Executive Summary

• Effective 4 September 2026: The Karnataka Shops and Commercial Establishments (Amendment) Act, 2026 received the assent of the Governor on 3 September 2026, was first published in the Karnataka Gazette (Extraordinary) on 4 September 2026 and is in force at once.
• Two new employer obligations: Employers must issue a service certificate within seven days of an employee’s application (new Section 6-B), and are prohibited from retaining employees’ original educational certificates, experience certificates or any other original documents, whether at appointment or during employment (new Section 6-C). Both attract penalties under Section 30.
• Registration obligations altered: Establishments employing ten or more workers that are already registered under the Occupational Safety, Health and Working Conditions Code, 2020 are exempted from separate registration under the Act, subject to an interpretive question addressed in this update. Godowns and storage facilities within one hundred metres of the principal establishment need no separate registration. Registration is now valid until closure of business, ending the five-year renewal cycle, all filings move to electronic mode, and deemed registration operates where the Inspector does not act within seven days.
• Night-shift compliance for women eased, sanctions sharpened: The prescriptive transport-logistics conditions in Section 25(1), covering driver screening, route controls, the control room requirement, the emergency mobile application and related matters, are omitted. The core conditions remain: written willingness, free and secure transport with GPS, rotation, security guards, separate welfare facilities and crèche cost. Non-compliance now attracts a fine of not less than Rs 10,000 in addition to the existing risk of cancellation of registration.
• Decriminalisation with heavier fines: Imprisonment under Section 4(8) is replaced with a fine of up to Rs 50,000, and fines under Sections 30 and 33 rise substantially, with Section 33 moving from Rs 500 to Rs 10,000.
• New compounding and appeal framework: The jurisdictional Labour Officer may compound offences at fifty per cent of the prescribed fine for a first offence and seventy-five per cent thereafter, capped at twice a year for offences of the same nature. Appeals lie to an authority not below the rank of Assistant Labour Commissioner, with mandatory pre-deposit of the fine and sixty-day disposal.

Background and Commencement

The Karnataka Shops and Commercial Establishments Act, 1961 has, since 21 November 2025, operated alongside the four Labour Codes, and in particular alongside the Occupational Safety, Health and Working Conditions Code, 2020, whose registration requirement extends to establishments employing ten or more workers.

The Amendment Act is Karnataka’s first substantial legislative response to that overlap. It received the assent of the Governor on 3 September 2026, was first published in the Karnataka Gazette (Extraordinary, Part IV-A) on 4 September 2026, and by Section 1(2) came into force at once. The operative date is therefore 4 September 2026.

The Amendment Act also conforms the 1961 Act to the Labour Codes at the level of statutory references: Section 21 now refers to the Code on Wages, 2019 in place of the Payment of Wages Act, 1936, and Section 22 to the Code on Social Security, 2020 in place of the Workmen’s Compensation Act, 1923.

These changes create no fresh employer action but confirm the direction of travel: the 1961 Act is being repositioned as a companion to the Codes rather than a parallel regime.

Registration: Alignment with the OSH Code

The Exemption

A new clause (k) in Section 3(1) provides that the Act shall not apply to an establishment employing ten or more workers, if already registered under the OSH Code.

A proviso adds that no separate registration is required for godowns or storage facilities situated within one hundred metres of the principal establishment, a point of immediate relevance to warehousing and logistics operations.

Two Possible Interpretations

Because the new clause sits in Section 3(1), which lists establishments to which the Act does not apply, a literal reading would exempt a qualifying establishment from the entire Act, including its substantive provisions on leave, holidays and hours.

The better reading, supported by the proviso and by the evident purpose of eliminating duplicate registration, is that the exemption is directed at the registration requirement, with the Act’s other provisions continuing to apply to the extent not inconsistent with the Codes.

Maharashtra reached a similar registration-focused position by administrative clarification earlier this year in respect of its own Shops and Establishments legislation, while confirming that the remaining provisions of the state Act continue to operate.

Until the Karnataka Labour Department’s position is visible, employers should not treat leave, holiday or hours obligations under the 1961 Act as displaced.

Practical Position on Registration

Existing registrations under the 1961 Act continue undisturbed, and with the renewal cycle abolished there is no further periodic act to perform in respect of them.

For new establishments, we recommend obtaining registration under the 1961 Act in the ordinary course until the department’s operational treatment of the new exemption, including on the e-Karmika portal, is visible.

Registration Mechanics Modernised

Applications, certificates, change notifications under Section 6 and duplicate certificates all move to electronic or digital mode.

Where the Inspector fails to act on an application, deemed registration now operates on the expiry of seven days rather than thirty.

The substituted Section 4(5) provides that registration, once issued, is valid until the closure or cessation of business of the establishment, and the renewal sub-section is omitted entirely. The five-year renewal cycle under the 1961 Act has ended.

New Employer Obligations

Service Certificates (Section 6-B)

Every employer must issue a service certificate to an employee within seven days from receipt of the employee’s application, in the form to be prescribed.

Employers should put a workflow in place now and watch for the prescribed form under the rules; the seven-day clock runs from the application, not from any internal approval.

Prohibition on Retaining Original Documents (Section 6-C)

No employer may retain original educational certificates, experience certificates or any other original documents of an employee, whether at the time of appointment or during employment.

The prohibition is absolute and admits no consent-based exception. Verification should proceed on copies against sight of originals, and any originals currently held should be returned. Onboarding standard operating procedures should be updated immediately.

Both new sections are brought within the penalty net of Section 30(1), under which the fines have simultaneously been increased.

Employment of Women During Night

Since the 2020 amendment, Section 25 has permitted a willing woman employee to work at night subject to a list of conditions in Section 25(1).

The Amendment Act omits clauses (h) to (o) of that list: the requirements relating to driver bio-data and antecedent screening, supervisory control of pick-up and drop routes, non-disclosure of women employees’ contact details to unauthorised persons, route selection so that no woman employee is picked up first or dropped last, security guards in vehicles in that situation, random vehicle checks, the control room or travel desk, and the emergency mobile application.

Core Protective Conditions That Remain

The core protective architecture remains:

• The continued application of the Act’s provisions on daily and weekly hours, overtime wages, rest intervals, spread-over and weekly holidays.
• Written willingness from the woman employee.
• Free transport from residence to workplace and back with adequate security and GPS tracking.
• Employment on rotation.
• An adequate number of security guards on the night shift.
• Separate rest rooms, welfare and washing facilities.
• The establishment bearing the cost of crèche facilities.

 

The residual power to prescribe further conditions also remains, so conditions of the omitted kind could return through rules.

Enforcement and Penalties

Two points deserve attention on the enforcement side.

First, Section 25(2), under which non-compliance can lead to cancellation of the registration certificate, is untouched.

Secondly, the substituted Section 30(3) now provides a fine of not less than Rs 10,000 for contravention of Sections 24 and 25.

The compliance burden has eased considerably, but the consequences of breaching the retained conditions are sharper.

Employers may also sensibly retain several of the omitted measures, such as driver screening and route protocols, as internal policy: they remain good practice, sit comfortably with obligations under the POSH framework, and are evidentially valuable even though no longer statutorily mandated.

Enforcement: Penalties, Compounding and Appeal

Decriminalisation

The offence under Section 4(8), which previously carried imprisonment of not less than six months together with a fine of up to Rs 5,000, is now punishable with a fine of up to Rs 50,000. Imprisonment is removed.

Fines Increased

Under Section 30(1), the fines rise from Rs 1,000 to Rs 3,000 and from Rs 2,000 to Rs 5,000, and the new Sections 6-B and 6-C are added to its scope.

The fine under Section 30(2) rises from Rs 250 to Rs 2,000. The substituted Section 30(3) provides a fine of not less than Rs 10,000 for contravention of Sections 24 and 25. Section 33 rises from Rs 500 to Rs 10,000.

Compounding (Section 33-A)

The jurisdictional Labour Officer may compound any offence under the Act or its rules by collecting fifty per cent of the prescribed fine for a first offence and seventy-five per cent for a second or subsequent offence.

An offence of the same nature is not compoundable if committed by the same person more than twice within a year, and no penalty may be imposed without a reasonable opportunity of being heard.

Appeal (Section 33-B)

A person aggrieved by an order under Section 33-A may appeal within thirty days to an authority to be notified, being an officer not below the rank of Assistant Labour Commissioner.

No appeal is entertained unless the fine ordered has been deposited, and the appeal is to be disposed of within sixty days.

The mandatory pre-deposit makes the economics of compounding, at fifty or seventy-five per cent, directly relevant to any decision to contest an order.

What Employers Should Do Now

• Continue existing registrations under the 1961 Act. There is nothing to renew; retain registration records until closure of the establishment.
• For new Karnataka establishments, obtain registration under the 1961 Act in the ordinary course until the Labour Department’s treatment of the new exemption is visible.
• Update onboarding procedures to eliminate any retention of employees’ original documents, and return any originals currently held.
• Establish a workflow capable of issuing service certificates within seven days of an employee’s application, and watch for the prescribed form under the rules.
• Refresh night-shift standard operating procedures against the retained Section 25 conditions, and take a considered decision on which omitted measures to continue as internal policy.
• Recalibrate penalty exposure registers for the revised fines, and note the compounding percentages and the appeal pre-deposit when responding to any enforcement action.

Disclaimer

This Flash Update is intended to provide a general summary of the Karnataka Shops and Commercial Establishments (Amendment) Act, 2026 for the information of our clients and should not be treated as legal advice or as a substitute for advice on specific facts.

Positions described as unsettled reflect the state of the law as at the date of this update, and departmental clarifications issued hereafter may alter them.