Under the Payment of Gratuity Act, gratuity can be forfeited if an employee is terminated for misconduct that amounts to an offense involving moral turpitude no criminal conviction is required. Disciplinary proceedings rely on a lower standard of proof than criminal cases.
It is up to the Disciplinary or Appointing Authority to determine if the misconduct qualifies and whether full or partial forfeiture is justified, based on its severity.
The employee must be given notice and an opportunity to respond.
Even if the alleged offense isn’t prosecuted, actions like suppression of facts or use of forged documents can amount to moral turpitude. An appointment obtained fraudulently negates any claim to gratuity.
When we talk about gratuity, we often imagine it as an end-of-service reward a recognition of years of hard work and dedication.
It’s your right, right?
Well, not always.
Gratuity is indeed a statutory right under the Payment of Gratuity Act, 1972, but like many rights, it comes with conditions.
One of the most debated and misunderstood aspects is the forfeiture of gratuity due to misconduct.
Today, let’s unravel a complex yet essential question: Can an employee lose their gratuity due to misconduct?
If yes, under what circumstances?
What role does the concept of moral turpitude play?
And what if there is no criminal conviction?
We’ll also walk through a real-life case
Western Coalfields Ltd. v. Manohar Govinda Fulzele
That throws light on how courts interpret such situations.
Let’s dive in.
What is Gratuity, Really?
Before jumping into the legal maze, let’s revisit the basics.
Gratuity is a lump sum amount paid by an employer to an employee as a token of appreciation for continuous service provided the employee has completed at least five years with the organization.
It applies to all factories, mines, oilfields, plantations, ports, railway companies, shops, and other establishments with 10 or more employees.
But Here’s the Catch
While gratuity is a right, it’s not absolute.
The law provides specific grounds under which an employer can deny or forfeit it fully or partially.
This brings us to Section 4(6) of the Payment of Gratuity Act, 1972.
Section 4(6): When Can Gratuity Be Forfeited?
This section lays out three situations where gratuity can be forfeited:
- Damage or Loss to Employer’s Property: If the employee’s act causes damage or loss to the employer’s property due to negligence or willful misconduct, gratuity can be forfeited to the extent of the loss.
- Riotous or Disorderly Conduct: If the employee commits an act of violence, or behaves in a riotous or disorderly manner during employment, gratuity can be fully or partially forfeited.
- Offence Involving Moral Turpitude: If the termination is due to an offence involving moral turpitude committed during the course of employment, gratuity can be wholly forfeited.
Understanding “Moral Turpitude”: No Conviction Needed?
Here’s where it gets tricky.
The term “moral turpitude” isn’t clearly defined in the Act.
Generally, it refers to conduct that is inherently immoral, dishonest, or unethical something that shakes the foundation of trust in the employer-employee relationship.
Examples can include:
- Using forged documents for employment
- Suppressing vital information during recruitment
- Embezzlement, bribery, or sexual harassment
- Acts of dishonesty or fraud
Now here’s the shocker:
A criminal conviction is not necessary to forfeit gratuity under moral turpitude!
Lower Standard of Proof
Unlike criminal cases where the standard is “beyond a reasonable doubt”, disciplinary proceedings within an organization rely on the principle of preponderance of probability. This lower threshold allows internal authorities to make decisions based on whether it is more likely than not that misconduct occurred.
In other words, the Appointing or Disciplinary Authority not a court can decide if the conduct amounts to moral turpitude and whether gratuity should be forfeited.
Real-Life Case: Western Coalfields Ltd. v. Manohar Govinda Fulzele
The Background
In this 2023 case, an employee, Manohar Govinda Fulzele, was terminated from Western Coalfields Ltd. after it was discovered that he had used forged documents to gain employment.
Following departmental inquiry, his services were terminated. The company forfeited his gratuity, citing misconduct involving moral turpitude.
Fulzele challenged the decision, arguing that:
- There was no criminal conviction.
- He had served for over 20 years.
- The act was in the past and had no connection with job performance.
The Court’s Verdict
The Supreme Court disagreed with Fulzele.
The court held that:
An appointment obtained by fraud or misrepresentation nullifies the very foundation of employment.
It is immaterial whether a criminal court has convicted the employee or not.
It emphasized that disciplinary proceedings and internal inquiries are valid avenues for determining misconduct, and forfeiture of gratuity is lawful in such cases.
Ask Yourself
Let’s make this a little interactive. Put yourself in the employer’s shoes:
- Would you reward an employee who lied to get the job?
- Can trust truly be restored once dishonesty is exposed?
- Should long service compensate for an unethical beginning?
These are the moral and legal dilemmas employers often face.
Key Takeaways for Employers and Employees
For Employers:
- Conduct thorough background checks during recruitment.
- Document all disciplinary proceedings carefully.
- Provide the employee with a notice and opportunity to respond before taking action.
- Ensure decisions are proportional to the misconduct.
For Employees:
- Remember that integrity matters as much as performance.
- Don’t assume that absence of a criminal case will protect your gratuity.
- Even past misconduct if uncovered can affect your end-of-service benefits.
- Always disclose material information truthfully during hiring.
Final Thought: Gratuity is a Right but Earned Rightfully
Let’s be clear: the objective of gratuity is to appreciate loyal and ethical service.
But if an employee breaks that trust through acts involving dishonesty, violence, or misconduct, the employer is within their legal rights to deny gratuity.
And as we’ve seen, you don’t need to go to jail for your gratuity to be denied.
A proven disciplinary inquiry fairly conducted is sufficient.
So, whether you’re an HR professional, a legal advisor, or an employee nearing retirement understand the gravity of misconduct and how it can ripple into the most important phase of your career.
What Do You Think?
- Should gratuity always be protected, regardless of past conduct?
- Do you agree with the court’s view that fraudulent appointments justify forfeiture?
- How can organizations improve their handling of such sensitive issues?
Share your thoughts in the comments or drop your questions below.
Let’s keep the conversation going because understanding your rights is the first step toward protecting them.
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