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Anonymous
Hi All,
As per Gratuity law in India is governed by The Payment of Gratuity Act, 1972. Gratuity is a lump sum payment made to an employee on (a) resignation (b) termination on account of death or disablement due to accident or disease (c) retirement (d) death.
Just wanted to know what is the procedure to be followed under the situation of dismissal or disciplinary issues.
Is the Gratuity forfieted case by case basis or for all dismissal and disciplinary issues??
Regards,
Ina

From India, Gurgaon
hekarthik
46

Hai for your information
Forfeiture of gratuity:
The gratuity of an employee whose service have been terminated for any Act of willful omission or negligence causing any damage or loss to or destruction of property belonging to the employer, gratuity shall be forfeited to the extent of the damage or loss caused. The right of forfeiture is limited to the extent of damage.
The gratuity payable to an employee shall be wholly forfeited:
1. If the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or
2. If the service of such employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by him in the course of his employment.

From India, Coimbatore
executor
139

Dear Ina,
While Kathik has shared with you the relevant clauses regarding forfeiture of gratuity; do remember that following principals of natural justice is a must. Also, all such "reasons" of termination will need to be supported by records of investigation and conclusion by a competent authority. Mere notes in company records regarding "indiscipline" will not suffice.
Most common reasons of termination of an employee - even under disciplinary issues - do not fall under these categories.
Hence, forfeiture of any statutory dues is very "case to case".
Non-payment or delayed payment of gratuity can harm the employer far more than the employee. These are statutory benefits and the onus is on the company to adhere to very straight forward laws.
Gratuity has been dealt with in depth by many experts under many other threads in this forum. I would urge you to do a basic search on citeHR and go through some of those.
Thanks,

From India, Mumbai
umakanthan53
6016

Dear Ina,

M/S Karthik and Executor have well answered your questions. However, my experience as Controlling Authority and Appellate Authority under the Payment of Gratuity Act,1972 shows that most of the employers do not evince adequate interest in understanding the provisions relating to forfeiture of gratuity and land themselves in unnecessary legal trouble and therefore let me elaborate the answer further.

Why should there be a specific provision enabling the employer to forfeit the gratuity of a dismissed employee?

Gratuity is a lump sum terminal benefit payable based on certain length of blemish less service.If the termination of employment of an employee is on account of dismissal arising out of proven misconduct, his eligibility for gratuity automatically becomes questionable because of the inherent stigma attached to his ignominious exit.Indiscipline is always the root-cause for the extreme punishment of dismissal.Allowing a dismissed employee simply walk away with his gratuity will tantamount to rewarding indiscipline.Hence the specific provision u/s 4(6) of the Act enabling forfeiture.

Does dismissal per se warrant forfeiture of gratuity?

No.Only in the case of termination of employment by way of dismissal on account of any one or all of the misconducts enumerated in clauses (a) or (b) of ss (6) of sec.4.

Would it not amount to double punishment?

Certainly not. As said at the outset, blemish less service is one of the essential qualifications for entitlement of gratuity on termination of employment.

Would forfeiture be automatic along with the orders of dismissal?

No. That's the wrong impression most of the employers do have out of a cursory reading of the relevant section. The forfeiture contemplated under the Act is of two types - partial and total.Partial forfeiture should be proportionate to the loss or damage caused to the property of the employer whereas total forfeiture could be resorted to only in the case of misconducts mentioned in items (i) and (ii) of cl (b) of ss (6) of sec.4. Therefore, the employer should take an independent decision regarding forfeiture of gratuity after passing the orders of dismissal and in tune with the principles of Natural Justice, issue a notice of his decision to forfeit gratuity to the dismissed employee and consider reply if any received in this regard.

The hon'ble High Court of Karnataka held in Surjikars' Tile Works v. Union of India [ (1979)54 FJR 281] that sec 4(6) covers all major misconducts, though not all misconducts and that Parliament in its wisdom has considered that minor acts of misconduct should not disentitle the employee to gratuity. Therefore, forfeiture, as rightly said by Executor, has to be decided on case to case basis.

From India, Salem
loginmiraclelogistics
1064

Dear friends,
I appreciate the detailed clarifications provided by Mr.Umakanthan.
I may add. The appropriate authority while ordering the forfeiture or the competent authority who orders for dismissal etc. should clearly, in unambiguous terms record the reasons, whether or not the gratuity to be forfeited. If the relevant orders simply say dismissed or terminated doesn't mean automatic forfeiture. In other words only as a result of speaking orders the forfeiture should take place that too it should mention whether partial, specify 10% 20, 50% etc or in full and such cause of action should be well supported by documentary evidences, proved/ undergone conciliation procedures etc. Ensure such an action should be foolproof so that it shouldn't risk in payment of gratuity with interest when the aggrieved gains after appeals.

From India, Bangalore
loginmiraclelogistics
1064

Dear friends,
Needy may go thro' some more discussion taken place in this link:
https://www.citehr.com/272088-termin...ese-cases.html
For ready information I also attach few excerpts from the SC judgment and guidance notes on the subject.
Regards,

From India, Bangalore
Attached Files (Download Requires Membership)
File Type: pdf Why & when to forfeit Gratuity.pdf (57.1 KB, 1073 views)
File Type: doc Forfeiture of Gratuity-SC judgment.doc (73.5 KB, 702 views)

rsksesp
2

Dear Members, the views shared by the members are awesome.
In a case an employee who had involved in a misconduct when caught red handed, before conducting the procedure encrypted under the ID Act 1947, had voluntarily submitted resignation and an undertaking stating that he had involved in the said act of omission/commission and therefore, voluntarily surrenders his gratuity towards the loss sustained by the employer. Shall the employer adjust the Gratuity payable to the employee directly towards the loss as undertaken by the employee by giving a notice of forfeiture. Please clarify.
regards,
Sasikumar.R (rsksesp)

From India, Coimbatore
Labour Law Index
180

Gratuity can be forfeited if,

(a) The gratuity of an employee, whose services have been terminated for any act, willful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer SHALL BE FORFEITED TO THE EXTENT OF THE DAMAGE OR LOSS SO CAUSED;

(b) The gratuity payable to an employee may be wholly or partially forfeited—

(i) if the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or

(ii) if the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by him in the course of his employment.

As held in the case of Hindustan Times v Workmen, Gratuity cannot be totally taken away, but only such portion is taken that is the loss caused by employee’s willful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer.

See this for more Indian Labour Laws & Shram Suvidha Simplified

From India, Kolkata
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