India: Maharashtra Adopts Model Shop and Establishments Legislation

By way of the Maharashtra Shops and Establishments Act, 2017, the state of Maharashtra has adopted the Central Government's model legislation intended to increase the ease of doing business and boosting employment opportunities for women. The Act represents significant reform of the prevailing legislation and employers should take note of the changes to ensure compliance and to best utilise the flexibility afforded by the new regime.

Background

In 2016, the Central Government in India passed the Model Shops and Establishments (Regulation of Employment and Conditions of Service) Bill to pursue twin objectives of increasing the ease of doing business on the one hand, and boosting employment opportunities for women by requiring a women-friendly work environment on the other. The Central Government chose the path of suggestive model legislation so that states could adapt the legislation in line with regional and local requirements.

Maharashtra became the first state to adopt this Model Bill by passing the Maharashtra Shops and Establishments (Regulation of Employment and Conditions of Service) Act, 2017 (the "Act") which received the governor's assent on 7 September 2017 and entered into force on 19 December 2017. On 2 February 2018, the Government of Maharashtra also notified draft Rules (subsidiary legislation) to assist the implementation of the Act. These draft Rules are expected to come into force following a period of consultation.

Key changes for employers

From 19 December 2017, the following key changes apply to all establishments employing 10 or more workers:

• Work hours and overtime: In contrast with the previous legislation, the Act does not prescribe uniform opening and closing hours for all establishments. Instead, it provides the State Government the flexibility to fix different hours depending on the industry. At the same time, no worker can be required or permitted to work for more than nine hours in any day and 48 hours in week. Working beyond these hours entitles the worker to overtime wages at the rate of twice the ordinary wage; however, the total number of overtime hours cannot exceed 125 hours in 3 months (i.e. approximately 10 hours in a week).
• Weekly rest day: All establishments are permitted to remain open on all days in the week provided that every worker is allowed to take weekly rest day.
• Leave: In addition to the paid weekly rest day, every worker is also entitled to 8 days of casual leave and 8 paid festival holidays per year. Leave will accrue up to a maximum of 45 days.
• Crèche and other facilities: Establishments are required to take appropriate health and safety measures to ensure cleanliness, lighting, ventilation and prevention of fire. In every establishment with fifty or more workers, crèche facilities must also be provided. Such facilities must be at the establishment itself, or within one kilometer of the establishment in the case of a common crèche facility which appear to be more onerous than the corresponding obligation under the Maternity Benefit (Amendment) Act, 2017 (which was covered by us here).
• Protections for women workers: The Act prohibits discrimination against women workers in relation to recruitment, training, transfers, promotions and wages. While women workers are allowed to work from 9:30pm to 7:00am if they expressly consent to do so (which was not previously permitted), the draft Rules impose a host of obligations on the employer in relation to women workers on night shifts including the provision of separate facilities and transportation for women, and the strict implementation and enforcement of the Sexual Harassment of Women at Workplace, Prevention, Prohibition and Redress) Act, 2013 (which was covered by us here).
• Registration: All establishments are required to submit an online application within 60 days of the commencement of its business or the date the Act entered into force. The establishment will be issued a registration certificate along with a Labour Identification Number. All other applications in relation to registration (renewal, change in details etc.) are also required to be made online.
• Penalties: Penalties for non-compliance have increased significantly and employers can be liable up to a maximum of INR500,000.
• Exempt workers: The Act only covers workers which are directly employed by the establishment, and does not apply to contract workers. Furthermore, workers occupying positions of confidential, managerial or supervisory character are expressly excluded and establishments are required to display a list of such workers on its website or in the establishment. While concern had been expressed about the ability of establishments to comply with this requirement, the draft Rules provide additional guidance on what is considered a managerial role and so on.

Key takeaways

These significant reforms will generally be welcomed by employers. The digitization of various processes under the Act (e.g. application for registration, maintenance of registers etc.) should make compliance more straight-forward. More significantly, the increased flexibility in relation to opening hours and overtime work, previously available to the IT sector, would be particularly attractive to companies operating in the retail and leisure industries.

At the same time, it will be necessary for companies to review their employment practices and institute systems to ensure compliance with the new rules. This would be particularly tricky for companies having a presence across India as different rules would govern establishments in different states until the Model Bill is adopted uniformly across all states.

Written by Fatim Jumabhoy, Partner, Tess Lumsdaine, Senior Associate, and Rebecca Lim, Associate

With thanks to Divyanshu Agrawal for his assistance in preparing this article