Leave Encashment Discrepancy: Can I Take Legal Action for Unpaid Leave Days?

Leave Encashment Discrepancy

My Last Working Day (LWD) with my organization was 25th March, and I had 22 leave days in my account at that time. When I received my Full and Final (FnF) statement, they had encashed only 7.3 leaves, stating that 15 leaves had lapsed according to the rules.

Policy on Leave Carry-Forward

The policy in place allows for the carry-forward of only 7 leave days after 31st March, and they are refusing to pay for the encashment of the remaining 15 days of leave.

Legal Action Consideration

Would I be able to file a case against my employer for this discrepancy?

Legal Recourse for Leave Encashment Discrepancy

From the bare details given, it cannot be concluded whether there exists a case or not. Now that you have decided to take legal recourse, it is better to consult an advocate.

Entitlement Under the Factories Act 1948

If you are working in a factory and come within the definition of 'Workman' as per the Factories Act 1948, Section 79 (3) makes it mandatory that the workman has to be paid within two days of termination of service the quantum of leave to which he was entitled immediately before such termination of service. The relevant sub-section is quoted below:

(3) If a worker is discharged or dismissed from service or quits his employment or is superannuated or dies while in service, during the course of the calendar year, he or his heir or nominee, as the case may be, shall be entitled to wages in lieu of the quantum of leave to which he was entitled immediately before his discharge, dismissal, quitting of employment, superannuation or death calculated at the rates specified in sub-section (1), even if he had not worked for the entire period specified in sub-section (1) or sub-section (2) making him eligible to avail of such leave, and such payment shall be made—

(i) where the worker is discharged or dismissed or quits employment, before the expiry of the second working day from the date of such discharge, dismissal or quitting; and

(ii) where the worker is superannuated or dies while in service, before the expiry of two months from the date of such superannuation or death.

Considerations Before Filing a Case in India

I wonder if you know what the cost of filing a case in India is, the time commitment you will need to give for it, and how your new employer will look at your employment history after that. And all for 15 days of leave?

Importance of Providing Full Background Details

I would also suggest that when you post anything on this forum, give the full background details, or you will not get the proper suggestion or reply from members. For example, your designation and the type of organization you were working for will make a major difference to the answer.

Dear Sir/Madam, I wanted to inquire about the PL encashment policy as per the law. Can a company encash half of the accumulated leaves for its employees? Please clarify (it is the company's policy).

Thank you.

There is no law that requires the company to give cash in exchange for unused leaves. The Factories Act and Shop & Establishment Acts (depending on the state) have rules for carry forward and lapsing, but encashment is applicable only upon resignation/termination and not otherwise (check your state rules).

However, there may be provisions in the Standing Orders if they apply to you that must be followed. The Standing Orders cannot provide rights less than what the act itself gives.

Otherwise, the company is free to establish a policy as it desires as long as it has been communicated at the time of joining or accepted periodically by the employee (including deemed acceptance by not refusing and continuing to work).

The only time leave cannot lapse is if the employee requested leave and it was denied.