Nagpur: Teachers Entitled to Gratuity Benefits
A teacher is an 'employee' and is entitled to service benefits like gratuity, the Bombay High Court has ruled, rejecting arguments that teachers are not employed in 'managerial' or 'administrative' capacities. The ruling came as a relief to a 65-year-old Pune-based college teacher after the Nagpur bench of the Court dismissed an appeal by an educational institution challenging an order for payment of gratuity claims to him.
"There is no escape but to hold that a teacher is an 'employee' within the meaning of Section 2(e) of the Payment of Gratuity Act, 1972, and hence, its provisions are applicable to him," a single-judge bench of the court comprising Justice Ravi Deshpande observed here. Noting that the Legislature has amended the definition of 'employee' under Section 2(e) of the Payment of Gratuity Act, 1972, with effect from April 3, 1997, the High Court said this is in tune with the observations made in a Supreme Court judgment.
"The objects and reasons of such an amendment make the definition of the legislature very clear to apply the provisions of the Act to teachers also," it said. The High Court also mentioned that the amended definition is wide enough to cover the category of teachers for the purpose of applicability of the Act. "There is no challenge to the judgments and orders passed by the authorities (controlling and appellate) on merit. Hence no fault can be found with the view taken by the authorities," it said.
The Court dismissed the petition filed by Vidarbha Youth Welfare Institution (Society), an educational institution, challenging the order of Assistant Labour Commissioner (controlling authority), Amravati, directing it to pay a gratuity of Rs 3.5 lakh with interest amounting to Rs 1.2 lakh to Pradip Kumar Lambhate. The judge also asked the petitioner society to pay an additional Rs 27,872 as interest at 10 percent per annum.
Applicability of the Payment of Gratuity Act, 1972 on Teachers
In this article, I have tried to analyze the Payment of Gratuity Act, 1972, evaluate its applicability to teachers, and identify the ceiling limit of the payment of the gratuity amount.
Before I proceed to deal with the issues as mentioned above, let us understand the legislative intent in framing this Act:
• The expression 'gratuity' itself suggests that it is a gratuitous payment given to an employee on discharge, superannuation, or death. It is a sort of financial assistance to tide over post-retiral hardships and inconveniences. Gratuity, in a sense, is a gift, especially for services rendered.
• It has now been universally recognized that all persons in society need protection against loss of income due to unemployment arising out of incapacity to work due to invalidity, old age, etc. For the wage-earning population, security of income when the worker becomes old or infirm is of consequential importance. The Act is a piece of social welfare legislation, and the provisions contained in the Act are in the nature of social security measures like employment insurance, provident fund, and pension.
• The Act accepts, in principle, compulsory payment of gratuity as a social security measure to the wage-earning population in industries, factories, and establishments. Thus, the main purpose and concept of gratuity are to help the workman after retirement.
Now I proceed to deal with the issue of whether or not the provisions of the Payment of Gratuity Act, 1972, are applicable to the educational institution, and if applicable, whether it is applicable to teaching or non-teaching employees or both.
The Payment of Gratuity Act, 1972, has been made applicable to the Educational Institutions via the following notification, which is reproduced herein below:
Applicability of the Payment of Gratuity Act, 1972, in Educational Institutions
‘Notification No. 5 - 42013/1/95 - SS II Dated 3rd April 1997 - In exercise of the powers conferred by Clause (c) of Sub-clause (3) of Section 1 of the Payment of Gratuity Act, 1972 (39 of 1972), the Central Government hereby specifies the educational institutions in which ten or more persons are employed on any day preceding 12 months as a class of establishments to which the said Act shall apply with effect from the date of publication of this notification:
Provided that nothing contained in this notification shall affect the operation of the notification of the Ministry of Labour S.O.239 dated 8th January 1982’
As per the Notification and precedents cited above, it is clear that the provisions of the Act, insofar as they may relate, are applicable to the Educational Institutions (subject to certain conditions).
Now, let us move to the next part of the issue, i.e., whether it is applicable to teaching employees. Before we proceed with this issue, let us consider the relevant law:
"Employee" means any person (other than an apprentice) employed on wages, in any establishment, factory, mine, oilfield, plantation, port, railway company, or shop to do any skilled, semi-skilled, or unskilled, manual, supervisory, technical, or clerical work, whether the terms of such employment are express or implied, and whether or not such person is employed in a managerial or administrative capacity, but does not include any such person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity.
The notification cited above, being very ambiguous to the extent that it did not specify which categories of employees in an educational institution will be entitled to gratuity, created a lot of ambiguity for many years as to whether a teacher is entitled to gratuity under the Payment of Gratuity Act, 1972, or not. High Courts in India gave contradictory views, which added to the ambiguity; however, I have not discussed the same as the issue has been settled by the Supreme Court later.
The issue of the applicability of the Act to the teachers was discussed in detail in the case of Ahmedabad [P.] Primary Teachers' Association v/s Administrative Officer – 2004 I CLR 495, wherein the Hon'ble Supreme Court held that teachers are not entitled to gratuity under the Act, in view of the fact that teachers do not answer the description of "employee" who are "skilled", "semi-skilled" or "unskilled". The Hon'ble Court observed that a teacher is not performing any skilled, semi-skilled, or unskilled manual or advisory, technical work as per section 2(e) of the act and thus is not entitled to gratuity under the Act.
The Supreme Court observed that non-use of wide language similar to the definition of "employee" as is contained in section 2(f) of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, reinforces the conclusion that teachers are not covered in that definition.
The Hon'ble Supreme Court, however, in paragraph 26 of the Judgement observed as under:
"Our conclusion should not be misunderstood that teachers, although engaged in the very noble profession of educating our young generation, should not be given any gratuity benefit. There are already in several States separate statutes, rules, and regulations granting gratuity benefits to teachers in educational institutions which are more or less beneficial than the gratuity benefits provided under the Act. It is for the Legislature to take cognizance of the situation of such teachers in various establishments where gratuity benefits are not available and think of a separate legislation for them in this regard. That is the subject matter solely of the Legislature to consider and decide."
The Central Government, in its wisdom, tabled a Bill in Parliament [BILL No: 90 of 2007] on 7th September 2007, proposing to widen the definition of "employee" in order to extend the benefits of gratuity to the teachers and therefore to amend Section 2[e] of the Act.
The proposed amendment sought to delete the words, "skilled", "semi-skilled" or "unskilled", “supervisory”, “technical” or “clerical work” and classify the work in only two categories “manual or otherwise”.
'(e) "employee" means any person (other than an apprentice) who is employed for wages, whether the terms of such employment are express or implied, in any kind of work, manual or otherwise, in or in connection with the work of a factory, mine, oilfield, plantation, port, railway company, shop, or other establishment, to which this Act applies, but does not include any such person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity;'.
The proposed Bill was passed by both the Houses and the presidential assent was received on 31st December 2009. The gazette Notification was also published on the same date. Hence now it is settled that the teachers are beneficiaries of the provisions of the Payment of Gratuity Act, 1972. In fact, the Act by amending Section 13 has also nullified the effect, if any, due to the judgment of the Hon'ble Supreme Court had on payment of gratuity.
Now, let us come to the second issue of the ceiling limit of the payment of the gratuity amount. The Act, via Sub-Section 3 of Section 4, states that the amount of gratuity payable shall not exceed the limit of Rs. 350,000 (Three Lacs Fifty Thousand). This amount was fixed with effect from 24th September 1997. Thereafter, the Central Government has received representation from trade unions and individuals to remove or enhance the upper limit on the maximum amount of gratuity payable under the Act.
The Central Government, based on representation and consultation with the stakeholders, proposed to enhance the ceiling limit on the maximum amount of gratuity payable under Sub-Section 3 of Section 4 to Rs. Ten Lakhs. Accordingly, it moved a Bill in Parliament [Bill No: 49 of 2010] on 8th April 2010. The said Bill has been passed by the Parliament and has also received the assent of the President on 17th May 2010. The Gazette Notification was published on 18th May 2010. Therefore, it is concluded that the maximum amount of gratuity payable under the Act is now Rs. Ten Lakhs.