employment india
Pay for unused vacation: Can India employer refuse to encash leaves?
<p>I work for a small tech company (9 employees) in India. My appointment letter states that I get 2 days of leave for every month of service rendered. I have accumulated 20.5 days of unused leave over the last 2 years. I submitted my notice of resignation two months back (2 months notice period as per appointment letter). The two months notice ends in a few days. Now, the Founder/CEO says that my leaves will not be encashed since the company does not have a leave encashment policy.</p>

<p>My question is: Can my employer legally refuse to encash my leaves?</p>

<p>Please let me know if any more information is required.</p>

<p>There seems to be one national law about leave, the <a href="https://www.ilo.org/dyn/natlex/docs/WEBTEXT/32063/64873/E87IND01.htm#a078" rel="nofollow noreferrer">Factories Act, 1948 §79</a>, which grants an adult employee 20 days of paid leave after a year of employment, assuming the person has worked the required number of days within the year. Sub-section 3 addresses accrued leave at the end of employment (for whatever reason), that he:</p>

<blockquote>
  <p>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</p>
</blockquote>

<p>In the case of a person quitting, the law continues</p>

<blockquote>
  <p>and such payment shall be made (i) where the worker is discharged or
  dismissed or quits employments before the expiry of the second working
  day from the date of such discharge, dismissal or quitting</p>
</blockquote>

<p>As for accumulation of leave, sub-section (5) says</p>

<blockquote>
  <p>If a worker does not in any one calendar year takes the whole of the
  leave allowed to him under sub-section (1) or sub-section (2), as the
  case may be, any leave not taken by him shall be added to the leave to
  be allowed to him in the succeeding calendar year:</p>
  
  <p>Provided that the total number of days of leave that may be carried
  forward to a succeeding year shall not exceed thirty in the case of an
  adult or forty in the case of a child</p>
</blockquote>

<p>So there is a statutory "use it or lose it" element. That said, the question is whether you are a "worker" as defined by that act. The definitions say:</p>

<blockquote>
  <p>"worker" means a person employed directly or by or through any agency
  (including a contractor) with or without the knowledge of the
  principal employer whether for remuneration or not in any
  manufacturing process, or in cleaning any part of the machinery or
  premises used for a manufacturing process, <em>or in any other kind of
  work incidental to, or connected with the manufacturing process</em>, or
  the subject of the manufacturing process but does not include any
  member of the armed forces of the Union</p>
</blockquote>

<p>Tech work is typically not considered to be "factory work" and is not obviously part of manufacturing, but writing software <em>might</em> be work "connected with the manufacturing process".</p>

<p>There is an act implemented at the state level (Maharashtra version <a href="http://www.sharpfacility.com/Labour%20Laws/General/BARE%20ACT/Shop%20and%20Establishment.pdf/IND94257.pdf" rel="nofollow noreferrer">here</a>), the Shops and Establishment Act. Ch VII of the act governs leave: the terms are similar to the above act in terms of accrual, number of days, prior service. However the payout on termination wording is different:</p>

<blockquote>
  <p>If an employee entitled to leave under sub-section (1) [or (1-A)] i<strong>s
  discharged by his employer</strong> before he has been allowed the leave, or
  if, <strong>having applied for and having been refused the leave</strong>, 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</p>
</blockquote>

<p>The important difference is that the payout condition is conditioned on either being fired, or having applied for the leave and being refused (after which point you may resign). If you don't make a claim for leave and you resign, then the conditions of <em>that</em> law don't appear to apply. But, in another state, the wording could be different, so it depends on your state.</p>

<p>The definition of "commercial establishment" includes "legal practitioner, medical practitioner, architect, engineer, accountant, tax consultant or any other technical or professional consultant". It is possible that a different state's version of the act includes a payout requirement.</p>
