Shops and establishments: 2016 model bill explained

By Manishi Pathak, Cyril Amarchand Mangaldas

Labour and employment laws in India are complex. Private employers need to ensure compliance with all of the central and state labour and employment laws that may be applicable to their industry and/or employees.

Manishi Pathak, Partner, Cyril Amarchand Mangaldas
Manishi Pathak
Cyril Amarchand Mangaldas

The applicability of most such laws depends on the nature of operations involved (manufacturing and non-manufacturing), total number of employees, nature of work performed by the employees, compensation payable to the employees, etc. While factories are governed by the Factories Act, 1948, non-manufacturing operations such as shops and commercial establishments are governed by the state-specific shops and commercial establishments acts. Most states have a Shops and Establishments Act (S&E Act), a key labour statute that regulates the working conditions of both workmen and non-workmen employed in shops and commercial establishments.

The central Ministry of Labour and Employment announced on 29 June that the cabinet had considered the Model Shops and Establishments (Regulation of Employment and Conditions of Service) Bill, 2016 (S&E Bill). The S&E Bill aims to bring about homogeny in working conditions of employees in shops and commercial establishments across India and to facilitate ease in doing business by addressing some broad issues while generating employment opportunities.

The S&E Bill will now be sent to the states and union territories to enable them to modify their local S&E Act. The state governments have the prerogative to modify the provisions in the S&E Bill as per their convenience. They may adopt the bill in its present form or make modifications as necessary.

Some of the key features of the S&E Bill are:

(a) It is applicable to shops and establishments employing 10 or more “‘workers” (an expression used in the bill to refer to employees excluding the exempt category). Government offices and the Reserve Bank of India, etc., are exempt from its applicability. However, for the first time, godowns, warehouses or workplaces related to packaging activities are proposed to be covered.

(b) Workers occupying confidential, supervisory and managerial positions in shops and establishments are specifically exempted. Currently, an employer with operations in several states would need to check the exemptions applicable to certain categories of employees under the S&E Act in each state.

(c) Establishments will be allowed to operate on a 24/7 basis, all year round. Currently only certain establishments, such as those engaged in IT services and e-commerce, are allowed to work on this basis, upon prior approval of the state authorities. This change would give a big respite to such industries.

(d) Women will be permitted to work between 6 am and 9 pm. However, similar to current practice, a shop or establishment will be allowed to engage women for night shifts, subject to approval from the state government, if adequate facilities are provided and their dignity is protected. Discrimination against women in matters of recruitment, training, promotions or transfer is not allowed.

(e) Multiple establishments are permitted to provide common canteen and creche facilities to their employees, which is a unique feature of the S&E Bill.

(f) Although establishments may remain open through the week, employees can work a maximum of nine hours a day (with a mandatory break of 30 minutes) and 48 hours a week. Any time over these limits will be treated as overtime.

(g) A simplified online registration procedure is provided.

(h) An employee is entitled to eight days of casual leave throughout the year. However, employees who work for 240 days or more in a calendar year are eligible to receive, from the next year, one day of leave for every 20 days of work performed during the previous calendar year. This is in addition to five paid festival holidays, national holidays, etc. An employee is allowed to accumulate a maximum of 45 days of earned leave.

The S&E Bill is aimed at facilitating large-scale employment generation, including creating further employment opportunities for women. The central government’s initiative to bring uniformity in such an important area could certainly make it easier to do business, especially for employers with operations across different states. However, while the S&E Bill may create a business-friendly environment in some of the key business jurisdictions, some of the major cities in different states may not see any specific benefits coming out of it.

States need to promote more cities as business jurisdictions so that the advantages of such a law and employment opportunities are not confined to a few cities and/or employees but rather benefit a large segment of workforce.

Cyril Amarchand Mangaldas is India’s largest full-service law firm. Manishi Pathak is a partner at the firm.

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