New Labour Code Confusion: Is the Shops and Establishment Act Still Relevant?

Shops and Establishment Act and the New Labour Code

Is the Shops and Establishment Act not taken into consideration under the new labour code? Please clarify.

The labor code does not apply to shops and establishments. FYI

Dear Colleague,

The Shops and Establishments Act and The Apprenticeship Act are remaining independent of the Code as of now. Your understanding is correct.

Acts Repealed by the Occupational Safety and Health Code

For example, the Occupational Safety and Health, WC code only repeals the following Acts once implemented (the date of notification is still awaited):

(a) The Factories Act, 1948;
(b) The Plantations Labour Act, 1951;
(c) The Mines Act, 1952;
(d) The Working Journalists and other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955;
(e) The Working Journalists (Fixation of Rates of Wages) Act, 1958;
(f) The Motor Transport Workers Act, 1961;
(g) The Beedi and Cigar Workers (Conditions of Employment) Act, 1966;
(h) The Contract Labour (Regulation and Abolition) Act, 1970;
(i) The Sales Promotion Employees (Conditions of Service) Act, 1976;
(j) The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979;
(k) The Cine-Workers and Cinema Theatre Workers (Regulation of Employment) Act, 1981;
(l) The Dock Workers (Safety, Health, and Welfare) Act, 1986;
(m) The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996.

If I remember correctly, so far only 29 Central Labor Laws have been subsumed into the four Labor Codes, namely the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, and the Code on Occupational Safety and Health, 2020.

State Labor Laws and Codification

So far as existing State Labor Laws are concerned, they are not covered in the codification. However, there is a Central Model Shops and Establishments Rules, 2016 in place which may be adopted by the States at their discretion. This adoption has been done so far by only one or two States.

In addition, as rightly guided by our colleague, the present Labour Law reforms by way of New Labour Codes (4 Codes) are only on the list of 29 Central Laws. As Labour is a Concurrent Subject, the State-enacted laws will not be covered under the Labour Codes proposed.

The States have to follow the Central Model, but unless there is some good drive by Unions and Employers, we cannot expect such reforms at the State level. There is a long way to go in our present scenario.

Shop & Establishment Acts vs. New Labor Codes

Shop & Establishment Acts are state acts. The new labor codes are central acts. They have not touched the state acts and focused on existing central acts.

Amendment to Leave Rules Under New Labour Codes

Amendment to leave rules is one of the many impacted aspects the New Labour codes have brought into the scene. Specifically, as per state(s) Shops & Establishments Act & Rules, the entitlement of PL/EL and Sick leaves is one day for every 20 days worked (EL/PL) and 12 days for 12 months of service (Sick leave). An employee can carry forward a maximum of 45 days to the next year, leaving the leave days over and above the 45 ceiling at the credit to automatically elapse, a loss to the employees concerned. There is no stipulation about the encashment of the leave days elapsed.

New Labour Codes on Leave Entitlement

On the other hand, New Labour Codes stipulate that an employee is entitled to one day for every 20 days of work, which roughly works out to 15 days p.a. of (EL/PL). One of the labour codes, namely, the Occupational Safety, Health, and Working Conditions Code, states that an employee cannot accumulate more than 30 days of paid leave in a calendar year. Employees are entitled to avail of the overflowing leave and/or encash them, presumably every year, and can carry forward without limit whenever applied leave is denied. The accumulated leaves get paid at the end of the calendar year. In case an employee accumulates more than 30 days of paid leave in a calendar year, the employer will have to pay for the excess leaves (Ref. Chap. VI-Sec. 32(1)-(i), (ii), vii(a)). However, this condition only applies to workers not in managerial or supervisory positions.

State Variations and Exemptions

It is to be noted that different state governments have different rules for leave and hence are not applicable in all the states uniformly. State & central government employees are outside the purview. Also, the leave rules of the Principal Employer are not applicable suo moto to contract labor, in general. It's obvious that the four new labour codes affect take-home pay, EPF contribution, the number of paid leaves, and maximum working hours in a week, and so on. It's a moot point how employers are managing this while euphoria among employees concerned. And the Codes will stay put. Please refer to the Gazette Notification.