Can We Legally Claim Payment for Unused Earned Leaves After Policy Change?

I work with a Pvt Ltd company based in Ahmedabad, Gujarat. We are a trading company/agency house and not a manufacturing company, with a total employee strength of around 55-60 persons. We are governed by the Shop and Establishment Act and not the Factory Act. I have been working with this company for 15 years, and our company has never paid for unused earned leaves to employees for years.

Change in Leave Policy

Four years ago, the company decided that for any unused earned leave for the year (30 leaves allowed), the company would pay the employees. This system was followed for two years. Suddenly, the management decided to stop this payment, stating that some employees had misused the facility. The management has taken no action against the employee they claim has misused the facility but has stopped the payment to all other honest employees.

Legal Provisions for Claiming Unused Leaves

I would like to know if there is any legal provision wherein we can claim these unused leaves by various employees?

Regards

Clarification on Leave Accumulation and Encashment in Gujarat

I am reproducing an extract of the act applicable in Gujarat. Hope this will clarify the position regarding the accumulation of Earned Leave (EL) and encashment. You may, in case you want, go to the labor court to seek redress.

Section 35 - Leave

1. [(1)(a) Subject to the provisions of clause (b), every employee who has been employed for not less than three months in any year shall, for every 60 days on which he has worked during the year, be allowed leave, consecutive or otherwise, for a period of not less than five days;

(b) Every employee who has worked for not less than two hundred and forty days during a year shall be allowed leave, consecutive or otherwise, for a period of not less than twenty-one days:

Provided that such leave may be accumulated up to a maximum period of sixty-three days.

Explanation: The leave allowed to an employee under clauses (a) and (b) shall be inclusive of the day or days during the period of such leave on which a shop or commercial establishment remains closed under section 18, or on which he is entitled to a holiday under subsection (1) of section 24 or section 31.]

2. [(1A) Every employee who has accumulated leave shall, when he goes on leave for a period of not less than twenty-one days, be entitled to surrender, out of the balance of leave remaining to his credit on the commencement of his leave, any period of leave, not exceeding twenty-one days; and such employee shall, for the period of leave so surrendered by him, be entitled to payment of wages as if the leave so surrendered had been allowed to him under subsection (1):

Provided that no employee shall be entitled to surrender leave under this subsection more than once in any period of two years.

(1B) In addition to the leave permissible under subsection (1), every employee shall be entitled to leave with wages as follows:
- Casual leave for seven days in a year,
- Leave on medical grounds for not more than seven days in a year, and
- Leave for not more than four days in a year on any of the days which the State Government may, by notification in the Official Gazette, specify as the National and Festival holidays.]

3. (2) If an employee entitled to leave under subsection (1) retires, resigns, or is discharged by his employer before he has been allowed the leave, or if, having applied for and having been refused the leave, he quits his employment before he has been allowed the leave, the employer shall pay him the amount payable under section 36 in respect of the leave.

4. (3) If an employee entitled to leave under subsection (1) is refused the leave, he may give intimation to the Inspector or any other officer authorized in this behalf by the State Government regarding such refusal. The Inspector shall enter such intimation in a register kept in such form as may be prescribed.

Regards, Col. Rathi

Dear Col Sab,

Thanks and well noted. However, if an employee does not take leave and they accumulate over a period of time, is there any legal provision under which he can ask for encashment of these leaves???

Thank you.

The Importance of Using Leave

It is actually a better idea to use the leaves. The leaves are given to allow employees to refresh themselves and take rest. Avoiding taking leaves just to earn some extra money is not a good idea. Many companies today have started implementing a no-carry-forward rule for that purpose.

In your case, the company probably figured out that the costs are too high. At best, you can get what the law allows - 21 days in 2 years. You can't fight the management on this. Any intervention by the Labor Court will take years and prove costly for you. In the kind of company you work for, you will definitely lose your job.