Is the company's leave lapse policy justified under labor laws?

I hope this message finds you well. I am writing to seek clarification regarding the company's leave lapse policy, specifically in relation to my recent resignation. I resigned from the company on the last day of November 2024. According to my records, I have accumulated a total of 27 days of leave for 2023 and 2024 (10.5 days from 2023 and 16.5 days from 2024). However, the company's policy states that any unavailed earned leave from 2023 will lapse on December 31, 2024. I understand that the company is neither encashing these leaves nor allowing me to avail them during my notice period. However, I would like to know if this policy is justified and whether there are any provisions under labor laws that could support my case. Additionally, I would like to inquire if the labor court can assist in this matter and if there are any other ways I can seek relief.

3 Answers
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A M Iktear Uddin (Anik)
Advocate A M Iktear Uddin (anik) Answered: 13 Jan 2025

The Factories Act and Shop Acts mandate that earned leaves cannot be arbitrarily cancelled - employers must allow workers to use their leaves or provide monetary compensation for unused ones. Legal recourse is available through the labor commissioner if these rights are denied, as multiple High Court rulings have confirmed that employees are entitled to leave encashment even during their notice period.

Ayantika Mondal
Advocate Ayantika Mondal Answered: 13 Jan 2025

Under Section 79 of the Factories Act, 1948 and various state-specific Shop and Establishment Acts, earned leave is a legal right and cannot be automatically forfeited - employers must either permit the employee to avail the leaves or provide compensation in lieu of unutilized leaves. You can file a complaint with the labor commissioner/labor court under the Industrial Disputes Act, 1947, as denial of legitimate leave benefits is considered an unfair labor practice. Additionally, several High Court judgments have established that earned leave encashment is a legitimate right of employees, and companies cannot have policies that completely deny this benefit during the notice period.

Admin
Advocate By LEAD INDIA Answered: 13 Jan 2025

Sir, Under the Factories Act and state labor laws, earned leave is a right that cannot be taken away without compensation. If your company refuses to allow you to use or cash out your earned leave during the notice period, it may violate the law. You can file a complaint with the Labor Commissioner or approach the Labor Court for recovery of your dues under Section 33(C)(2) of the Industrial Disputes Act. For further legal assistance contact us on our helpline number.

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