The Karnataka High Court has granted interim relief to the Bruhat Bangalore Hotels Association, Bangalore Employers Association, and other petitioners by staying coercive action under the newly introduced Karnataka Compulsory Gratuity Insurance Rules, 2024. The court’s order brings temporary relief to employers struggling with compliance.
Justice B M Shyam Prasad observed that suspending the enforcement of coercive measures — rather than the Insurance Rules themselves — strikes a balance between protecting employers and preserving employee rights. He emphasized that employers must still pay premiums for workers who have completed five years of service, as required under the Payment of Gratuity Act. The case will next be heard on June 3, 2025.
The petitioners argued that the new rules are financially burdensome, especially for small businesses, as they mandate insurance premium payments even for employees who have not completed the minimum five years of service required to be eligible for gratuity. They also highlighted the lack of differentiation between employers of varying financial capacities.
Employee unions, however, urged the court not to stay the rules, arguing that they were long overdue. They pointed out that Section 4A of the Payment of Gratuity Act was introduced back in 1989, and these rules would reduce the need for litigation by ensuring timely gratuity payouts.
The court’s interim order halts any coercive actions for non-payment of insurance premiums under the new rules — provided employers pay premiums for eligible employees — offering much-needed clarity until the matter is fully resolved.
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