Gratuity Confusion: Should We Approach State or Central Authority for Our Claims?

Gratuity Issue – Clarifications Required:

Our company, XXX, has its head office in Mumbai, which was established in the 1960s. It initially started producing molasses-based chemicals in Maharashtra, but this operation was closed in the 1990s. In 1972, XXX launched another company for different products in Madras. During the 1990s, additional products were added to the same complex. In 2002, the company name was changed to YYY. Since 2002, XXX has maintained its corporate office in Mumbai and a manufacturing facility in Chennai. This manufacturing facility was closed by December 2012, and permission was obtained from the TN Labour Ministry to close the company, agreeing to settle employees by paying compensation after selling the land. We, 84 officers, are approaching the Control of Authority, Labour Commissioner office, Chennai.

1) We are unclear whether we should approach the Control Authority of the State or Central Government since the head office is in Mumbai and the factory was in Chennai. The company has no other business unit.

2) Also, we, the officers (Management Category), were eligible for 30 days of gratuity per year of service as per appointment, promotion letters, and even by the letter given by the Chairman after closing the company. Can the Gratuity Control Authority ensure we receive 30 days of gratuity, or is it only 15 days as per the Act?

Can anyone clarify the above two points?

Gratuity entitlement is 15 days per six months of service, but management is at liberty to pay more. In this case, the company has committed to a higher figure in writing. Q1 is not clear.

Payment of Gratuity Act is an establishment-based enactment; therefore, you have to apply for gratuity in the place where you have worked. If you are entitled to a higher amount of gratuity, it is payable as per the concerned agreement. However, if the PGA Authority awards only 15 days of completed year of service gratuity, you can enforce the agreement by approaching the appropriate government for payment of the remainder amount of gratuity.

In your case, the Appropriate Authority is the Central Govt. You can approach the Central Labour Commissioner because you have an office or factory outside one state.

If the terms of appointment say that managers are eligible for 30 days of gratuity, you will receive it. The appropriate authority cannot say that they cannot pass an order for the payment of 30 days' gratuity because the law states that there is no bar on any employee to receive a more beneficial amount.

I beg to differ from the view of my learned friend Mr. Madhu regarding the Controlling Authority for the purpose of disposing of the gratuity claims of the employees of the factory in Madras, which is now closed. Although the company has its registered office in Mumbai, which may be considered an establishment under the State's S&E Act, when the need for gratuity claims arose, it had only one factory in Tamil Nadu, which is now closed. Additionally, its sole manufacturing unit in Madras was closed with the permission of the Government of Tamil Nadu, being the appropriate Government under the ID Act, 1947. The gratuity claim stems from the closure permitted by the Government of Tamil Nadu and the assurance provided by the management beforehand.

Hence, I recommend that the employees of the closed Madras factory:

1) Should approach the Controlling Authority appointed by the Government of Tamil Nadu, which also serves as the appropriate Government under the P.G Act, 1972.

2) Section 4(5) of the P.G Act, 1972, upholds the employees' right to receive better gratuity terms under any award, agreement, or contract with the employer. Therefore, in case of any retreat by the company currently, if the appointment letter includes improved terms, it can be considered a contract, and a higher gratuity amount can be claimed.