This article is written by Atif Ahmed, an advocate pursuing Diploma in M&A, Institutional Finance and Investment Laws from Lawsikho. In this article, the author discusses about the rights given to the employees working in shops and commercial establishments.


The lockdown necessitated by the Covid-19 has not only impacted the Companies, but it has also miserably impacted the shops and commercial establishments across the country. These shops and commercial establishments, for example, residential hotels, restaurants, theatres, other retail shops etc, have either seen little, or no business in these past few months. Also, these shops don’t have the kind of capital or investors that the companies usually have, and often these operate at smaller margins, and hence lesser profits, as compared to the big companies, and hence these are more severely impacted. 

This pandemic has caused recession across the world, and the economists believe that this is only going to worsen up in the coming future. Millions of jobs across different industries are going to be affected, and even the jobs of the employees working at the shops and commercial establishments across the country, are not going to be spared. Loss of income is going to force the employers to terminate the employment of their employees, now more than ever. 

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The employment of the employees working in the companies is often regulated by the Employment Agreement, which provides protection to the employees. However, the employees working at the shops and commercial establishments often do not enter into any Employment Agreement. So it becomes imperative to know if there is any legislation that provides protection to the employees in such cases. 

Shops and Commercial Establishment Acts, which are state-wise legislations regulate the employment of employees working at Shops and Commercial Establishments, across the country. 

NOTE: In this Article we shall discuss the rights provided to the employees by The Punjab Shops and Commercial Establishments Act, 1958, (Herein referred to as ‘ACT’) which is applicable to the State of Punjab and Haryana. It is worth noting that the rationale and the provision of the all State Shops and Commercial Establishment Acts are similar to much extent. 

Shops and Commercial Establishments Acts 

What is the objective of the legislation? 

One of the important legislation to which most businesses in India are subject to, is the Shop and Establishment Act, enacted by every state in India. The Act is designed to regulate the payment of wages, hours of work, leave, holidays, terms of service and other work conditions of people employed in the shop and commercial establishments. 

What are shops and commercial establishments?

The Shop and Establishment Act in India is promulgated by the state and may slightly differ from state to state. However, as per the Act, all shops and commercial establishments operating within each state are covered by the respective Shop & Establishments Act. 

Shops are defined as premises where goods are sold either by retail or wholesale or where services are rendered to customers and includes an office, a store-room, godown, warehouse or workhouse or workplace. 

Establishments are defined as shops, a commercial establishment, residential hotel, restaurant, eating-house, theatre or other places of public amusement or entertainment. Further, establishments, as defined by the act, may also include such other establishments as defined by the Government by notification in the Official Gazette. 

However, factories are not covered by the shops & establishments act and are regulated by the Factories Act, 1948.
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Aspects Regulated by the Shop and Establishment Act 

The Shop and Establishment Act regulates a number of aspects relating to the operation of a shop or commercial establishment. Some of the key areas regulated by the shop and establishment act include: 

  • Hours of work;
  • Interval for rest and meals; 
  • Prohibition of employment of children; 
  • Employment of young person or women; 
  • Opening and closing hours; 
  • Close days; 
  • Weekly holidays; 
  • Wages for holidays; 
  • Time and conditions of payment of wages; 
  • Deductions from wages; 
  • Leave policy; 
  • Dismissal;
  • Cleanliness; 
  • Lighting and ventilation;
  • Precautions against fire; 
  • Accidents; 
  • Record keeping. 

Let us now discuss the important rights provided to the employees by The Punjab Shops and Commercial Establishments Act, 1958 (Herein referred to as ‘ACT’)

What are the rights of the employees working in shops and commercial establishments? 

  1. Descent hours of Employment (Section 7) 

  • No person shall be employed for more than 48 hours in any one week and 9 hours in any one-day. 
  • But on occasion of seasonal or exceptional pressure of work, a person may be employed in excess of the above-mentioned working hours on the following conditions: (a) the total number of overtime hours worked by an employee does not exceed 50, within a period of any one quarter; and (b) the person employed overtime, shall be paid remuneration at twice the rate of his normal wages calculated by the hour. 
  1. Proper intervals for Rest and Meals (Section 8) 

  • No employee (except a chaukidar, watchman or guard) shall be allowed to work in an establishment for more than 5 hours before he has had an interval for rest, of at least half an hour. 
  • The period of work of an employee in an establishment shall be so fixed that, inclusive of his interval for rest, the spread over shall not be more than 10 hours in a day. 
  1. Conditions for Employing Young Persons (Section 6) 

  • A young person means a person who has attained the age of fourteen years, but has not attained the age of eighteen years. 
  • The total number of hours worked by a young person employed shall not exceed thirty hours in any one week or five hours in any one day. This shall however exclude the intervals taken for meals and rest. 
  • A young person shall not be employed continuously for more than three hours without an interval of at least half an hour for meal or rest. 

What about the persons who have not attained the age of 14 years? According to section 29 of the Act, employment of such persons by the employers is prohibited. 

  1. Entitlement of ‘day off’ in a week (Section 11) 

No employee shall be required to work- (a) on a closed day, in any establishment which is required to observe a closed day; and (b) on one day in a week, in any other establishment; and (c) before the opening hour of the establishment and after closing hour of the establishment (However, a watchman may be required to work even on an off day, but he must be allowed another off day in the week.) 

What is the meaning of closed day? ‘Closed Day’ means the day of the week on which a shop or commercial establishment remains closed. 

  1. Right to Holidays or Double Wages (Section 12) 

Every employee in an establishment shall be allowed – (a) a holiday on the Independence day, Republic day, and Mahatma Gandhi’s birthday and they shall be paid wages for the same; and (b) 3 other holidays (with wages) in a year in connection with such festivals as the Government may declare from time to time; and (c) However, if an employee is required to work on any such holiday, then he should be paid remuneration at double the rate of his normal wages calculated by the hour

  1. Right to take Leave(s) (Section 14) 

  • Every employee who has been in employment for not less than 20 days in a year, shall be entitled to 1 day’s earned leave for every such 20 days of employment. 

Provided that- a young person shall be entitled to one day’s earned leave for every fifteen days of employment during the year. 

  • If an employee is discharged or dismissed from employment or if he leaves the service during the course of the year, then he shall be entitled to leave alongwith wages or wage in lieu of his unavailed leave(s). 
  • If an employee does not in any one year take the whole of the leaves allowed to him, any leave not taken by him shall be added to the leave to be allowed to him in the next year. 

Provided that— (i) The total number of days of leave that may be carried forward to a succeeding year shall not exceed 30. (In the case of a young person, the total number of days of leave that may be carried forward to a succeeding year shall not exceed 40). (ii) Where the employer and the employee have entered into a contract or agreement of service which provides for a longer leave with wages or weekly holidays, then the employee shall be entitled to that. 

(Notwithstanding rights of leave as discussed above, every employee in an establishment shall be allowed 7 days casual leave and 7 days sick leave in a year, along with wages.) 

  1. Period during which the wages are to be paid (Section 16) 

  • The employer or other person who is responsible for the payment of wages to the employee shall fix a period during which such wages shall be payable. However, this period shall not exceed one month. 
  • The wages of every person employed shall be paid within 7 days from the date on which such wages become due. 
  • Where the employment of any person is terminated by or on behalf of the employer, the wages earned by him and the remuneration/wages in lieu of unavailed period of due leaves, shall be paid within 2 days of the termination of employment. 
  • Where an employee himself quits his employment, then such wages and remuneration in lieu of unavailed period of due leaves, shall be made to him on or before the next pay day. 
  • The claim of the employee against the employer for the contravention of above mentioned provisions of wages/remuneration shall be entertained only if it is preferred within six months from the date of its accruing. 
  • Section 18 of the Act provides that if the Judicial Magistrate is satisfied that the employee has not been paid his due wages, he shall direct the employer to pay the wages along with compensation which could be upto 8 times the amount of wages withheld. 
  1. Right to be given Notice before Removal (Section 22) 

No employee shall be removed from the service unless and until either one month’s previous notice or one month’s pay in lieu thereof has been given to him. 

However notice/pay is not required to be given in the following cases: (a) if the employee is removed on account of his misconduct, or (b) If he has not been in the service for a continuous period of three months. 

What happens in case the employee is removed without giving him notice/pay? In such a case, the Judicial Magistrate can award compensation to the employee equivalent to two month’s salary. However, such claim shall be entertained only if it is preferred by the employee within six months from the date of his removal. 

  1. Rights of Women Employees 

Condition of Employment: (Section 30) 

  • No woman shall be required to work whether as an employee or otherwise in an establishment during night. 
  • A woman can be required to work as an employee or otherwise in an establishment which is engaged in the treatment or care of the sick, the infirm, destitute or mentally unfit. 
  • No employer of any establishment shall knowingly employ a woman in any establishment during six weeks following the day of her confinement or miscarriage. 

Maternity benefits: (Section 31)

Every woman who has been continuously employed in the establishment for a minimum period of 6 months preceding the date of her delivery, shall be entitled to receive a payment of maternity benefit (which shall be prescribed by the Government) for: six weeks immediately preceding the day of her delivery; and the day of her delivery; and six weeks following the delivery. 

(Provided that no such payment shall be made for any day on which she attends work and receives payment thereof during the six weeks preceding her delivery.) 

Can an employer fire his employee at his will? Is there any remedy available to the employee in such a case? 

  • Yes, the employer can terminate the services of the employee at any time, and for any reason, however as discussed above, according to section 22 of the Act, the employer is required to serve to the employee, a one month’s previous notice of termination, or he has to give the employee one month’s pay. 
  • However, if the employee has not been in continuous service of the employer for at least three months, or if the employee is being fired for his own misconduct, then such notice or pay, is not required to be given to the employee. 
  • The employee has a remedy in terms of compensation in case the employer doesn’t serve such notice to him, or if the employer doesn’t give him one month’s pay. The court/tribunal could award the employee a compensation equivalent to two month’s salary. 

Can an employee quit the services of his employer at his will? 

  • Yes, the employee is also free to leave the employment at his will, but according to section 23 of the Act, if the employee has been in the service of the employer continuously for a period of three months, then he shall terminate his employment only after giving to his employer a 7 days previous notice or pay in lieu thereof. 
  • And in case an employee does not give such a notice to the employer before terminating his employment, the employer may forfeit the unpaid wages of the employee for a period not exceeding 7 days. 

Can the employer and the employee enter into an employment agreement? If yes, will it override the provisions of the Shops and Commercial Establishment Acts? 

  • Yes, the employer and the employee are free to enter into a contract of employment, and detail their own terms of engagement relating to amount of compensation, place of work, designation, work hours, termination, resignation etc. 
  • However, the employment agreement should not provide for any provision which gives to the employee lesser relief than what he is entitled to under the provision of Shop and Establishment Acts. For example, the employment agreement cannot provide that the employment could be terminated at the will of the employer, without giving any notice or pay. 


The State-wise Shops and Commercial Establishment Acts provide important rights to the employees working in the shops and commercial establishments across the country. However, the biggest issue is the lack of awareness among these employees, which leads to their exploitation by their employers. These employees are often made to work for long hours without any interval of rest, are not given as much leaves as they are entitled to, are made to work overtime, without any extra wage, and most importantly are fired suddenly at the will of their employer, without giving any wage. And these people suffer without a voice. The plight could only be improved with awareness. 

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