Extent & Applicability under The Payment of Gratuity Act, 1972 :
The Act extends to the whole of India. Provided that in so far as it relates to plantations or ports, it shall not extend to the State of Jammu & Kashmir. [Section 1(2)].
The Act applies to:
♦ Every factory, mine, oilfield, plantation, port and railway company;
♦ Every shop or establishment within the meaning of any law for the time being in force in relation to shops and establishments in a state, in which 10 or more persons are employed, or were employed, on any day of the preceding twelve months;
♦ Such other establishments or class of establishments, in which 10 or more employee are employed, or were employed on any day of the preceding twelve months, as the Central Government, specify in this behalf. [Section 1(3)]
♦ A shop or establishment to which this Act has become applicable shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time after it has become so applicable falls below ten. [Section1 (3 A )]
The expression ‘law‘ used in Section 1(3)(b) means any law in respect of shops, establishments – commercial or non-commercial. (K. Gangadhar Vs The Appellate Authority, (1993) 66 FLR 648(AP).
The provisions of Section 1(3)(b) of the Act are very much comprehensive. It also includes Municipal Board. (Municipal Board Vs Union of India, (1993) 67 FLR 973 All)
In exercise of the powers conferred by clause (c) of Section 1(3) of the Act, the Central Government has specified Motor Transport undertakings, clubs, chambers of commerce and industry, inland water transport establishments, Solicitors’ Officers, Local Bodies and circus Industry, in which 10 or more persons are employed or were employed on any day of the preceding 12 months, as classes of establishments to which the Act shall apply. Once this Act becomes applicable to a shop or establishments, it will continue to govern by it even if the number of employees falls below 10 after the application of the Act.
Application of the Act to an employed person depends on two factors (i) he should be employed in an establishment to which the Act applies & (ii) he should be an employee under the definition of Section 2(e) of the Act.