(1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years,
(6) Notwithstanding anything contained in sub-section (1),-
(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 shall be wholly 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.
Comment: "The right to gratuity is also a statutory right. The appellant was not charged with nor was given an opportunity that his gratuity would be withheld as a @page-SC1927 measure of punishment. No provision of law has been brought to our notice under which, the. President is empowered to withhold gratuity as well, after his retirement as a measure of punishment. Therefore, the order to withhold the gratuity as a measure of penalty is obviously illegal and is devoid of jurisdiction.": D.V. Kapoor v. Union of India AIR 1990 SUPREME COURT 1923
This is the extract of the Bare Act.
Company cannot deny gratuity to him.
23rd July 2018 From India, Pune
23rd July 2018 From India, Madras
23rd July 2018 From India, Kumbakonam
Greetings. I'm getting an opportunity to interact with you after long time, sir.
The query is raised by and on behalf of management and not by employee. Your advised is good for employee.
It seems you made a mistake while responding to the query.
I have drawn your attention only with the intention to correct yourself.
23rd July 2018 From India, Mumbai
I was thinking that the query was raised by an employee.
It is the basic responsibility of the HR available in the organization to guide the management about the statutory compliance. Even the employee terminated on disciplinary ground or unsatisfactory performance, the Gratuity must be paid.
24th July 2018 From India, Kumbakonam
The query has been answered very well by Shri Nathrao Ji.
Ask your management to go through "The Payment of Gratuity Act 1972" especially Section 4; and pay the gratuity payable. This will help you save some litigation cost :)
24th July 2018 From India, Delhi
It is ill-advised decision of the management and there seems to be more than that meets the eye in stopping the gratuity of the employee who has put in 5 years in the employment. They cannot fight the case[if it goes to such an extent] and it might only spoil the goodwill of the company if it is dragged to the labour court.
As already put out by one of our esteemed members by way of Bare Act, it is pretty clear and straight forward case of not heeding to the rules if the management continues to stick to their illogical conclusion.
Thanks and Regards
24th July 2018 From India, Hyderabad
I appreciate all the answers mentioned in response to my query. I will be obliged if consider one more similar case. The only change is that the employee had been terminated because of his wrongdoing. The employee has already completed 5 years with company and was terminated very next day. He shared the company's confidential data with the competitor company as well as he transferred the sales/client confidential data to his personal mail id against the company policy.
So, in this case, can the management hold the gratuity of that employee?
25th July 2018 From India, Delhi
All the employees of your establishment are facing termination by mangement on very next day of 5 years of service tenure! It gives wrong understanding or may be coincidence.
In my opinion they sholud not be paid single penny, provided they are proved guilty for misconduct as per your company standing order and terminated after due trials as per the norms of ID Act.
The senior and learned members have given very accurate opinion for the matter.
25th July 2018 From India, Mumbai
You said the employee had been terminated because of his wrongdoing.
You are HR Executive. It will not be an appropriate to ask you a question what do you mean by "Termination".
Is this termination followed by due process as per law? Have you proved the wrongdoing?
It is your allegation on the employee that he is engaged in wrongdoing. You need to prove it by applying principal of natural justice.
Also as per recent judgement of HC Mumbai, Gratuity cannot be forfeited without a proper show cause notice and the proof of loss to employer. (WP No. 2749 OF 2004 in Nanubhai Nichabhai Desai vs The Dy.General Manager, Uco Bank).
There are similar judgement by other HCs also.
According to Karnataka HC (LLR Karn. HC 48) and many other HCs, forfeiture of gratuity only when dismissal is for prescribed misconduct under the Act.
26th July 2018 From India, Mumbai
The thought of holding gratuity who has complied the primary condition of completion of 5 yrs.is itself wrong decision by employer.
The cause of removal is a lame excuse. whatever the reason not to bear him any more on performance basis we won't comment. But denial of payment of gratuity is challengiable..and you are inviting trouble even the worker challenge s his unlawful removal also along with non payment of gratuity benefit..Mere poor performance can not be a causefor denial of gratuity.
There was no single incident of his mis behaviour loss of charishma of your company reputation
So you have to pay gratuity and other removal benefits unconditional ly..
20th August 2018 From India, Nellore
Cleaning up mess can be tried but should not try to improve cleanliness in drainage.
25th August 2018 From India, Bangalore
I am agree with all the members who have advised not to hold Gratuity amount, since employee already have worked long term his performance cannot be consider by measuring 5 - 6 months work, that employee have contributed from long time.
6th September 2018 From India, Pune
We should not hold the Gratuity amount, its a legal issue and if you needed to any settlement, you can hold that amount except Gratuity.. If you are not payable to employee then you needed to pay along with Interest to the employee as per the Labour Law.....
9th September 2018 From India, Bangalore
The forfeiture of gratuity can be done as per the provisions of Gratuity Act. The Contract of employment should also to be considered and it should be very specific; when an employee violates the terms and conditions of employment to what extent the damages claimed from his future dues and the proper enquiry should be made by following the principles of natural justice.
The Gratuity Act does not permits forfeiture of gratuity for disclosing any trade or business information to competitors or others unless the disclosure of information results in much loss to the business. The action of an employee resulted in set-back of business should be proved otherwise the forfeiture will become an act of victimization.
If an employee makes a claim before ACL-Gratuity, the authority will direct to pay the amount along with simple interest.
6th October 2018 From India, Madras