with experience in labour issues.

Under the present law, the tribunal has only one member who is either a High Court judge or a district judge. A three-member Principal Appellate Tribunal is also proposed to be created which will have two members from the central government and one from the judiciary.

This body will act in case of difference of opinion among the EPFAT members.

“As and when there is any difference in the adjudication in the two member Tribunal, the matter shall be transferred to the Principal Appellate Tribunal at Delhi to adjudicate the matter,” the proposal says, adding that the majority principle will then kick in. An official told Business Standard during 2013-14, out of the total workload of 3303 cases with the EPFAT, 494 cases were decided. Hence, a total of 2809 cases were still pending at the end of 2013-14.