Can We Withhold Gratuity for an Employee Who Discouraged Overtime? Seeking Advice

We have terminated an employee for "instigating other employees not to come for overtime" (there was a clause, as agreed upon by the union in 18(1) settlement, to come for overtime during urgent production requirements). This resulted in a loss of Rs 20 lakh (production loss), and the company was unable to deliver the product as committed to the customer.

For the above-stated reason, can we forfeit his gratuity payment under the ambit of Section 4(6)(b) of the Gratuity Act 1972? Please advise.

Forfeiture of Gratuity: [Section 4(6)]

1. Forfeiture to the extent of the damage/loss: If the services of an employee have been terminated for any act, willful omission, or negligence causing any damage or loss to, or destruction of, property belonging to the employer, then the gratuity shall be forfeited to the extent of the damage or loss so caused.

2. Wholly or partial forfeiture of gratuity: If the services of such an employee have been terminated for riotous or disorderly conduct or any other act of violence on his part, or if the services of such an employee have been terminated for any act which constitutes an offense involving moral turpitude, provided that such offense is committed by him in the course of his employment, then the gratuity payable to the employee may be wholly or partially forfeited.

Have you conducted any domestic inquiry which has found him guilty of instigation?

Yes, we have conducted a domestic inquiry with a 3rd neutral party in line with the principles of natural justice. According to the findings of the inquiry officer, "he has been proven guilty of the misconduct charged against him."