Exploring Labour Law with me # Day 6

Can an employer refuse to pay an employee the gratuity even if they have completed the necessary service as mentioned above and there is no misconduct, termination, loss or damage etc.?

Before answering the question. Let us first understand when an employer can refuse to pay gratuity. Gratuity may not be payable if an employee is terminated for any misconduct. But this may not be the case everywhere. Many fair employers follow the ethical way and pay gratuity to the terminated employee also. Only if the misconduct has led to significant financial loss resulting in termination an employer can refuse to pay gratuity.

Yet, anyone can challenge the above statement as there is always the notion of why we should pay gratuity to a terminated employee.

Back to the question. Even in situations where a properly relieved employee who has less than 5 years of service and more than 4 years 240 days service can be denied the payment of gratuity if the employer is unable to pay. But this relies on many scenarios such as how the company is performing, its balance sheet, the turnover, profits made etc…

Also there is Section 4A. Compulsory Insurance, but we will talk about it in future posts.

Even when an employee takes the employer to the court that he/she has completed 4 years and 240 days and that the employer refuses to pay gratuity, he/she may still lose the argument (mostly like to win the argument, but let's see the darkside). Section 2A. Continuous service takes about the uninterrupted services including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave (not being absence in respect of which an order [***] treating the absence as break in service has been passed in accordance with the standing order, rules or regulations governing the employees of the establishment), lay off, strike or a lock-out or cessation of work not due to any fault of the employee.

Employees are required to have a Continuous uninterrupted service. However, if it is interrupted it can be only due to certain reasons which are mentioned in the section 2A.?

When an employee resigns and gets relieved for his/her service. He/she is voluntarily relieving themselves from the job and this interruption in the continuous service for the eligibility of the payment of gratuity does not fall under the reasons listed in section 2A.

The employee voluntarily relinquishes his/her continuous service and in turn will not be eligible for the Payment of Gratuity under the Act.

But will this be the same case for Bonus? What is the eligibility for Bonus? Why is it paid during the time of Diwali?

Comment your answer…

P.S. The above explanation is based on, “Respect for Law”. In many cases we see some establishments avoid this and take their chances. However, we should always approach with the simple truth of “Respect for Law”.