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Eligibility of Teachers for Gratuity under the Payment of Gratuity Act, 1972
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Eligibility of Teachers for Gratuity under the Payment of Gratuity Act, 1972
Eligibility of Teachers for Gratuity under the Payment of Gratuity Act, 1972

The Payment of Gratuity Act provides for payment of gratuity to employees, employed in factories, mines, oil fields, plantations, ports, railway companies, shops or other establishments and for connected matters. Section 1 (3(c)) of the Act empowers the Central Government to apply the provisions of the Act to establishments or class of establishments in which ten or more employees are employed or were employed on any day preceding 12 months. Invoking this power, the Central Government as per notification dated 03/04/1997 extended the provisions of the Act to educational institutions employing 10 or more persons. Thus from 03/04/1997, the Payment of Gratuity Act has become applicable to educational institutions employing 10 or more persons for wages.

The teachers employed in private schools in Gujarat raised claim for gratuity. But it was declined on the ground that the teachers did not come within the purview of the term ‘employee’ under the Act. The definition of ‘employee’ then stood as follows  ‘employee’ means any person (other than apprentice) employed on wages, in any establishment, factory, mine, oilfield, plantation, port, railway company or shop to do any skilled, semi-skilled, or unskilled, manual, supervisory, technical or clerical work, whether in terms of such employment are expressed or implied, and whether or not such person is employed in a managerial or administrative capacity, but does not include any such person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity”.  (underlining supplied).

As per the above definition, the person should be employed to do any skilled, semi-skilled or unskilled, manual, supervisory, technical, or clerical work to constitute an employee under the Payment of Gratuity Act, as it then stood. The work of teachers did not come within any of the stipulated categories of work as above. Following the dictum of Hon’ble Supreme Court in Sundarambal’s case (1989 (1) LLJ 61), the Full Bench of High Court of Gujarat in Ahmedabad (P) Primary Teachers Association vs. Administrative Officer held that the teachers will not come within the purview of ‘employee’ under the Payment of Gratuity Act and therefore they are not eligible for gratuity.

The matter was taken up before the Hon’ble Supreme Court and the apex Court in Ahmedabad (P) Primary Teachers Association vs. Administrative Officer (2004 (1) SCC 755), observed that if the coverage of the definition is expanded, following the pattern of the definition of ‘employee’ as per 2(f) Employees Provident Fund & Miscellaneous Provisions Act, 1952, the teachers could be brought within the purview of Payment of Gratuity Act. But in view of the definition of ‘employee’ under the Payment of Gratuity Act then existed, it was held that teachers are not covered by the said definition and hence they are not eligible for gratuity.

Drawing inspiration from the observations of the Hon’ble Supreme Court, certain amendments were introduced in the Act as per Payment of Gratuity (Amendment) Act, 2009. The amendment was given retrospective effect from 03/04/1997, the date on which the educational institutions were brought under the coverage of the Act. The definition of the term ‘employee’ was amended and now it stands as follows:-

“Employee’ means any person (other than an apprentice) who is employed for wages, whether the terms of such employment are express or implied, in any kind of work, manual or otherwise, in or in connection with the work of a factory, mine, oilfield, plantation, port, railway company, shop or other establishment to which this Act applies, but does not include any such person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity”. (Underling supplied).

As per the above definition ‘employee’ means any person employed for wages in any kind of work, manual or otherwise. Thus the scope of the definition of the term ‘employee’ is broadened and a person employed in any kind of work is brought within the coverage of ‘employee’. Now, the nature of work is no longer a factor to determine as to whether a person employed is an ‘employee’ under the Act.

In the case of Birla Institute of Technology Vs The State of Jharkhand & Ors (Civil Appeal No. 2530/2012, decided on 07.01.2019), the Hon’ble Supreme Court, without noticing the amendment of the term ‘employee’ as per 2009 Amendment Act, concluded that the teachers will not come within the purview of ‘employee’ under the Payment of Gratuity Act and not eligible for gratuity. Immediately, their Lordships noticed the mistake and suo moto recalled the order and held that they are eligible to gratuity.

Thus as of now, teachers are eligible for gratuity under the Payment of Gratuity Act.

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