Is It Legal to Deny Leave Encashment After Resignation in Government Undertakings?

Dear HR Colleagues,

Please guide me on the following issue:

An employee has resigned from service, and their leave was never refused during their tenure. Once the person submits their resignation, the leave balance at credit gets frozen, and they are neither allowed to avail leave during the notice period nor given encashment of the balance leave. This organization is one of the Government Undertakings and is governed by the Bombay Shops & Establishment Act.

In the case of Death and Retirement, the leave encashment is provided along with the Final Settlement.

What is the legal stand on this? Your early responses will help me a lot.

Thank you & Regards,
Nitin Daangal
Deputy Manager
HR & Corporate Services
Reichhold India Private Limited
Phone: 02138-675000, 020-66440000, 9730631234
Email: nitin.daangal@reichhold.com, Reichhold Home

Hi,

During the notice period, it is at the employer's discretion to grant leave to the employee who has tendered his resignation. The remaining leave balance to the credit of the employee up to the date of leaving the services must be paid at the time of full and final settlement. The employer cannot deny leave encashment; if they do not oblige, it is considered self-defaulting and an illegal stance taken by the employer.

Mohan Rao
Manager HR

Dear Nitin,

While in service, if accumulated leave days are likely to lapse, a good company would allow encashment or ask the employee to go on vacation for the allowable days. This ensures that the employee is not denied their rights.

Leave encashment typically occurs at the time of separation. If the employee has a required leave balance remaining, they can request to waive the notice period or stay away from work. The specific process depends on the service separation clause outlined in the offer letter.

It is not within your rights to freeze or deprive an employee of their accumulated leave days. An employee has the option to take legal action against the company for such actions. While many companies under the Bombay Shops & Establishments Act have established their own rules, it is important to communicate with the management if possible.

For instance, imagine you have INR 5000 in your savings account. You decide to close the account and inform the bank manager. However, upon learning of your intentions, the bank manager attempts to freeze your account, preventing you from withdrawing or closing it.

Is this action justified? The answer lies there.

Regards,

Chandru