Which are the Kinds of Offices Covered by the Shops and Establishments Act? [Legal Questions]

An oft bandied about word in the start-up community is “Shops and Establishments” Registration. Shops and Establishments Registration is mandatory in some cases for businesses, as long as they qualify as an “Establishment” under the Shops and Establishment Act.So if you run a business in Maharashtra, you need to look at the the Bombay Shops and Establishments Act, 1948. As per that law, the word establishment is defined as follows:

(8) "Establishment" means a shop, commercial establishment, residential hotel, restaurant, eating house, theatre, or other place of public amusement or entertainment to which this Act applies and includes such other establishment as the [State] Government may, by notification in the Official Gazette, declare to be an establishment for the purposes of this Act.

Do internet businesses need to register under the Shops and Establishments Act?

A loophole that you as a business can exploit comes from the origin of the law – In most States, such as Maharashtra for instance, it was passed in 1948 when there was obviously no internet, and virtual offices existed only in the pages of science fiction books. Since most start-up entrepreneurs today choose to initially work out of home, or collaborate remotely with each other and virtual offices are not establishments under the Act, you will not need to worry about registration.

Who then needs to register under the Shops and Establishments Act?

Reading the law, it becomes clear that any business which is involved in selling goods or services to customers out of a commercial office becomes liable to register. To repeat the point made earlier then, if you work out of an office and your products or services are sold online, you could exploit the loophole that no customers are purchasing from your shop, and hence registration would not be necessary. If however, you also entertain walk in clients and sell products and services to them, that loop-hole would no longer be available to you to use.

What are the implications of being a registered enterprise under the Act?

1. Shops are not allowed to be opened earlier than 7 a.m. usually, unless they sell perishable goods like milk and fish for which they are allowed to be open from 5 a.m.
2. Shops must be closed by 8.30 p.m. except in certain cases.
3. An employee in a shop or commercial establishment cannot be required or allowed to work for more than 9 hours in a day and 48 hours in a week, as a result of our labour laws. After every five hours of continuous work, the person must be allowed to rest. Even if the employee is working over-time, he/she should not work more than 11 hours a day. One day in a week compulsorily must be a holiday, for which pay cannot be deducted.

Is there a single law for the entire country?

No, unfortunately. There are different laws for different regions in the country. So in addition to the Bombay Shops and Establishments Act, 1948 which we looked at earlier, there is the Delhi Shops and Establishments Act, 1954 and the Karnataka Shops and Establishments Act, 1961 among many, many others.

So before you register, you need to check the applicable law which affects you. In some cases, a single law may apply across States. Many laws created for the erstwhile State of Bombay apply to Gujarat and the Union Territories nearby. While some states like Manipur have their own Shops and Establishments Acts, some North East Indian states share a single law for Shops and Establishments Registration.