Gratuity Dilemma: How to Calculate for a Worker with Varied Employment Status?

Dear sirs, a daily wage worker has worked in my factory as a casual worker for 3 years, and in none of those years has he worked for more than 240 days. Subsequently, he was made permanent, and now he is retiring. For which period should I calculate gratuity?

Case History: Netram Sahu v. State of Chhattisgarh

As an answer to your query, I am reproducing another case history, similar to your query.

Thanks.

QUOTE

March 27, 2018

Case name: Netram Sahu v. State of Chhattisgarh

Date of Judgement: March 23, 2018

The question, which arose in the instant case, was whether the appellant can be held to have rendered qualified service, i.e., continuous service as specified in Section 2(e) read with Section 2A of the Payment of Gratuity Act, so as to make him eligible to claim gratuity, as provided under the Act, from the State.

Section 2A of the Payment of Gratuity Act defines "continuous service."

In the case, the appellant employee had rendered 25 years and 3 months of service (22 years and 1 month as a daily wager and 3 years and 2 months as a regular work charge employee). However, the appellant was not paid the gratuity amount by the State after his retirement on the grounds that the appellant could not be held eligible to claim the gratuity amount because, out of the total period of 25 years of his service, he worked 22 years as a daily wager and only 3 years as a regular employee.

The Supreme Court, in view of the facts and circumstances of the case, directed the State to release the payment of the gratuity amount and made the following observations:

- That the appellant had actually rendered service for a period of 25 years. Having regularized the services, the appellant became entitled to claim its benefit for counting the period of 22 years regardless of the post and the capacity in which he worked for 22 years.

- That there is no provision in the Act which disentitles the appellant from claiming the gratuity or prohibits the appellant from taking benefit of his long and continuous period of 22 years of service, which was rendered by him prior to his regularization for calculating his continuous service of five years.

- That in the circumstances of the case, if the appellant is denied relief, then the same would be a travesty of justice. The question as to from which date such services were regularized was of no significance for calculating the total length of service for claiming the gratuity amount once the services were regularized by the State.

Takeaway: The Supreme Court in the case settles the legal proposition that while determining "continuous service" under Section 2A of the Payment of Gratuity Act, the question of whether the services were regularized or not is of no significance.

UNQUOTE

Dear Murali-Shekar, simple and understandable wording for the answer to your query is as follows:

Date of joining and service calculation

The date of joining of the worker in your establishment is that of a daily wage worker. The total years of service will start from the date of joining as a daily wage worker. The years in which the worker did not work for 240 days (including sickness, accident, leave, layoff, strike, or a lockout or cessation of work not due to any fault of the employee concerned) will not be considered for gratuity, irrespective of whether his services were regular or otherwise.

Court case reference

I remember a case that I came across many years back, but I do not have the details of it. In that case, the Honorable court stated that the breaks given by the employer are not the fault of the employee concerned. Therefore, the employee is eligible for gratuity for those years as well in which he could not complete 240 days.