Gratuity If Continuous Five Years With Same Contractor?

Respected All
I am working on contract basis in a manufacturing company through a Contractor. I have a query in my mind that whether an employee is eligible to get the gratuity amount if he works continuously five years with a same contractor? Whether contractor is liable to pay a gratuity amount to that employee? What if he denies to pay the same? Please I need your valuable reply....
Thanks

Dear friend,
Basically, as per the provisions of the Payment of Gratuity Act,1972 the employer under whom an employee serves for not less than a continuous service of five years, the employer is bound to pay him gratuity in case of the employee's termination of employment other than dismissal arising out of any misconduct involving riotous behaviour, moral turpitude if the Act is applicable to his establishment. There is no distinction whether he is a contractor or otherwise.

You are eligible for gratuity if you have worked continuously for 5 years or more.
If contractor does not pay gratuity then principal employer is liable to pay, which the principal employer can recover the amount from contractor later.

Dear Mr. Ritesh,
If member has worked with different establishment,but same contractor, total service more than 5 yrs, which establishment is responsible to pay Gratuity ?
Thanks,
Vidyadhar Bhat

In that case contractor is liable to pay. Responsibility of principal employers come only when the contractor fails to fulfill its obligation.

I would like to request Mr.Vidhyadhar to go through my answers to the thread "35 Interesting Questions relating to Contract Labour". Continuous and unblemish service under the same employer is the most essential ingrediants for entitlement of gratuity to an employee on the normal termination of his employment. Since contract labour is a system of indirect employment involving the existence of dual or triple layers of employers, even the higher Judiciary have divergent views on the ultimate liability to pay gratuity to a contract labour.

Respected All
Mr. Vidhyadhar Sir rightly put a query even I had also a same query.
Umakanthan Sir replied on the query raised by Vidhyadhar sir that "even the higher Judiciary have different views on the liability to pay gratuity to a contract labour". Then Sir still the confusion is continue that if higher judiciary have different opinions then what is the final answer? Who is the ultimate responsible to pay gratuity to a contract labour? In this case what we are expected to do?

As is rightly put by Resp.Umakantan sir, irrespective of number of layers running to principal employer, for the contract worker the CONTRACTOR is to be construed as Principal employer for the purpose of Gratuity and the worker to be paid by the contractor alone, whether he is getting or not from the company where he is running the contract.
Rgds

Dear RKORE77,

It is my considered and humble opinion that any question of law could be understood and answered in the right perspective only by one's own meticulous reading of all the available judgments though contradictory to one another on the question. That's why I intentionally refrained from a sort of pin-point answers to the queries of both Vidhyadhar and yourself.

Now, let us make a brief analysis of the following judgments on the issue as far as known to me so far.

(1) Cominco Binani Zinc Ltd v. Pappachan [ 1989 LLR 123 - Kerala High Court ]

(2) Madras Fertilizers Ltd v Controlling Authority under the P.G Act [ 2003 LLR 244 - Madras High Court ]

(3) Mettur Thermal Station v Appellate Authority under the P.G Act [ 2012 LLR 1160 - Madras H.C ]

In the first one the questions before the Court were the liability of payment of bonus and gratuity to the contract labour employed in the factory of the Principal Employer. Since the claim was based on the settlement between the contractor and the union of contract labour, the hon'ble Kerala High Court refused to fasten the liability on the PE as he was not a party to the said settlement based on the narrow interpretation of sec.21(4) of the CLRA Act,1970.

In the second case, the hon'ble Madras High Court undertook a detailed analysis of sec.21(4) of the CLRA Act with reference to the term "wages" as defined u/s 2(vi) of the Payment of Wages Act,1936 particulary elaborately interpretting clause (d) of the definition and ruled that the PE is liable to pay gratuity to the contract labour by virtue of the vicarious liability imposed by the section in case of failure by the contractor.

The third one followed the ratio decidendi of the second case law.

Therefore, the inescapable conclusion is that a contract employee, working for a principal employer, can stake a strong claim for gratuity directly from the PE at the time of termination of his employment if he is otherwise qualified in the event of contractor's failure. Since "gratuity" also falls within the ambit of the definition of wages under the PW Act,1936 and the vicarious liability created by sec.21(4) of the CLRA Act,1970 on the PE for payment of wages and other benefits applies to payment of gratuity too, it is advisable for all the PEs engaging contract labour through man power agencies and other contractors to include the amount of gratuity in the CTC of the contract labour on annual/ pro rata basis irrespective of the length of service.

I have question. Contract worker worked for a fixed contact (3 + 3) for 6 years. But the main contractor engaged two sub contractor one for 4 years and another for 2 years. What about GRATUITY. Any case law.