Scope of the Payment of Gratuity Act:
With Special Reference to Service of Teachers

The payment of Gratuity Act, came into existence on 21st August, 1972. The Act applied to only certain establishments prior to its amendment. The gratuity was paid to persons who are covered within the meaning of the term ‘employee’ under section 2(e) of the Act, subject to the conditions mentioned in Section 4 of the Payment of Gratuity Act, 1972.

Under section 2(e) of the Act of 1972 the term ‘employee’ is defined as:
"employee" means any person (other than an 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 the terms of such employment are express 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.

According to this definition the service of a teacher does not come under the category of an employee to get gratuity. The dispute of payment of gratuity to the teachers is very old in relation to claiming to be employees within the definition of the Act.

This issue was decided by the Supreme Court in the case A. Sundarambal vs. Govt. of Goa and Daman & Diu [1988(4) SCC 42]. It was held that the work of the teacher is to impart education; they are not covered within the definition of ‘employee’ as they are not doing skilled, semi-skilled and unskilled work. They have been denied gratuity on this ground.

In Ahmadabad Private Primary Teacher’s Associates vs. Administrative Officer and Others [AIR 2004 SC 1426]. The Supreme Court again ruled that teachers are not entitled to gratuity as they are not covered under the definition of ‘employee’ as given under section 2(e) of the Act.

Keeping in mind the several decisions of the Hon’ble Supreme Court and keeping in mind the interest of the teachers the Central Government of India decided to redress the disputes. Accordingly, the Act was amended on 31.12.2009 with effect from 3.04.1997 which specified an education institution, as an establishment under the act, in which 10 or more persons are employed on or were employed on any date preceding 12 months as a class of establishment to which the said act shall apply with effect from the date of publication of the notification of the Act.

The amended definition of ‘employee’ is defined as;
“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.

In the present definition, the nature of work includes any kind of work, manual or otherwise in or in connection with the establishment to which the Act applies. Therefore the teachers are covered within the definition of ‘employee’ under section 2(e) of the amended Act.

Under section 4(1) of the Act, gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years-

● On his superannuation, or

● On his retirement or resignation, or

● On his death or disablement due to accident or disease.

Therefore any person to be called an employee under the act must satisfy the definition of ‘employee’ given under section 2(e) and must fulfill the condition i.e. continuous service for not less than five years on the date of termination of his service as provided under section 4(1) of the Act.

For computation of gratuity amount, the service period as a teacher should be taken into account from 3.04.1997 because the service period completed by teachers before 3.04.1997 excludes them from the definition of an employee. Therefore, services rendered by the teachers prior to 3.04.1997 shall be treated as services rendered as a non-employee for the purpose of gratuity.

The  author can be reached at: bharatcharan@legalserviceindia.com