Is leave lapse policy legal during notice period after resignation?
I request clarification regarding the company’s leave lapse policy in relation to my recent resignation. I resigned from the BFSI company in November 2025 with a 90-day notice period ending in February 2026. As per my records, I have accumulated 17 days of earned leave for 2025. The company policy states that any unavailed earned leave for 2025 will lapse on December 31, 2025. However, the company is neither encashing these leaves nor allowing me to avail them during my notice period. I would like to know whether this policy is legally justified and if there are any labor law provisions that support my case.
Dear client, as per your query , a company policy that lapses accrued Earned Leave (EL) during the notice period while also denying its encashment or use is for generally open to legal challenge, as accrued leave is treated as earned wages or a vested right of the employee. Although an employer may be lawfully restricting an employee from availing leave during the notice period, it is usually mandatory to be compensated the employee for accumulated leave at the time of final settlement. In case of further queries, please do not hesitate to contact us. Thank you.
Under Indian labour laws, earned leave is a statutory benefit and cannot be arbitrarily forfeited. As per the Shops and Establishments Act (applicable state law) and principles under the Factories Act, 1948, unavailed earned leave at the time of separation must be either allowed to be availed or encashed, even during the notice period. A company policy causing lapse without encashment is generally considered illegal. You should raise a written representation to HR, citing the applicable State Shops & Establishments Act. If unresolved, you may file a complaint before the Labour Commissioner / Labour Authority, who can direct leave encashment with dues. For further legal assistance contact us on our helpline number.
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