Understanding Continuous Service in the Gratuity Act: Is Mr. X Eligible?

Dear Friends & Seniors, I need some clarification on the continuous service term used in the Gratuity Act. I will explain my confusion with the help of an example.

An employee named "X" joined a company on 01/01/2013. He left his job on 30/08/2019.

Year-wise payable days (PD) or days for which he was paid, including paid leave and holidays but excluding unauthorized absence and leave without pay of Mr. X, were as follows:

Year PD
2013 305
2014 350
2015 333
2016 230
2017 305
2018 299
2019 240

Question 1: Was Mr. "X" in continuous service?

Question 2: If yes, then for how many years?

Regards,
Rahul Sindhwani

An employee shall be said to be in continuous service for a period if he has, for that period, been in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave (not being absence in respect of which an order treating the absence as a break in service has been passed in accordance with the standing orders, rules, or regulations governing the employees of the establishment), lay-off, strike, or a lock-out, or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was rendered before or after the commencement of this Act.

For the purposes of clause (2), the number of days on which an employee has actually worked under an employer shall include the days on which:
(i) he has been laid-off under an agreement or as permitted by standing orders made under the Industrial Employment (Standing Orders) Act, 1946 (20 of 1946), or under the Industrial Disputes Act, 1947 (14 of 1947), or under any other law applicable to the establishment;
(ii) he has been on leave with full wages, earned in the previous year;
(iii) he has been absent due to temporary disablement caused by an accident arising out of and in the course of his employment; and
(iv) in the case of a female, she has been on maternity leave; so, however, that the total period of such maternity leave does not exceed twelve weeks.

From the records shown, the Employee is in continuous service. Assuming the number of days is calendar years, as his date of entry is 01-01-2013, he is eligible for 7 years of gratuity (50% of the last drawn salary per year of service).

You have given a lengthy reply, quoting the extract of the Gratuity Act. Nevertheless, in the present case, the poster has mentioned the number of days for which he was paid. From the year 2013 until the current year, i.e., 2019, the employee had unauthorized absences, and he was not paid salaries and wages each year. Against this backdrop, how can the service be construed as "continuous"? Can you please explain?

I am writing this as a learner; therefore, please do not take my question otherwise.

Thanks,

Dinesh Divekar

I agree with your point. For any unauthorized absence, the management ought to have initiated disciplinary action as per standing orders and concluded a break in service, if any, in writing, and it should have been communicated to the employee. Treating the absence as a break in service should have been done in accordance with the standing orders, rules, or regulations governing the employees of the establishment. In the absence of any such documentation, the employee is eligible for gratuity for that year if they had put in 240 days.

Warm regards,

Dear Mr. Alexander & Mr. Divekar,

Thank you for the information provided. I have some doubts which I would like to share.

1. In 2016, Mr. X received payment for only 230 days from the company (matter not related to layoff). In such a case, would it be considered as a complete year of service or not?

2. If not, can we consider his service as 6 years rather than 7 for the payment of gratuity?

Regards,
Rahul Sindhwani

I can answer the question only if I get the following information:

1) In 2016, how many days was the factory working at full strength of workmen?
2) The employee received payment for only 230 days. What happened to the remaining days? Was he on leave without wages, or on any medical leave?

Thank you.

If you have not initiated any action for unauthorized absenteeism of X, then it is deemed 'authorized leave without wages'. "Leave, absence from duty without leave (not being absence in respect of which an order treating the absence as a break in service has been passed in accordance with the standing orders, rules, or regulations governing the employees of the establishment)." Then continuity of service is established.