Karnataka amends its shops and establishments legislation to ease compliance burden on employers

At a glance

• State of Karnataka has enacted the Karnataka Shops and Commercial Establishments (Amendment) Act 2026 (Amendment Act), which came into force on 4 September 2026 and introduces significant changes to employer compliance obligations.
• Establishments employing ten or more workers and registered under the Occupational Safety, Health and Working Conditions Code 2020 (OSH Code) are now exempt from obtaining a separate registration under the Karnataka Shops and Commercial Establishments Act 1961 (S&E Act).
• The Amendment Act digitises key administrative processes, introduces service certificate requirements for exiting employees, and prohibits employers from retaining employees’ original certificates and documents during the term of employment.
• Several offences are now subject to enhanced monetary penalties instead of imprisonment, while a revised compounding framework and a statutory right of appeal have also been introduced.
• The reforms brought under the Amendment Act align Karnataka's regulatory shops and establishments framework more closely with India's labour codes and reflect a broader trend among States to reduce duplicative registration requirements.

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We would like to express gratitude to JSA for their contribution on this publication.

The State of Karnataka has enacted the Amendment Act, which came into force on 4 September 2026. The Amendment Act introduces a range of changes intended to amend the S&E Act, simplify compliance requirements, and bring certain provisions in closer alignment with India's labour codes.

Exemption from duplicate registration requirements

One of the most significant changes is the removal of parallel registration obligations for certain employers. Establishments employing 10 or more workers that are registered under the OSH Code are now exempt from obtaining a separate registration under the S&E Act. The exemption also extends to godowns and storage facilities located within 100 meters from the principal establishment.

The amendment addresses a longstanding compliance concern arising from overlapping registration regimes under Central and State labour laws. Karnataka joins a growing number of jurisdictions that have sought to reduce duplication where employers are already registered under the OSH Code.

Alignment with labour code reforms

The Amendment Act updates various statutory references to reflect India's labour code framework. References to earlier legislations which have been subsumed under the labour codes, including the Payment of Wages Act 1936 and the Workmen's Compensation Act 1923, are replaced with references to the Code on Wages 2019 and the Code on Social Security 2020, respectively.

However, certain provisions of the S&E Act continue to rely on concepts derived from the earlier legislations, suggesting that some interpretive issues may remain and could require further clarifications.

Increased digitisation and streamlined administration

The reforms introduce a greater reliance on electronic processes. Registration applications, registration certificates, renewals and closure notifications may now be handled through digital channels.

The amendments under the Amendment Act also seek to accelerate the registration process by shortening the period within which registration authorities may reject applications. In addition, registrations are intended to remain valid until the closure or cessation of business of the establishment, reducing the need for periodic renewals.

New employee-related obligations

Employers must now issue service certificates to employees within seven days of receiving an application for the same following the end of employment. The Amendment Act also prohibits employers from retaining employees' original educational certificates, experience certificates or any other original documents at the time of appointment or during the course of employment.

These measures are designed to strengthen employee protections and facilitate smoother transitions between employers.

Changes to night work and enforcement provisions

The Amendment Act removes certain detailed operational safeguards that were previously required for engaging women during night shifts under the S&E Act. While a number of protections remain in place, including transport and security-related obligations, some requirements that were unique to the S&E Act, such as selection of transport routes, pre-employment screening of drivers, etc. have been removed. Employers should therefore review the interaction between the S&E Act and the OSH Code framework when assessing compliance requirements for engaging woman employees during night shifts.

The Amendment Act also continues the broader trend towards reducing consequences of labour law offences. Imprisonment has been removed for many violations and replaced with increased financial penalties. At the same time, the Amendment Act expands the availability of compounding of offences, introduces revised penalties, and creates a formal right of appeal against compounding orders.

Employer considerations

Employers operating in Karnataka should review their registration status, assess whether the new OSH Code exemption applies, and update internal compliance processes to reflect the new requirements on service certificates, document retention, and digital filings. Businesses should also monitor further guidance on the implementation of Amendment Act, particularly where transitional or interpretive questions remain.