Check out this blog to know about gratuity frauds, how it affects an employee, measures to be taken against such frauds, and other details. Also, learn about the consequences and process of justice.

A monetary benefit received by an employee for his/her services provided to the organisation is known as gratuity. This benefit is provided by the employer. Paid under the Payment of Gratuity Act, 1972, there is no fixed amount or percentage which an employee will receive. Gratuity is paid at the time of the culmination of service (resignation or retirement) provided that at least 5 years of continuous service to the organisation precedes it.  In case of death or disablement, the rule is relaxed. Some employers are involved in gratuity frauds also.

When Is an Employer Required to Pay Gratuity?

The Act regarding payment of gratuity for employees was introduced in 1972. It covers all employees working in mines, ports, plantations, companies, and others. Unlike the provident fund in which both the employer and the employee contribution, the gratuity amount is borne by the employer. An employer must pay gratuity to the employee if the following conditions are met:

• Minimum years of service- 5 years
• Minimum number of employees- 10 employees

Payment of Gratuity by the Employer

An employer gets a 30-day window after the culmination of service of an employee to pay the gratuity amount. In case the employer fails to pay the amount within the specified period, he is expected to pay simple interest as stipulated by the Government on the gratuity proceeds. The employer can also be charged for gratuity frauds if an employee files a complaint. The gratuity amount should be paid in cash unless the employee, legal heir of the employee, or nominee requests otherwise. 

Role of an Employee in Receiving a Gratuity

An Employee Must:

• The employee must send an application (Form I) to the employer requesting payment of the gratuity within 30 days of exit from the job
• If a nominee entitled to the gratuity amount on behalf of the employee gives an application, it should be submitted in Form J

The employer must verify the application and issue a notice in Form L mentioning the gratuity amount to be paid if a claim is valid and admissible. He must also mention a date that is within the 30 days. The notice then should be sent to the Controlling Authority to do the needful. 

Note: The employee’s application does not mean that the employer’s liability starts after the application arrives since, under the Act, the employer must pay the gratuity amount. 

How to File a Complaint About Non-payment of Gratuity/ Gratuity Frauds?

• Different controlling authorities are established in different areas to ensure effective implementation of the Payment of Gratuity Act, 1972
• The employee must place his case with the Controlling authority (CA)
• The CA will issue a notice (Form O) to both parties i.e., the employee and employer. Both the parties will have to meet at the specified date, time, and venue for the case proceedings
• Since the CA has the status of a quasi-judicial body, it can adjudicate disputes of gratuity frauds
• In case the employer or his representative fails to arrive for the meeting, the case may be heard and the application determined ex-parte
• In case the employee fails to appear, the application will be disposed of
• If the result of the case is in favor of the employee, the authority may issue a notice to the employer in Form R regarding clearance of dues. 

Usually, the Asst. The Labour Commissioner of a state is appointed as the CA. The hearings regarding gratuity frauds are held in the office of the Labour Commissioner. If you are an aggrieved party, you should file a case against the employer with the CA u/s 8 of the Act. 

Let us now discuss gratuity frauds  using a case study.

Case Name: Manager, Western Coalfields Ltd. vs Mr. Prayag Modi 

Court: High Court of Madhya Pradesh, Principal Seat

Case No. W. P. No. 20795/2016

Date of judgment: 06/02/2018

Gratuity is a right of an employee which is deemed as property under Article 300 A of the Constitution. It can be withheld only under certain provisions of the Gratuity Act. 

In this case, the employer served the employee with a charge sheet followed by a departmental inquiry. He was found guilty of theft, dishonesty, and frauds. The employer then decided to dismiss him from service. 

Note: If an employee is found to indulge in anti-organisational activities, he/she is not entitled to receive gratuity. 

An industrial dispute raised by the employee was already pending in the Industrial Tribunal, so the employer applied with the ID to terminate the workman’s service. After the permission was granted, the workman was removed from service. The workman made several attempts, but both his writ petitions and writ appeal were dismissed. He was also not entitled to the gratuity benefit anymore. 

Since no opportunity was provided to the employee before forfeiture of gratuity, it became a point in favor during the court proceedings. According to the Constitution, it is an asset, and it is earned by the employee, proving long service to the employer. The only allegation against the employee was related to negligence. The verdict of the Court went in favour of the employee. 

Conclusion

Gratuity frauds are a major issue faced by employees these days. To deal with this, the government has set up different Controlling Authorities where the employees can seek redressal. Go through this article to know about the gratuity rules and how to protect your interests. We hope this article has helped answer all your queries relating to non-payment of gratuity or gratuity frauds.  

Read more,

• How We Can Withdraw Gratuity Amount?
• Calculation of Retirement and Death Gratuity in India
• Can We Claim Gratuity Amount by Employer in India?