JSA Prism | Employment Law | September 2026

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Karnataka introduces amendments to the shops and commercial establishments framework

The Government of Karnataka, vide the Karnataka Shops and Commercial Establishments (Amendment) Act, 2026 (“Karnataka S&E Amendment Act”), has introduced changes to the Karnataka Shops and Commercial Establishments Act, 1961 (“Karnataka S&E Act”), aimed at simplifying regulatory compliance, reducing procedural requirements and providing greater operational flexibility to establishments in the State.

The Karnataka S&E Amendment Act, among other things, rationalises registration requirements, enables greater use of digital processes, removes the requirement for periodic renewal of registration, streamlines certain requirements relating to the employment of women during night shifts, and introduces a revised enforcement framework with enhanced penalties and provisions for compounding and appeal.

The Karnataka S&E Amendment Act which received the Governor’s assent on September 3, 2026, was published in the Karnataka Gazette on September 4, 2026, and has come into force with immediate effect.

Key features of the Amendment Act

• Exemption from applicability: Establishments employing 10 (ten) or more ‘workers’ (i.e., non-managerial level employees) which are registered under the Occupational Safety, Health and Working Conditions Code, 2020 (“OSH Code”) will be exempt from the provisions of the Karnataka S&E Act. Further, the Karnataka S&E Amendment Act clarifies that godowns and storage facilities situated within 100 (one hundred) metres of the principal establishment would be covered under the registration of the principal establishment.
  Notably, the Karnataka S&E Act does not prescribe any minimum employee threshold for its applicability. Accordingly, establishments employing fewer than 10 (ten) workers and those that are not otherwise registered under the OSH Code will continue to be covered under the Karnataka S&E Act and accordingly obtain registration under the same.

• Registration of establishments: Applying for registration, receiving the registration certificate, paying the applicable fees, and notifying the Inspector of closure of an establishment must now all be done through electronic or digital mode. Further, the period for the Inspector to communicate refusal of registration has been reduced from 30 (thirty) days to 7 (seven) days. Registration, once issued, would remain valid until closure or cessation of the establishment, thereby removing the existing periodic renewal requirement.
• Service certificate and employee documents: Employers are now required to issue a service certificate to an employee within 7 (seven) days of receiving an application from the employee for the same. Further, employers are also prohibited from retaining original educational certificates, experience certificates or other original documents of employees, whether at the time of appointment or at any point during employment.
• Alignment with the Labour Codes: References to the Payment of Wages Act, 1936 (“PoW Act”) and the Workmen’s Compensation Act, 1923 are now replaced with references to the Code on Wages, 2019 (“Wages Code”) and the Code on Social Security, 2020, respectively, specifically with reference to Section 21 (Application of PoW Act) and Section 22 (Application of Workmen’s Compensation Act, 1923). However, certain other references in the Karnataka S&E Act, including the definition of ‘wages’, continue to refer to the PoW Act and have not been correspondingly amended. Notwithstanding these residual references, given that the PoW Act has been repealed and its provisions have been subsumed into the Wages Code, the Wages Code would apply to matters previously governed by the PoW Act.
• Employment of women in night shifts: Several detailed operational requirements relating to transportation that previously applied when woman employees were employed during night shifts have now been omitted. These include requirements relating to verification of drivers’ antecedents, control of transport routes and schedules, confidentiality of woman’s personal contract details, restrictions on the order in which women employees could be picked up or dropped off, requirement to provide security guards at the workplace and in the night shift vehicles (when women are being picked up first or dropped off last)and random security checks for vehicles, maintenance of a control room or travel desk, and provision of an emergency mobile application.
  However, the amendments do not dispense with the underlying requirement to provide transport facilities to women employees working in night shifts. Employers are still required to provide transportation to and from the employee’s residence, free of cost, with appropriate security measures and GPS facilities. Accordingly, while the detailed procedural and operational requirements governing such transportation have been relaxed, the substantive obligation to provide safe and secure transport facilities continues to apply.

• Enhanced penalties: The Karnataka S&E Amendment Act substantially increases the monetary penalties prescribed under the Karnataka S&E Act:
  • for specified contraventions, the maximum fine for a first offence has increased from INR 1000 (Indian Rupees one thousand) to INR 3000 (Indian Rupees three thousand), while the maximum fine for a second or subsequent offence has increased from INR 2000 (Indian Rupees two thousand) to INR 5000 (Indian Rupees five thousand);
  • for certain other contraventions relating to overtime wages, payment of advances, production and maintenance of registers, records and display of notices, the maximum fine has been increased from INR 250 (Indian Rupees two hundred fifty) to INR 2000 (Indian Rupees two thousand);
  • non-compliance with requirements relating to employment of women and children will now attract a fine of not less than INR 10000 (Indian Rupees ten thousand), replacing the earlier framework which provided for imprisonment and/or fine; and
  • for obstructing an Inspector or failing to comply with a direction issued by an Inspector, the maximum fine has been increased from INR 500 (Indian Rupees five hundred) to INR 10000 (Indian Rupees ten thousand).
• Compounding of offences: The jurisdictional Labour Officer may now compound an offence by collecting 50% of the prescribed fine for a first offence and 75% of the prescribed fine for a second or subsequent offence. An offence of the same nature committed by the same person more than twice within a period of 1 (one) year cannot be compounded. Further, a penalty cannot be imposed without providing the concerned person with a reasonable opportunity of being heard.
• Right to appeal: A person aggrieved by an order imposing a compounding penalty may now appeal to an appellate authority notified by the Government, within 30 (thirty) days of receiving the order, and the appellate authority is required to dispose of the appeal within 60 (sixty) days.

Conclusion

Overall, the Karnataka S&E Amendment Act reflects a shift towards a more streamlined and business-friendly regulatory framework, with greater emphasis on digital compliance, reduced procedural requirements (such as removal of renewal requirement and exemptions) and operational flexibility for employers. At the same time, the amendment seeks to preserve core employee protections, particularly in relation to the employment of women during night shifts and the safeguarding of employee documents, while introducing stronger penalties and a structured compounding and appellate mechanism to improve enforcement. The changes therefore represent an attempt to balance the needs of a progressive business environment with the continued protection of employee rights and welfare.

This Prism has been prepared by:

Preetha Soman Partner

Rebecca Thomas Senior Associate

Nileena Banerjee Junior Associate

For more details, please contact km@jsalaw.com.