Payment Of Gratuity - Payment Of Grautity - CiteHR
Umakanthan53
Labour Law & Hr Consultant
Apex Management
Labour Laws Consultants
+1 Other

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I have a query regarding gratuity. If the management of any organization changes then who is responsible for payment of gratuity to the employee? The old management or new management?
Can the old management clear all the dues of gratuity of the employees before the process of transfer to new management is done?
Do the employee have any legal rights to get the gratuity from old management before or after the process of transfer.
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Dear Rajan,

By the change of ownership, the relationship of employer and employees subsists and the new employer can not escape from the liability of payment of gratuity to the employees. So held the hon'ble High Court of Kerala in Pattathurila K. Damodaran v V.M.Kassim Kanju [ 1993 (1) LLJ. 1211 ].

To understand the principle behind this reasoning, it is better to refer to section 25FF of the Industrial Disputes Act,1947 which deals with the effect of transfer of management of the establishment from the existing employer to another on the service of the existing employees. Sec.25FF clearly lays down that when the management of an existing establishment changes either by agreement or operation of law, every employee with a continuous service of not less than one year in the establishment before transfer is entitled to notice and compensation in accordance with the provisions of Sec.25F as if he/she is retrenched. However, this is not applicable subject to the following three conditions - (a) when the services of the employees stand uninterrupted because of the transfer (b) the service conditions do not become less favourable after the transfer and (c) whether under the terms of transfer or otherwise, the new employer is liable to pay retrenchment compensation to the workmen in the event of retrenchment on the basis of the entire uninterrupted service. It is like the analogy of a ship - the sailors may change but the ship remains the same and goes on.

Therefore, any employee remaining in the service of the establishment after the change or transfer of its management is legally entitled to stake the claim for gratuity only against the new management in the event of the termination of his employment.
Dear Rajan, No; you can’t since the transfer is over and your services are continued under the new management.
If the previous management has not paid the share of gratuity then can the employee take any legal action against them? If yes, then can you provide me the references for the same? Thanks.
Dear Mr Rajan,
Mr. Umakanthan M has nicely resolved the issue but why are you so keen for legal action against previous management when the liability to pay gratuity is shifted on to the new management.
PK Sharma
Hello, respected seniors, My query is whether Industrial Dispute act 1947 is applicable to educational institutes? I forgot to mention in my first post that I work in a college imparting medical education (private institute) affiliated to University. When I read the above mentioned act, it was not mentioned anywhere that it is applicable to colleges also.
Whether the Gratuity act is different for educational institutes and if so where I can get the details as mentioned in my first post.
Please clarify.
Thanks in advance.
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