Gratuity Eligibility After 4 Years 11 Months: What Can I Do If My Request Is Denied?

Dear Team, I joined the company in Anantapur (Andhra Pradesh) on 3rd September 2019 as an Assistant Manager. I just resigned from the company a few days back (5th June 2024), and my last working day is 29th July 2024. Will I be eligible for gratuity?

I work in an automobile manufacturing company five days a week, with timings from 07:45 AM to 05:51 PM. What are my options if they plainly deny my gratuity request, saying I haven't completed five years?

Thanks,
Harish

Interpretations of Section 2A of the Payment of Gratuity Act

Section 2A of the Payment of Gratuity Act has been interpreted differently. One interpretation is that if the employee has worked for 240 days (190 days for establishments that work for less than 6 days a week) in the fifth year, that year shall be treated as one year. If that interpretation is taken, you will get gratuity.

Another interpretation is that in order to be eligible for gratuity, the basic condition is the completion of five years of service, with each year constituting 240 days/190 days, as the case may be, in each year of 12 months. If this interpretation is taken, then you will not be entitled to get gratuity. There are a few High Court rulings in support of the first interpretation, though there is no Supreme Court verdict in support of it. Therefore, if your establishment considers the second interpretation, that is, completion of 5 years for eligibility, and then working of 240/190 days in each year for entitlement and computation, then you may have to challenge it before the Controlling Authority quoting these verdicts.

Considerations Before Approaching a Controlling Authority

Approaching a Controlling Authority or taking a previous employer to that extent may spoil the relationship, and the employer may retaliate by giving negative remarks. Therefore, such an action is not recommended if you are planning to continue with service in the private sector. Obviously, if you are selected for any government opening or get an offer from any PSU or are planning to work independently, then you can try the option of fighting.

Eligibility for Gratuity Under the Payment of Gratuity Act, 1972

As per Sec. 4 of the Payment of Gratuity Act, 1972, gratuity is payable to an employee upon the termination of employment after rendering continuous service of not less than five years, either on superannuation, retirement, death, or disablement due to accident or disease. However, completion of five years is not mandatory in the case of termination of employment due to death or disablement.

Definition of Continuous Service

Continuous service is defined under Sec 2A of the Act, which states that gratuity shall be paid if an employee works for 190 days in the case of a mine or 240 days in other cases.

Case Law: Mettur Beardsell Ltd Vs. The Regional Labour Commissioner

In the case of Mettur Beardsell Ltd Vs. The Regional Labour Commissioner (1998 LLR 1072), the Madras High Court clearly held that gratuity is payable if an employee works for 4 years and 240 days or 190 days, as applicable, in the fifth year and does not necessarily have to complete five years in full term. There are a few other case laws as well. However, there is no Supreme Court verdict on this.

Steps to Take if Gratuity Claim is Rejected

If the management rejects your gratuity claim, you may approach the Authority under the Act and file a claim petition for payment of gratuity. It will be allowed, and you can claim without any issue.