Gratuity and EPF payments not to be computed at whim | Daily News

Gratuity and EPF payments not to be computed at whim

A director of a Company had after having some disagreements with the rest of the Company Management, left the company after a severance package was offered to him. However, he subsequently complained to the Commissioner of Labour about certain EPF dues not being settled by the Company. (Sportsman Tea (Pvt.) Ltd. v. Commissioner General of Labour and Others - SLR - 93, Vol 1 of 2006 [2004] LKCA 74; (2006) 1 Sri LR 93 (September 19, 2004)).

The Commissioner ordered a payment of a substantial sum of EPF dues to the Director. Aggrieved by this order, the Company petitioned the Court of Appeal for a writ of Certiorari quashing that decision.

The Court of Appeal judgement summarizes the circumstances of the case: “The Third Respondent, former Director of the Petitioner Company, complained to the First Respondent that a certain sum being arrears of EPF dues has not been paid to him. An inquiry was held by the Assistant Commissioner of Labour – the Second Respondent – and after written submissions were filed, the Second Respondent sought certain clarifications from the Petitioner Company. The company informed the Second Respondent that as the inquiry is concluded, order could be made on the material submitted. The Second Respondent thereafter requested the company to pay a certain sum as EPF dues and the surcharge.”

The Petitioner Company contended in the Court of Appeal that the Assistant Commissioner of Labour – the Second Respondent – has failed to give the Petitioner an opportunity to examine the documents on which he, the Second Respondent – is said to have made the order, and that he has not given reasons for his order. (The order was for a payment of a substantial amount of EPF dues to the Third Respondent – the ex-Company Director.)

What was the issue with documents?

Court observed in judgement: “The Second Respondent by his letter of 15.01.2002 conveyed his order to the Petitioner Company requesting the company to pay the Third Respondent Rs. 123,000 as EPF dues and the surcharge. The Petitioner submitted that the Second Respondent has failed to give the Petitioner an opportunity to examine the material on which the Second Respondent was said to have made this order and this is a breach of the rules of natural justice.”

It appears the Petitioner Company was loathe to hand over the originals of the documents when the Assistant Commissioner asked the Company to do so. Since the originals were not made available, the said Assistant Commissioner made his order based on the copies furnished, though they were not certified as true copies.

The Appeal Court judgement notes: “The powers of the Commissioner of Labour under the Employees Provident Fund Act is not only to determine claims but also to call for documents (Section 31) and to examine any records or documents relating to any provident fund or pension scheme (Section 32). In this instant case the Second Respondent having the materials necessary in his possession had called for the originals which were in the possession of the Petitioner but the Petitioner failed and neglected to produce the same.”

The Petitioner had cited a case in which the Commissioner of Labour was found to be in breach of the principles of natural justice because he had relied on new documents but had not given the party he made the order against, the opportunity to challenge these documents. However, in this case under review, no new documents had been relied on. On the contrary, it was just that the originals of the documents were not available to the Commissioner.

The relevant judgement excerpt states: “The Petitioner complained that he was not given an opportunity to peruse the documents on which the Second Respondent relied upon to arrive at his decision. He relied on the judgement in Ceylon Printers Ltd and Another v Weerakoon, Commissioner of Labour and Others where Gunasekara J held: “In view of the failure by the Commissioner to give the Appellants an opportunity of challenging the new material on which he acted, the Commissioner is under a duty to give reasons for his decision, particularly in view of the fact that it was not he who held the inquiry and recorded the evidence. In the result, the order of the Commissioner was in breach of the principles of natural justice.”

“This judgement is not applicable in this instant case as the documents that are relied upon by the Commissioner of Labour, namely P 13a, P 13b and the decision of the Board of Directors at the meeting held on 28.02.1995 to arrive at his decision are not new documents. The originals of these documents are in the possession of the Petitioner.”

Court dismissed the Petitioner Company’s application for a writ. Court held: “The submissions of the Petitioner that the decision of the Commissioner is in excess of his jurisdiction and without any material has no merit. Under these circumstances the Petitioner is not entitled for the relief claimed for. I dismiss this application without costs.” 

In another labour related application, (Brown and Company Limited vs The Commissioner of Labour SC APPEAL No. 84/2011), the Supreme Court (SC) overruled an Appeal Court judgement affirming a gratuity payment by the Labour Commissioner. The Supreme Court held that the interruption of service was not factored in when computing the gratuity payment as the Respondent had been terminated as a Director or the Company and subsequently was hired on contract,  and eventually retired as Company Chairman. This re-engagement on a contract basis cannot be considered an extension of service and as a result a computation of the gratuity payment based on the entire period of service was wrong, the Supreme Court held.

The following is the relevant excerpt from the judgement: “I find that the Court of Appeal has gone wrong in its judgement by having decided that the service was not interrupted just because the Complainant Respondent had physically come to work on the very next day after the date of retirement at 55 years. The Court of Appeal had ignored the fact that he was retired and then he accepted the fixed term contract and commenced services anew according to the contract and come on the next day as a worker on a contract basis.”

“Due to the aforementioned reasons, I make order setting aside the judgement of the Court of Appeal and the decision of the Third Respondent, the Deputy Commissioner of Labour. The Appeal of the Appellant is allowed. However, I order no costs.”