The Karnataka Shops and Establishment Act, 1961 | Labour and Industrial Law - CLAT PG PDF Download

Objectives

• Registration is a mandatory requirement for all companies, persons, and legal entities planning to set up a shop or commercial establishment in the state.
• The Act is an important document for employers and their human resources (HR) departments in the state. The Act regulates commercial establishments in areas such as working hours prescribed for employees, annual leaves with wages, wages and compensation, employment of women and children, and other aspects.

• Businesses that have yet to set up in the state should review the document to understand key statutory requirements, while employers that have already set up in the state should review the Act to ensure their HR policies and handbook are compliant.

What businesses must comply

• Commercial establishment means any commercial, trading, banking, insurance entity, an establishment, or administrative services wherein persons employed are mainly engaged in office work, a hotel, restaurant, a cafe or any other refreshment house, a theatre or any other place of public amusement or entertainment.
• Shops are defined as places where any trade or business is carried on or services are rendered to customers, including offices, storerooms, and godowns. However, shops attached to a factory where the persons employed fall within the scope of India's Factories Act, 1948, are not included.

What businesses are exempt

Establishments that are exempt from the applicability of the Act include:

• Federal, state government, or local authority offices.
• Industries or entities providing power, light, water, public sanitation, or similar services.
• Railway dining cars.
• Establishments for the care or treatment of the mentally unfit, infirm, or sick.
• The Food Corporation of India's establishments.
• Offices of legal and medical practitioners with no more than three employees.
• Banking company offices.
• Management personnel in any establishment.

How to register under the Act

• New shops or commercial establishments in Karnataka, regardless of the number of employees, must apply for registration under the Act within 30 days of commencing business.
• Applications can be submitted online through e-Karmika, the state government portal for registration, renewal, or amendment of licenses.
• The inspection and granting of registration typically takes about 15 days.

Documents required

• Fill up details of the company in Form-A.
• Submit the following supporting documents:
• Commercial address proof.
• Identity proof and PAN card copy of proprietor, partners, or directors.
• PAN copy of the entity.
• Registration documents such as partnership deed or memorandum of association (MOA) of the company.
• Fee payment challans.

Employment of Women and Children

• The Act prohibits the employment of children under 14 years of age.
• Night shifts for women employees or young persons aged 14 to 18 years are also prohibited.
• Information technology (IT) or biotech companies requiring women employees to work at night must obtain special permission from authorities.

Weekly Holidays

• All establishments must remain closed for at least one day of the week and provide a day of rest to employees.
• Exceptions to the weekly holiday provision include medical shops,general stores,theaters,petrol bunks,lodges,hotels,clubs,hostels, and companies offering IT or biotechnology services.

Annual Leave with Wages

• Every employee in Karnataka is entitled to leave with wages at the rate of one day for every twenty days of work performed.
• For young persons, the provision is more generous, offering leave with wages at the rate of one day for every fifteen days of work performed.

Key Compliances for Your Business

• The Act stipulates a nine-hour workday or a forty-eight-hour workweek for employees in the state.
• Overtime work requires employers to pay employees at twice the rate of normal wages.

Registration Procedure

• Every business owner must submit Form A to register their establishment within 30 days of starting the business.
• The registration certificate should be displayed visibly inside the office premises.
• The registration certificate is valid for 5 years. A renewal application must be submitted before the expiry date.
• Employers must notify the registration authority of any changes in the information provided during registration or renewal within 15 days of the change (e.g., change of address, ownership, number of employees).
• Upon closing the business, the registration certificate must be surrendered to the registration authority.

Authorities

• The Chief Inspector, usually the Labour Commissioner, enforces this act.
• Inspectors and Senior Inspectors are designated as "Inspectors", while department-level authorities are referred to as "Additional Inspectors."

Establishments Exempted from Weekly Holiday

• Shops and establishments involved in the sale of medicines and medical equipment.
• Clubs,lodging and hotels, and hostels attached to schools or colleges.
• Hair cutting salons.
• Shops dealing mainly in meat, fish, eggs, milk (except ghee), and dairy products.
• Shops selling bread, chocolate, fresh ingredients, confectionery, ice cream, cooked food, fruits, vegetables, flowers, and raw fodder.
• Paan,beedi,cigarette, and soft drink shops.
• Newsstands selling daily newspapers, weekly magazines, and related office supplies.
• Cinemas,theaters, and other public recreation centers.
• Petrol and diesel stations.
• Tanning bodies.
• Exhibition shops and museums.
• Oil,flour,brick, and lime manufacturing industries.
• Copper,brass, and container manufacturing firms.
• Research organizations in information/biotechnology,biological engineering, and infectious diseases.

Working Hours

• In Bangalore city, businesses cannot operate before 6 AM or after 9 PM.
• In other places, businesses cannot operate before 8 AM or after 8 PM.

Employment and Regulation

• Employers must issue an appointment order in Form 'P' to every employee.
• Employee attendance should be recorded daily in Form 'T'.
• For organizations exempted from weekly holidays, employees must receive a mandatory holiday on the 7th day after 6 consecutive working days. If the 7th day cannot be given, the 11th day should be a mandatory holiday.
• Salaries must be paid before the 7th day of the following month.
• The working hours for any employee should not exceed 48 hours per week, or 58 hours including extra working hours.
• At the end of the year, earned leave is calculated at 1 day per 20 days worked, and sick leave at 1 day per 30 days worked. This leave account should be recorded in Form 'F'.
• An employee who has completed 180 days of service cannot be dismissed without prior notice.
• The Karnataka state Government has set minimum wages for labours working in shops and commercial establishments.