Hello,
This is getting to an interesting but a simple point.
I write with the limitation of NOT having read wither of the judgement and on the basis ONLY of my understanding of the law on the subject and the posts in this thread!:
1) I contend that the PE is under no legal obligations to pay gratuity to an employee engaged through a contractor because no "employer-employee relationship" exists.
2) Sec 22 (?) of CLRA does obligate and empower the PE to pay wages to the employee of the contractor if the contractor has failed to pay and in such case only the PE may recover such amounts from the contractor. And since GRATUITY is NOT "wage" under any applicable law,the PE is NOT obliged to pay gratuity to employees of a contractor under any conditions.
Having said this, I raise a caution too. The way contract labour issues are handled in most organizations, it is fairly easy to prove such contracts to be SHAM and claim direct "employer-employee relationship" between the (so called) Contractor's employees and the PE and in such case, yes, the PE will be held obliged to pay gratuity to such Contractor's employees!
Further, it is interesting to take a note as to why the same logic will not work in case of ESI or PF. The clue is that even the Contractor's employees are "workers" under the Factories Act! Kindly ponder over this issue.
Regards
samvedan
January 16, 2013
-------------------------------
From India, Pune
315This is getting to an interesting but a simple point.
I write with the limitation of NOT having read wither of the judgement and on the basis ONLY of my understanding of the law on the subject and the posts in this thread!:
1) I contend that the PE is under no legal obligations to pay gratuity to an employee engaged through a contractor because no "employer-employee relationship" exists.
2) Sec 22 (?) of CLRA does obligate and empower the PE to pay wages to the employee of the contractor if the contractor has failed to pay and in such case only the PE may recover such amounts from the contractor. And since GRATUITY is NOT "wage" under any applicable law,the PE is NOT obliged to pay gratuity to employees of a contractor under any conditions.
Having said this, I raise a caution too. The way contract labour issues are handled in most organizations, it is fairly easy to prove such contracts to be SHAM and claim direct "employer-employee relationship" between the (so called) Contractor's employees and the PE and in such case, yes, the PE will be held obliged to pay gratuity to such Contractor's employees!
Further, it is interesting to take a note as to why the same logic will not work in case of ESI or PF. The clue is that even the Contractor's employees are "workers" under the Factories Act! Kindly ponder over this issue.
Regards
samvedan
January 16, 2013
-------------------------------
From India, Pune
Let us ask these questions and answer one by one.
1. Has the employee with a contractor completed five years?
If yes , the employee is eligible to get Gratuity
2. Has he worked all five years with the same Principal Employer?
If yes, there is no issue and Principal Employer is responsible
3. Has the employee completed five years but under different contractors/
If yes, then for purpose of gratuity, who is the Principal Employer?
This question is being discussed now ad Mr. Madhus\' s view was that the Principal Employer is not liable.
I tend to disagree on this view. In the absence of any Judgement on this, we need to rely on existing Judgements and extrapolate the meaning keeping in mind the purpose of the legislation.
Very purpose of Gratuity act is to provide some lump some amount at the time of cessation of employment after some years of service, to the employee.
The purpose of Contract Labour Act and the inclusion of Principal Employers liability to pay the dues in case the Contractor fails to do so is to ensure that benefits as envisaged in specific legislation reach the beneficiary.
The judgement quoted by Mr Madhu is very clear that gratuity though excluded in the Payment of Wages Act is also included in the definition of wages.
I am just reproducing the relevant portion of the definition.
"any sum which by reason of the termination or employment of the person employed is payable under any law, contract or instrument which provides for the payment of such sum,"
In other words, any sum payable at the time of cessation of employment becomes a liability of the Principal Employer
The reason behind inclusion of liability clause in the Contract labour act is that "the contractor may disappear but the Principal employer may not"
The chances of Principal employer winding up the business or changing the name of the business will be less than the Contractor winding up or changing his business name. Hence, the employee must be given an option to claim the termination benefits from the last Principal employer.
I am not getting into discussions as to who is "liable for the Payment" I am restricting my discussion as to " who is liable to make the payment in case there is a default and a claim"
T Sivasankaran
From India, Chennai
1. Has the employee with a contractor completed five years?
If yes , the employee is eligible to get Gratuity
2. Has he worked all five years with the same Principal Employer?
If yes, there is no issue and Principal Employer is responsible
3. Has the employee completed five years but under different contractors/
If yes, then for purpose of gratuity, who is the Principal Employer?
This question is being discussed now ad Mr. Madhus\' s view was that the Principal Employer is not liable.
I tend to disagree on this view. In the absence of any Judgement on this, we need to rely on existing Judgements and extrapolate the meaning keeping in mind the purpose of the legislation.
Very purpose of Gratuity act is to provide some lump some amount at the time of cessation of employment after some years of service, to the employee.
The purpose of Contract Labour Act and the inclusion of Principal Employers liability to pay the dues in case the Contractor fails to do so is to ensure that benefits as envisaged in specific legislation reach the beneficiary.
The judgement quoted by Mr Madhu is very clear that gratuity though excluded in the Payment of Wages Act is also included in the definition of wages.
I am just reproducing the relevant portion of the definition.
"any sum which by reason of the termination or employment of the person employed is payable under any law, contract or instrument which provides for the payment of such sum,"
In other words, any sum payable at the time of cessation of employment becomes a liability of the Principal Employer
The reason behind inclusion of liability clause in the Contract labour act is that "the contractor may disappear but the Principal employer may not"
The chances of Principal employer winding up the business or changing the name of the business will be less than the Contractor winding up or changing his business name. Hence, the employee must be given an option to claim the termination benefits from the last Principal employer.
I am not getting into discussions as to who is "liable for the Payment" I am restricting my discussion as to " who is liable to make the payment in case there is a default and a claim"
T Sivasankaran
From India, Chennai
I have gone through the judgement.
The problem I see is this (perhaps i have not understood what the hon. judges were trying to convey) :
Yes, definition of wages does include amount payable at the time of termination. But it specifically excludes gratuity. Contract Labour Act says PE is liable for all payments that are covered under payment of wages act. After that, you cant come out and say employer is still payable.
The judges have used a vague connection of beneficial legislation, etc. The doctrin of beneficial legislation can not be extended to do opposite of what is categorically stated in the act. Asking the PE to pay and recover from a contractor, who has stopped doing work for him, is as good as saying the PE has to pay. Further, there was also a point raised by the PE that the workers did not work for him for the entire term of 5 years and it was not necessarily continuous employment. Still they were made liable.
However, since the judgement was passed, the precedent made stands and the employer will be considered liable.
From India, Mumbai
The problem I see is this (perhaps i have not understood what the hon. judges were trying to convey) :
Yes, definition of wages does include amount payable at the time of termination. But it specifically excludes gratuity. Contract Labour Act says PE is liable for all payments that are covered under payment of wages act. After that, you cant come out and say employer is still payable.
The judges have used a vague connection of beneficial legislation, etc. The doctrin of beneficial legislation can not be extended to do opposite of what is categorically stated in the act. Asking the PE to pay and recover from a contractor, who has stopped doing work for him, is as good as saying the PE has to pay. Further, there was also a point raised by the PE that the workers did not work for him for the entire term of 5 years and it was not necessarily continuous employment. Still they were made liable.
However, since the judgement was passed, the precedent made stands and the employer will be considered liable.
From India, Mumbai
After serving in a psu under DHI for continuous 6 years on contract basis directly under the principal employer i was brought into regular service of this psu in 1990. for calculation of gratuity, this psu is not counting my contract period of 6 years saying that as per the gratuity scheme of this psu contract/casual employees are not entitled for gratuity benefits. is there separate gratuity scheme for individual psus or are all psus in india are governed by the payment of gratuity scheme 1972 and its subsequent amendments..
if i am eligible where to put my grievance.
From India, Jaipur
if i am eligible where to put my grievance.
From India, Jaipur
Employment period of fixed term contract should be counted for gratuity calculation. This applies to PSUs also. Certainly, certain PSUs (also private companies) have designed their own gratuity formula but it should not be less favourable than what is there in the Payment of Gratuity Act.
Madhu.T.K
From India, Kannur
Madhu.T.K
From India, Kannur
No, contract period will not count.
You were not an employee of the psu at that time.
I understand you must have been employed with a contractor.you need to ask him for the gratuity.
You should at least be happy you got made permanent and directly employed by the psu. Why create a problem for your self by complaining about the past and endangering your position in the company ? The difference is 3 months salary only. Which is more important ? Your old gratuity of continuing smooth employment ?
From India, Mumbai
You were not an employee of the psu at that time.
I understand you must have been employed with a contractor.you need to ask him for the gratuity.
You should at least be happy you got made permanent and directly employed by the psu. Why create a problem for your self by complaining about the past and endangering your position in the company ? The difference is 3 months salary only. Which is more important ? Your old gratuity of continuing smooth employment ?
From India, Mumbai
Joesph has stated that he was directly under the employer, that means he was not under any contractor but he was on a fixed term contract which is also often misunderstood as contract employment. If he has been even on a daily wages or was engaged as a casual employee the payment of whom was directly made by the PSU employer, then his service should be included in the period of service for the purpose of payment or calculation of gratuity.
It is not the matter of three months pay, but there should not be any foul play and there should not be any misinterpretation of law.
Madhu.T.K
From India, Kannur
It is not the matter of three months pay, but there should not be any foul play and there should not be any misinterpretation of law.
Madhu.T.K
From India, Kannur
Sir, Thanks a lot for your quick response. i would like to clarify that i was appointed on contract basis initially for one year and after its expiry the contract period was extended time to time after each expiry but without any break. it continued till 1990 where i was offered a regular post in this psu. i would also like to add that Provident fund was deducting from my consolidated period throughout this period.
From India, Jaipur
From India, Jaipur
Dear Joseph
I am certain that you will get your gratuity. Do pursue the matter diigently.
I have seen such cases in PSUs where such recruitment are done for certain posts, esp for Medical staff and doctors.
During a particular period in the late nineties when there was an embargo on new recruitment for several years; many were recruited on contract.
Later their services were regularized.
Your case is similar, and you are eligible for gratuity for that period as well.
Be assured; as in PSUs the can not commit any illegal action; as a PSU is the extension of "the State" (the government).
Warm regards.,
From India, Delhi
I am certain that you will get your gratuity. Do pursue the matter diigently.
I have seen such cases in PSUs where such recruitment are done for certain posts, esp for Medical staff and doctors.
During a particular period in the late nineties when there was an embargo on new recruitment for several years; many were recruited on contract.
Later their services were regularized.
Your case is similar, and you are eligible for gratuity for that period as well.
Be assured; as in PSUs the can not commit any illegal action; as a PSU is the extension of "the State" (the government).
Warm regards.,
From India, Delhi
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