Is Gratuity payable when workmen has challenged his termination in labour court

A workman was terminated after a proper domestic enquiry due to his habitual absenteeism. He had rendered 21 years of service. Following the failure of conciliation proceedings, the concerned workman has challenged his termination in the labor court. The workman was terminated in December 2014, and the matter is still pending in the Labor court. The workman has now, in September 2018, come to the employer for his Gratuity claim since he is in need of money.

Now I have two queries: Can the employer withhold his gratuity citing the matter is pending in court? And if not, what will be the status of Gratuity if it is paid and afterward the Court awards reinstatement of the workman with back wages?

It is the employer's duty to pay gratuity within 30 days, whether the employee has challenged the termination or not.

Dear Colleague,

The dispute pertains to dismissal for absenteeism, which does not bar him from receiving the Gratuity. You should have settled it together with other dues at the time of dismissal. You should thank your stars for his not raising a dispute on the delayed payment of gratuity. Now settle this without any further delay.

Regards, Vinayak Nagarkar HR Consultant

I concur with the views of our learned friends M/S Prashant and Vinayak.

In the absence of any action by the employer forfeiting the gratuity of a dismissed employee under section 4(6) of the Payment of Gratuity Act, 1972, the employer has to make arrangements to disburse the amount of gratuity to the dismissed employee within 30 days from the date it became payable or deposit the amount forthwith with the Controlling Authority. Such a drastic failure on either way on the part of the employer cannot come to the aid of the employer later either to repudiate the claim for gratuity on the ground of delay/laches or against the levy of interest on the amount of gratuity.

By accepting gratuity, is an employee indirectly accepting termination?

This question from our learned member Varghesemathew deserves appreciation in the context of the list against his termination being continued by the concerned workman still in the Labor Court.

For arriving at an appropriate answer, first, we have to critically analyze the following aspects:

(i) the orders of termination of employment passed by the employer, and
(ii) its impact on the eligibility of the terminated workman for gratuity pertaining to the period of service rendered before such termination and the legal obligation of the employer to pay gratuity.

The orders of termination are dismissal against the workman's alleged habitual absence after following the due procedure of Law according to the employer. Procedural lapses, if any, in the disciplinary proceedings are subject to judicial scrutiny, and as such, one cannot prejudge as of now the final outcome of the pending dispute. However, it is certain that the orders of dismissal are not against any misconduct on the part of the workman exhaustively enumerated in clauses (a) and (b) of section 4(6)(1) of the PG Act, 1972, and no action was initiated in this regard to forfeit the gratuity either in part or whole as mandated by sec. 4(6) of the Act.

Automatically, it implies that the eligibility of the workman to claim gratuity for the period of service rendered by him according to his entitlement stands intact. Hence the employer's legal obligation to pay gratuity for the service prior to the date of termination subsists despite the dismissal orders. He ought to have arranged for its payment within 30 days from the date of dismissal as contemplated u/s 7(3) or deposited the amount in case of any dispute by way of refusal by the workman as per Sec. 7(4)(a) of the Act respectively.

Now coming to the dispute against dismissal pending before the Labor Court, if the workman succeeds, he may be ordered to be reinstated with or without back wages but certainly with continuity of the service before dismissal. If the employer succeeds, the dismissal of the claim by upholding the orders of dismissal. Anyway, the claim for gratuity for the service prior to dismissal would survive.

Had the amount been deposited with the Controlling Authority earlier, now the workman can be directed to the C.A, and an objection, if any, could be filed by the employer against the disbursement in view of the pending case. It is for the C.A to decide. If the C.A sustains the objection of the employer, he may refuse, and the workman has to wait till the disposal of the case before the Labor Court or withdraw the dispute for getting the gratuity early. If the C.A overrules the objection and releases the deposited amount, the claim for gratuity in respect of the service prior to the date of dismissal becomes settled once for all irrespective of the nature of disposal of the pending dispute.

Thus, in as much as there is no dispute about the eligibility of gratuity for the service rendered prior to dismissal, my conclusion is that receiving gratuity while the dispute against dismissal is still pending will not be a tacit acceptance of the termination nor will it dilute the claim of the workman for reinstatement.

You can take an application from the employee as a Memorandum of Settlement in Form-H. Pay the gratuity amount with something extra to get his consent that he is no longer interested in contesting the case further by receiving this amount. With this help, the case at the Labour Court would be closed.

This way, you can settle a long-running case and be in a win-win situation. This is the right time because "the camel came down the hill." Be proactive.

I hope all the senior members of the forum will agree with this point.

Hello,

Is there any judgment that we can refer to in support of the view that the Gratuity Payment is payable even though the termination of employment is under appeal and pending? I would appreciate it if you could provide a few relevant judgments here.

Thank you,
Raj

I refer to the judgment of the Division Bench of the Madhya Pradesh High Court in Hira Mills Ltd. (By Manager) vs Mukund Sonubhaiya Pandit And Ors. decided on 1 May 1968 (Bench: P V Dixit CJ & Justice G P Singh) Citation: (1969) ILLJ 81 MP. Author: P V Dixit CJ. This case would apply squarely.

@KK!HR,

Thanks a lot for the judgment. It is very helpful, although the factual matrix is slightly different for some of the labor courts to understand and apply it! It does have enough substance to argue in support of this view! There are also other Supreme Court judgments on the doctrine of election that can be used, which I shall.

Thanks again!