Whether Gratuity Law in India allows payment of Gratuity for work done for less than 240 days

The Definition of Continuous Service as mentioned in Sec 2-A of the Gratuity Act is as follows –

(1) “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 break in services 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;”

The Definition was amended by the Act 26 of 1984. The said amendment to Gratuity Act in India was incorporated to protect the benefits of workers. The Definitions says that even if the worker fails to attend 240 days in a year he is eligible for gratuity unless for his absence order is passed under standing order or other rules treating his absence as break in service. The Act was amended as, the Hon’ble Supreme Court held that in the case of Lallappa Lingappa it was necessary for the workman to work 240 days to become eligible for the Gratuity. While interpreting the provisions in the Act at that time Supreme Court held that if the worker works for less than 240 days in a year he is not entitled for the Gratuity. The Supreme Court held that the expression “actually employed” meant actually worked. The said Judgement was passed in the matter of a Spinning Mill wherein the Management considered the number of years for gratuity in which the employees were actually employed for at least 240 days in a year and paid Gratuity accordingly. The Trade Unions opposed the Judgement and forced the Government to amend the Payment of Gratuity Act. With the amendment the worker is not eligible for Gratuity if he is absent from the service and if such a absence is treated as a break in service and necessary order has been passed by the employer in accordance with Standing Orders, Rules or Regulations applicable to the establishment. Therefore, unless the absence is considered as a break in service and necessary order is passed, the Management can not refused to pay Gratuity for failure to work for 240 days.

The Hon’ble Karnataka High Court, in the matter of Bangalore Metropolitan Transport Corporation V/s Dept. Labour Commissioner, Bangalore in 2009 observed that in the absence of appropriate order evidencing break in service in terms of Section 2A(1) of the Act, Gratuity cannot be denied. Therefore unless there is an order as provided under Section 2A(1) of the Gratuity Act, even if worker has not completed 240 days he will be entitled to Gratuity.