Query Related To Gratuity

In a certain organization, there were 2 firms one was a proprietary firm and the other was a pvt ltd firm. The proprietor of the 1st firm was also one of the partner of the other firm.

Due to some management reasons, the proprietary firm was taken over by the pvt ltd firm and all the employees of the proprietary firm were asked to resign and issued fresh appointment letters in the pvt ltd firm.

Since the proprietary firm was in existence since the last 15 years, there were many employees who had service in the firm for more than 5 years.

Will the employees be considered as fresh employees in the new firm and will they loose out on their gratuity?

When the change of ownership took place an MOU was signed declaring that the pvt ltd firm takes over the proprietary firm with all its assests and liabilities. However nothing to this effect is mentioned in the appointment letter and all employees have been asked to resign citing personal reasons (The employees are more than 100).

Please advice

Dear Tittle,
In this entire case, resignation shall be play the important roll...
Just see how it is..
if your proprietor firm is merge with Pvt. Ltd. then, you don't need to take resignation letter from employee, their service automatically treated as continue.
But, if you take resignation, then it shall be treated as end of employment in one establishment & accordingly you need to settle their gratuity too & their service shall be treated as continue with Pvt. Ltd. it shall be only consider as New joiner.

In this case you, in new appointment letter employer should mentioned the clause that -- Gratuity will be payable as per the payment of Gratuity Act,1972. For purpose of gratuity your date of joining in previous NAME OF COMPAY on date of joining of previous company will be the basis of calculation.
Hence then seniority will be considered

Titti,
The liability for payment of Gratuity, ESI, PF or any duets ends from the date of handing over/take over the firm basing on the conditions mentioned in MOU.
Hence all employees loose their services and the liability of payment of Gratuity lays on old management (propitiatory firm).
The services will be added w.e.f date of new joining of employees only.

Titti,
The Propitiatory form liability for payment of Gratuity, ESI, PF or any duets ends from the date of handing over/take over the firm basing on the conditions mentioned in MOU.
Hence all employees loose their services. The liability of payment of Gratuity lays on old management (propitiatory firm).
The services will be added w.e.f date of new joining of employees only.
Hence, it is better to settle the Gratuity amount by Proprietor firm on the date of resignation of employees.

Dear Friend,

Before answering your question, let me ask you some questions.

On whose behalf you are asking this question - on behalf of the employees or the management acquiring the proprietory concern?

When the merger is well-known before and the employees likely to be affected by the merger are well over 100 in number, whether any attempt by the employees either formal or informal was made to ask the Proprietor of the old concern about the settlement of the service of the employees?

If so, any assurance was given by him that the all the 100 and more employees would be taken by the Buyer/ Aquirer with continuity of service and all attendant benefits?

In case just an oral assurance was given by him and out of trust in the man OR the clause in the MOU REGARDING TAKING OVER OF LIABILITIES BY THE ACQUIRER the employees kept mum, why no one questioned about resignation and appointment as fresh employees?

Whether the people were asked to resign before or after the merger?

Whether the eligible people were paid their gratuity?

Dear Sir,

Thank you so much for your reply.

The business is a family run biz. and the proprietor of the 1st firm in question is also the partner of the 2nd firm along with his wife.

The merger was not announced well in advance to the employees it was done just a few days before the end of the previous financial year and the merger took effect from the beginning of the current financial year. The employees were not aware what decision the management would be taking as they had kept their decision pending regarding whether the employees would be transferred or freshly appointed in the new firm.

It is only in June that they were asked to resign from the old firm and were told that they would be issued fresh appointment letters. However all the employees have expressed their reservations regarding resigning from the old firm and getting fresh appointment letter. Since April though anything was not given on paper, the salary of the employees was paid in the name of the new partnership fir,

The management is just giving verbal assurance that they will take care of the employees when they leave, yet the employees are asking for some written confirmation or a mention of the same in their appointment letter which the mgt does not want to do.The mgt is good & ethical and they have taken care of employees in the past also, yet with so many changes the employees are not ready to settle for anything less. The employees are really concerned about their gratuity cause PF has been transferred to the new co.

Please advice.

Dear Tittli,

Really it is a good indication that though being the one among the affected employees ( I suppose ), you are holding your management still in high esteem and as such your management certainly deserves appreciation.However, in the matter of suo-moto business decisions of any employer which can adversely affect his employees, his ethical and caring disposition in the past can not be an excuse for his calculated moves circumventing legal provisions at the present. Simply put, the entire exercise is a total merger of the Sole-proprietorship concern with the Partnership Concern in which the erstwhile sole-proprietor is also a partner along with his wife. In effect, along with all the assets and liabilities, the services of the emplyees are also automatically getting transferred from the former to the latter. If some of the employees are not willing for any personal reasons, they can resign on their own. No question of Law can be raised because it is the policy decision of the management to merge it with another concern for business reasons like synergy, delegation of administration, economy and the like without affecting the continuity of employment and service conditions of the erstwhile employees. But, as per your statement there was neither any authentic intimation to nor any formal consultation with you by the management before the merger. Since this April, you are all borne on the rolls of the new firm and being paid and your P.F accounts also transferred to the new employer. It means that all the (defunct) proprietoty concern employees already stand transferred to the partneship firm with continuity of service since this April. So far so good. Then, why the management insists now to submit your resignation from the defunct firm? What about your inter-se seniority with the existing employees of the partnership firm? What about the past services of those employees not eligible for gratuity? Why should the management suddenly shell out so much money on gratuity settlement to a no. of eligible employees and treat them as fresh appointees? Please ponder over all these genuine questions, keeping aside your blind faith in your management based on the past experience. Better approach the problem collectively with the management and whatever decison taken in this regard, let it be a settlement under the Industrial Disputes Act,1947.

Dear Sir,
No full and final settlement is being done from the old co. Only PF is being transferred. As far as gratuity is concerned nothing has been done. The effected emp. are being told that at the time of their leaving the org. everything will be taken care of incl. giving exp. letter in 1 single firm. Kindly advice

Mr. Tittli,
It is better for Management and as well as Employee to settle all benefits now. Once the employee has resigned and he will get new appointment order, he will loose his service. His services will effect from the date of new appointment only. The Old Management may give experience letter, but they have to mention the end date on which the management (Firm) is changed. So the employee may loose his experience on one side and another side they may not entitle to claim Gratuity from New Management.