The Supreme Court has held that a principal employer is not required to pay gratuity to contract workers when there is no direct employer–employee relationship between them. The ruling came in a case involving the state-owned Oil and Natural Gas Corporation (ONGC).
Contract workers engaged at ONGC and its units had sought gratuity from the company. Under the Payment of Gratuity Act, the controlling authority had directed ONGC to pay, but the appellate authority later set aside that order.
The workers then approached the Bombay High Court, which restored the controlling authority’s direction and asked ONGC to make the payment. ONGC challenged this before the Supreme Court.
A bench comprising Justices Ahsanuddin Amanullah and Manmohan said the controlling authority’s role is limited to computing the gratuity amount, not deciding who must pay it. Since the contract terms showed no direct employer–employee relationship between ONGC and the contract workers, the company could not be made liable.
The Supreme Court set aside the Bombay High Court’s order. It noted that ONGC had already paid gratuity in this matter and, as the money had reached the workers, it could not be recovered. The judgment indicates that, going forward, contract workers must seek gratuity from the contractors who directly employ them, not from the principal employer.
