2. An employee who was retrenched from service was subsequently engaged for wages for broken periods whenever work was available. No monthly salary was paid to him. The question for consideration was whether such a person was an employee within the meaning of Payment of Gratuity Act1972 and whether he could claim his service to be continuous for claiming benefits under the Act. Decide.

Facts of the Case

An employee had initially worked for a company on a full-time basis. Due to organizational downsizing, the company retrenched him. However, after this retrenchment, the employer continued to engage him on a temporary basis. He worked whenever work was available, often for short and broken periods. The employer paid him wages for each period of work, but he never received a fixed monthly salary.

Despite the irregular nature of his re-engagement, the employee completed several years of service with the company. Later, he applied for gratuity under the Payment of Gratuity Act, 1972, claiming that his post-retrenchment engagements constituted continuous service. The employer disputed this claim, stating that the employee was no longer a regular worker and thus not eligible for gratuity benefits.

Issues of the Case

1. Was the employee still considered an “employee” under the Payment of Gratuity Act, 1972 after being retrenched?
2. Could irregular and broken periods of re-employment be considered as continuous service?
3. Does the nature of payment (wages vs. monthly salary) affect the right to gratuity?

These issues touch upon the core of retrenchment and gratuity eligibility, raising questions about the protection of workers engaged in informal or non-permanent roles post-termination.

Principles and Related Case Law

Relevant Provision: Section 2(e) and Section 2A of the Payment of Gratuity Act, 1972

• Section 2(e) defines an “employee” as any person employed for wages in any kind of work.
• Section 2A clarifies the meaning of “continuous service.” Even if the service is interrupted by illness, leave, or absence from duty without break in the employer-employee relationship, it may still qualify as continuous service.

Case Law: Mettur Beardsell Ltd. vs. Regional Labour Commissioner (1998)

In this case, the court held that a worker who was retrenched but later called back for work during peak seasons continued to maintain an employer-employee relationship. His total tenure, including broken periods of work, counted towards continuous service for gratuity purposes.

Case Law: Surendra Kumar Verma vs. Central Government Industrial Tribunal (1981)

The Supreme Court emphasized that laws related to labor welfare must be interpreted in favor of the worker. Temporary or ad-hoc re-engagements cannot deprive the employee of statutory rights like gratuity.

Judgment

The court ruled in favor of the employee. It held that:

• Even though he was retrenched, the employer continued to exercise control over his work through recurring engagements.
• The payment of wages for each broken period reflected an ongoing relationship.
• The employee qualified as an “employee” under Section 2(e) of the Act.
• His repeated, albeit irregular, employment formed a pattern of continuous service under Section 2A.

Hence, the employee was entitled to gratuity. The court stressed that retrenchment and gratuity eligibility cannot be denied merely due to the irregularity of work, especially when the employer continues to engage the worker periodically.