India: New Act Introduced To Regulate Shops & Establishments In Gujarat

Last Updated: 19 June 2019
Article by Avik Biswas, Manishii Pathak, Sowmya Kumar and Utkarsh Singh

1. INTRODUCTION

The Government of Gujarat has introduced the Gujarat Shops and Establishments (Regulation of Employment and Conditions of Service) Act, 2019 (the "New Act"), which came into effect on May 1, 2019. With this, the Gujarat Shops and Establishment Act, 1948 (the "Old Act"), stands repealed.

2. KEY AMENDMNETS

We set out below the key provisions of the New Act, contrasted with the Old Act:

Subject Matter

Old Act

New Act

1.

Applicability

The Old Act was applicable to all the establishments, irrespective of the number of workers employed.

The New Act applies to establishments employing 10 or more workers.

However, establishments with less than 10 workers are required to intimate the facilitator (in whose jurisdiction the business is located) regarding certain details about their businesses.[1]

2.

Definition of "employer"

The definition included a person owning or having ultimate control over the affairs of an establishment.

The definition under the Old Act has been elaborated to specifically include a partner of a firm (where the employer is a firm) or a director of a company (where the employer is a company).

3.

Definition of "establishment"

The definition of the term "establishment" was covered under two heads, which were "establishment" and "commercial establishment".

The New Act prescribes a comprehensive definition in respect of an "establishment", which includes the business of banking, insurance, brokerage, and the establishments of medical practitioners, architects, engineers, accountants, tax consultants or any technical or professional consultants, along with shops, hotels and restaurants.

4.

Definition of "employee"

The definition included persons wholly or principally employed, whether directly or through any agency, and included an apprentice.

The definition of the term "employee" has been replaced by the term "worker", which includes a person employed (including through an outsourcing agency) to do any manual, unskilled, skilled, technical, operational or clerical work, but does not include an apprentice.

5.

Cancellation of the registration certificate

There was no provision pertaining to the cancellation of the registration certificate.

The labour department has the power to cancel the registration certificate and remove an establishment from the register of establishments, if such an establishment is found to have obtained its registration through misrepresentation or suppression of material facts, or by submitting forged or false documents.

6.

Leaves and holidays

The Old Act prescribed the following:

  • 4 days of paid festival holidays in a calendar year;
  • 1 day off in a week;
  • 21 days of privilege leave for employees who have worked for 240 days or more in a calendar year;
  • 7 days of sick leave and 7 days of casual leave

In terms of the New Act, workers are allowed the following:

  • 8 days of paid festival holidays in a calendar year;
  • 1 day off in a week, even if the shop or establishment is kept open on all days in a week;
  • Privilege leave at the rate of 1 day for every 20 days of work, provided the worker has worked for more than 240 days in a previous calendar year;
  • 7 days of sick leave and 7 days of casual leave

7.

Welfare provisions (including crèche facilities)

The Old Act contained provisions relating to cleanliness, ventilation, lighting and first aid.

In addition to prescribing obligations for the employer with respect to the health and safety of workers, the New Act prescribes that every shop or establishment, which employs 30 or more women workers, should maintain a suitable room as a crèche for the children of such workers.

A group of establishments can also provide a common crèche within a radius of 1 kilometer (approximately 0.62 miles), subject to the conditions which are prescribed by the labour department. Where there are 100 or more workers engaged in an establishment, employers are also required to maintain a canteen.

8.

Discrimination against women employees

The Old Act had no specific provision in relation to discrimination against women employees.

The New Act states that no woman worker will be:

  • discriminated against in matters of recruitment, training, transfers, promotion or wages; and
  • required to or allowed to work in any establishment except between the hours of 6 a.m. and 9 p.m., unless the labour department is satisfied with the safety and transportation measures implemented by the organisation, and issues an order allowing women to work during night shifts.

9.

Wages for overtime

The Old Act prescribed that all employees (other than those working at residential hotels or restaurants) will be entitled to wages for overtime, at the rate of 1.5 times their ordinary wages, in case they work for more than 9 hours a day or for more than 48 hours a week.

The New Act states that every worker who is required to work beyond 9 hours a day or 48 hours a week will be entitled to wages at the rate of 2 times his or her ordinary wages for such overtime work.

The total number of overtime hours cannot exceed 125 hours in 3 months.

10.

Opening and closing hours of the establishment

Under the Old Act, there was no specific provision with respect to to keeping establishments open 24/7.

Any shop or establishment situated in, on, or around municipal corporation areas, hospital premises, national highways, railway platforms, petrol pumps and state roadways bus station premises may be kept open for 24 hours, as long as the establishments comply with requirements relating to working hours, weekly offs, leave and holidays, spread-over and overtime. Other shops and establishments may be kept open throughout the year, except between 11 p.m. and 6 a.m., as long as the employers comply with requirements relating to working hours, weekly offs, leave and holidays, spread-over and overtime.

11.

Penalties

The maximum penalty prescribed under the Old Act for any contravention was INR 750 (approximately USD 10). However, in certain cases of continuous violation, penalties could extend to INR 10 (approximately USD 0.10) for every day of such violation.

The New Act prescribes a penalty of up to INR 50,000 (approximately USD 716), and if the contravention leads to any accident causing injury or death of a worker, the contravention shall be punishable with a fine ranging from INR 25,000 (approximately USD 358) to INR 50,000 (approximately USD 716) and/or with imprisonment of up to 6 months.

3. INDUSLAW VIEW

The New Act is based on the model legislation, known as the Model Shops and Establishment (Regulation of Employment and Condition of Services) Act, 2016. This is a progressive move by the Government of Gujarat and should go a long way in increasing the ease of doing business. At the same time, penalties under the New Act have been increased substantially to ensure they are an effective deterrent. As importantly, the New Act has no provision relating to any notice of termination of service. Further, since the Old Act stands repealed pursuant to the introduction of the New Act, any existing employment contract harmonious with the New Act will be considered as if it were issued under the New Act, unless specifically superseded by any regulation or order under the New Act.

It is laudable that there are specific provisions relating to women workers, including prohibiting discrimination against them, and the requirement of a creche facility. That being said, it may be noted that the New Act states that every establishment where 30 or more women workers are employed is required to maintain a room as a crèche. This requirement appears to contradict the 2017 amendments to the Maternity Benefit Act, 1961, under which every establishment with 50 or more employees is required to provide a crèche facility. In addition to this, the rules under the New Act are yet to be notified.


[1] The provisions of the New Act will not apply to establishments already having valid registration under the Old Act, until the expiry of their registration.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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