Gratuity Calculation After a 4-Year Lockout: How Should It Be Handled?

Dear All,

Could you please help me out with the following question: If a company is under lockout for 4 years and after that another group of companies has taken over this company, then how do we calculate the gratuity of the employees? Is it calculated for the last four years as well?

Kindly let me know your feedback as soon as possible.

Thanks,
BALA

If the new company is taking over the old company's employees and providing continued service, then they have to bear the gratuity liability for 4 years. Otherwise, if the new company does not retain the old employees, the liability of paying gratuity to its employees falls back on the old company.

Rashmi

Thanks Rashmiji for your kind information. I agree with it. However, the old company was in a lockout, and nobody had attended the duty during this period. My question is, will this period be considered as continuous service for the calculation of Gratuity? If yes, then will they be liable for other dues such as paid leave, medical benefits, etc.

Please provide your advice as soon as possible.

Thank you,
Bala

In a situation where there is no work due to the non-functioning of the establishment, the normal rule is "no work - no pay," which is typically applied as a measure to settle disputes between the employer and the workman. However, in extraordinary situations like a "strike" or "lock-out," the question of wages for the period of no work depends on the legality and justifiability of the strike or lock-out. According to Section 24 of the Industrial Disputes Act, 1947, a strike or lock-out is deemed illegal if declared or commenced in contravention of Sections 22 or 23 of the Act. Similarly, a lock-out in contravention of Section 23 would not be illegal if it is declared as a consequence of an illegal strike.

In the absence of vital information such as the origin of the dispute leading to such a long lock-out, the decision of the adjudicating authority (if any, in the event of the dispute referred for adjudication), the circumstances leading to the takeover of the defunct establishment by another company, and its terms, it is not possible to provide a concrete answer to your query. This is due to the provisions of continuous service defined under Section 2A of the Payment of Gratuity Act, 1972.

Regards