Shop and Establishment Act

Compliance on organizational basis, refers to ensuring that the organization complies to laws and regulations which are applicable across the company and usually includes regulations related sexual harassment, equality, child labour, etc.

Shop and Establishment Act is covered under state legislation and each state has framed its own rules and regulations for the same. Since rules are framed by the state government, obviously, rules will differ from state to state and hence rules for the state in which registration is to be obtained needs to be followed.

Broadly, all shops, hotel, eating house, restaurant, theatres, place of public amusement or establishment and other commercial establishment etc. are covered under the Shop and Establishment Act and are required to obtain registration under the same.

The main objective of the Act is to protect the rights of both employer and employee. The Shop and Establishment Act generally regulates payment of wages, hours of work, terms of service, wages for holidays, leave policy, work conditions, overtime work, interval for meals and rest, prohibition for employment of children, employment of young persons or women, maternity leave and benefits thereof, opening and closing hours, closed days, weekly holiday, dismissal, cleanliness, lighting and ventilation, fire safety and precautions, accidents, record keeping, etc.

Establishment covered under the Act must apply for registration, within 30 days from the date of commencement of establishment, in prescribed form along with prescribed fees. Shop and Establishment Act is governed by labour department of the state and generally registration application is to be submitted to local district labour officer. If the concerned officer is satisfied with the application he/she will issue Shop and Establishment Act registration certificate. As mentioned earlier, application procedure would differ from state to state, however, basic details to be provided at the time of applying for registration are as under:

• Name and address of the establishment
• Name of the employer
• PAN of establishment
• Address proof
• Sale deed or rent agreement
• Category of establishment
• Number of employee
• Details of employee
• Other relevant details as called for

The Delhi Shops and Establishments Act, 1954

The Delhi Shops and Establishments Act, 1954 (hereinafter referred to as “the Act”) was enforced with the view of regulating the working conditions of the employees working at such Shops and Establishments. Generally, the working conditions of many small shops and commercial establishments are prone to a lot of ill practices such as child exploitation, unreasonable working hours, unreasonably low wages and salary, lack of healthy working conditions etc. due to lack of government’s supervision. The Act seeks to establish an Authority governing these establishments, improve working conditions for the employees and penalize employers who do not act in consonance with the Act.

The first and foremost question which would occur in the mind of any employer or occupier is, whether the said Act applies to his/her establishment. Though the definitions provided under the Act clearly categorize establishments within and outside the purview of the Act, there are various judgements which have simplified as well as expanded the definition of a shop or a commercial establishment while deciding on the applicability of the Act.

In the case of Chief Commissioner, Delhi v. Federation of Indian Chambers of Commerce and Industry, the Court, while interpreting the definition of “commercial establishments” laid the following essentials for a place in order to fall within the definition of “commercial establishments”:

• it must be “premises” and
• it must have some trade, business or profession being carried on or
• any work in connection with or incidental or ancillary thereto is carried on.1

Shops are basically premises where goods are sold either by retail or wholesale or where services are rendered.

Where economic activity leading to sale is carried: The word ‘shop’ has acquired an expanded meaning. Where in a premises any economic activity is carried on leading to sale or purchase that premises will have to be held a shop for the purpose of the Act even though there is no actual giving or taking of goods in such premises. If the business carried on in a premises results in having some nexus with the purchase or sale the Act will be applicable.

Branches of an office: Offices which keep track of their branch offices and are involved in checking all transactions related to the sales carried on at such offices will also be held within the purview of this Act. It was observed that3, “Where it was indicated that the branches of an office are responsible and answerable to the party; that the head office kept track of the efficiency of each branch and its profitability; that the head office has control over the branch offices and gets information periodically as to stocks received and goods sold from each branch from time to time; that the business in respect of all branches is carried on with the same funds and there are transfers of employees as well from one branch to another branch; that a single audit is made by preparing a single statement of accounts including sales in all the branches which are put together. Such factors clearly indicated that the administrative office at Rajamundry is nothing but a controlling office to supervise the sales taking place in different branches and thus falls within the definition of expression shop”.

Establishments such as:

• Educational Or Other Institutions Run For Private Gain;
• Journalistic And Printing Establishments;
• An Office, A Store-Room, Godown, Warehouse Or Workhouse Or Work Place;
• Premises In Which Business Of Banking, Insurance, Stocks And Shares, Brokerage Or Produce Exchange Is Carried On,

are all covered within the provisions of the Act.4

Registration under Companies Act, 2013: Even if an office branch is registered under The Companies Act, 2003 it is required to register under the Shops and Establishment Act, 1954 if there is any type of business activity or trading being carried on there.

Establishments exempted under the Act: There are many establishments which are either partially or completely exempted from the purview of this Act. The definition clause and Schedule I collectively provide a list of exempted establishments and the extent of their exemption.

Certain examples of establishments which are completely exempted under the Act are listed below:

• A Factory registered Under The Factories Act, 1948 (43 Of 1948),
• Places of Public Amusements or Entertainment such as theatres, cinemas, restaurants, eating houses, residential hotels, clubs;
• Quarries And Mines governed by the Mines Act, 1952 (35 Of 1952);
• Establishments of doctors and medical practitioners;
• establishments of legal practitioners and
• Foreign News Agencies

However, there are certain establishments which are partially exempted under the Act. Such as, if the establishment is that of an accountant or an auditor, it will be entitled to exemption only under Section 15 (related to opening and closing hours of establishments) and Section 16(related to close day) of the Act.

Upon applying these principles along with the provision in the Act it would become clear to any occupier r not he falls within the purview of the Act.

Now, the next concern for every occupier of a shop or such other establishment shall be to make sure that his establishment is duly registered in the Record of Registers kept by the Chief Inspector within 90 days of forming such establishment.

Important Aspects

• Working hours: The Act provides that no employee must work for more than 9 hours per day and 48 hours per week. Work can be extended to 54 hours week for stock taking or making of accounts if the employer has provided for notice of such extension three days in advance.
• For employing young persons 5: No young person shall be required or allowed to work about the business of an establishment for more than six hours a day, whether or not he is a member of the employer’s family. Such working young persons must be provided a break every three and a half hours for resting or taking meals. Such young persons and also women, shall not be engaged in work for more than 8 hours per day or between 9 p.m. and 7 a.m. during the summer season and between 8 p.m. to 8a.m. during the winter season.
• Holidays (Close day): Before the employer declares the holiday or a close day he must exhibit a notice of such day prior to such day in the premises. Every shop and commercial establishment shall remain closed on the close day. Close days will be declared by the government. Different close days can be prescribed for different classes of establishment or different area. In addition, commercial establishment shall remain closed on three of the National holidays each year as the Government may prescribe. There should be a weekly holiday for all employees for which no wages will be deducted.
• Privilege leave: Every employee shall be entitled to a long privilege leave of fifteen days or more after every twelve months; that of 5 days for every four months, of continuous employment and yearly sick leaves of 12 days or more. A casual sick leave shall be available to the employee after every month of work. If the person is a caretaker or a watchman his privilege leave will be for 30 days or more.
• Timely payment of wages: Wages should be paid, in cash, on fixed intervals which are pre-decided and which should not exceed one month. When an employer imposes fine which shall be deducted from his wages or otherwise for any damage or loss caused by the employee he must be informed about the reasons of such fine or deduction in writing and shall be recorded in the register kept for this purpose.
• Letters of Appointment: Employer to furnish letters of appointment to employees. It is to be noted that failure to issue appointment letters under section 34 of the Act to the employee amounts to ‘unfair labor practice’ resorted to deprive them of the benefits which accrue to them due to the length of their service.6
• The Act requires every employer to maintain Records of the leaves taken, hours of work, intervals allowed for rest and meals, overtime work of all employees in separate records. The occupier of any shop or establishment, in the prescribed manner shall keep exhibited in the shop or establishment notices setting forth the number of hours in the week during which persons may in accordance with the provisions of this Act be employed about the business of a shop or establishment and such other particulars as may be prescribed.
• Chief Inspector: The Act also deals with powers and duties of the Chief Inspector. The role of the Chief Inspector is vital in implementing the provisions of the Act. It is his responsibility to take care that the provisions of the Act are duly followed. If in any shop or establishment there is any contravention of any provisions of this Act, or any rule or order made thereunder the proprietor, the employer or the manager thereof as the case may be shall, on conviction, be punished with fine which shall not be less than twenty-five rupees and which may extend to two hundred and fifty rupees or as may be prescribed under the Act.

Records & Registers

• Every employer shall maintain a register of employment and wages in Form ‘G’. Every register shall be duly bound and its pages serially numbered provided that where the opening and closing hours are ordinarily uniform, the employer may maintain such register in Form ‘H’ along with a separate register of wages and record of leave in Form ‘I’ provided further that entries relating to a particular date, on which an employee is called upon earlier or detained later than the usual working hours, shall be made immediately in the remarks column of Form “H” before such early or late working commences.
• Every occupier shall exhibit in his establishment a notice showing the close day, the daily working hours and the usual period of rest interval fixed for employees in form ‘K’.
• The registers, records and notices relating to any calendar year shall be preserved till the end of the following year.
• The employer shall furnish every employee with a letter of appointment Such letters of appointment shall contain the following and such other particulars as may be prescribed, namely:
• The name of employer,
• The name, if any, and the postal address of the establishment,
• The name, father’s name and the age of the employee,
• The hours of work,
• Date of appointment.