Can Employers Reduce Leave Benefits to Just Statutory Levels? Seeking Legal Insights

Dear Sir, my company is situated in Mumbai. I require your opinion on the following issue.

Leave Entitlements Under Different Acts

As per the Factories Act, the employee/worker is eligible for 15 days of leave in a year (1 leave for every 20 days worked), and as per the Maharashtra Shops and Establishments Act, 2017, an employee is eligible for 18 days of leave in a year.

Current Leave Policy

Currently, our company provides 28 Privilege Leaves and 7 Casual Leaves in a year.

Question on Reducing Leave Benefits

If a company is offering more than the statutory leaves to employees and wishes to withdraw the existing facility to provide only statutory leaves, can the company do so? If yes, under what provisions?

Please provide any references to Supreme Court or High Court judgments on this matter.

Thank you.

Dear Mayur, any employment benefit more than the statutory scale given to the employees over a substantial period of time becomes a customary benefit. Leave with wages and holidays are service conditions found at sl no. 5 of Schedule IV of the IDA, 1947. Therefore, the employer cannot change them to the disadvantage of the workman without complying with the provisions of Section 9-A of the Act, i.e., a 21-day notice shall be given as prescribed in the Act.

Thank you very much for your valuable advice. Our office is governed by the Maharashtra Shops and Establishments (Regulation of Employment and Conditions of Service) Act, 2017. With reference to the said Act, I require to know whether the employer can withdraw existing leave facilities and provide only statutory leaves to its employees. Also, I request you to provide any Supreme Court or High Court judgments on this matter.

Regards, Mayur P. Kulkarni

Applicability of the ID Act Provisions

As pointed out by Learned Umakanthan Sir, the ID Act provisions would be applicable even if you are covered under the Shop & Establishment Act. The famous Supreme Court judgment in Bangalore Water-Supply vs R. Rajappa & Others, decided on 21 February 1978 (Citation: 1978 AIR 548), is the basic law on the subject. In case the procedure of notice of change is not followed, it will be an illegal change, and the consequences are unpleasant.

Employee Benefits Beyond Statutory Requirements

No statutory law prevents an employer from giving benefits to employees beyond what a statutory act prescribes. Whatever is given "more" shall be treated as a "gesture" from the company/management, which ultimately leads to employee participation. This, in turn, will give rich dividends to the company.

The sudden withdrawal of such benefits from employees without sufficiently advanced notice reflects an irrational, illegal, and arrogant attitude of the employer. This behavior will be confronted by employees and can hamper industrial peace.

Dear Mayur, it is a piquant situation that a pertinent question would arise as to the applicability of which Shops and Establishments Act on the whole when an establishment (probably having its registered/corporate office in Maharashtra) coming under the Maharashtra Shops and Establishments (Regulation of Employment & Conditions of Service) Act, 2017 has its branches in other States which do have their own similar laws. Certainly, the confusion relating to compliance would be more confounded when you adopt the policy of interstate transfer and seniority of employees as the provisions for leave, etc., are at variance. Even otherwise, the saving clause provided under Section 35 of the MSE(RE&CS) Act, 2017 protecting the more favorable rights and privileges under any other law, custom, usage, etc., would be a contentious issue if the notice under Section 9-A of the IDA, 1947 is legally resisted by the employees.

Therefore, before effecting any changes to the service conditions in tune with the Maharashtra Act, you have to make a comparative analysis of similar provisions under other State laws.

Let's compare the leave provisions of the S&E Acts of Maharashtra, Karnataka, Kerala, and Tamil Nadu as follows:

(1) EL/PL/AWW: Maharashtra - 18 days; Karnataka - 18 days; Kerala - 12 days; Tamil Nadu - 12 days
(2) Sick Leave: Maha - 12 days; Karnataka - 12 days; Kerala - 12 days; TN - 12 days
(3) Casual Leave: Maha - 8 days; Karnataka - Nil; Kerala - 12 days; TN - 12 days.

How does your management tackle such a situation in case it has branches in all these States? It is better to consider formulating a Common Leave Policy incorporating the maximum benefits in terms of scale and calculation.