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India's Employers Face Legal Dilemma as OSH Code and State Shops Acts Clash
India’s ambitious labour law consolidation, intended to simplify a fragmented compliance landscape, has instead created fresh uncertainties for employers in key industrial states. , along with its counterparts, was meant to replace a web of central and state-level statutes with a single, uniform framework. Yet, as most states continue to retain their own , businesses in Karnataka, Maharashtra, and elsewhere find themselves navigating two conflicting sets of rules. The result is a legal puzzle that threatens to undo the very simplification the codes promised.
, brought into force by the in , consolidates 13 former central laws related to working conditions. It sets baseline standards for working hours, leave, and safety. However, expressly provides that if an employee is entitled to “better benefits” under any other law, those benefits shall prevail. This , intended to protect workers, has become the primary source of ambiguity. State S&E Acts—long-standing statutes that govern shops and commercial establishments—often provide different, and sometimes more generous, terms. With no explicit repeal or harmonization of these state laws, employers are left to reconcile the two regimes on their own.
Eight Hours or More? The Working Hours Conundrum
One of the most immediate conflicts concerns the definition of a standard working day. caps at eight per day, with details on and to be prescribed by the appropriate government. In contrast, the permits nine hours per day and 48 hours per week. also allows a higher daily cap. An establishment operating in Bengaluru or Mumbai must therefore choose which ceiling to apply. While ’s eight-hour limit appears more protective and should logically prevail under the “better benefits” rule, the state acts have not been amended to reflect this. The absence of a clear directive forces employers to interpret the law themselves, with potential exposure to disputes under either enactment.
This mismatch also clouds the calculation of overtime. If the standard working day is eight hours under but nine under state law, at what point does overtime begin? ’s ——depends on hours worked beyond the “normal working hours.” Without a unified definition, employers risk paying either too little or too much.
: ’s Silent Category
A further layer of ambiguity arises from ’s silence on . exclusively addresses “annual leave with wages”——and does not mention other categories of absence. By contrast, the explicitly grants leave for sickness, accidents, or other reasonable causes, and the Maharashtra Act provides set casual leave. The question is whether ’s silence was deliberate—intended to leave this field entirely to state legislation—or whether it implicitly overrides state provisions by omission. Practically, most employers will continue to follow state law because does not forbid granting additional leave. But the lack of clarity means that any future change in state rules could disrupt established practices, and the possibility of a legal challenge that ’s silence implies a prohibition remains open.
: Annual Entitlement or Exit Benefit?
Perhaps the most significant departure from prior practice is ’s approach to . Under the earlier regime in Karnataka and Maharashtra, employees could carry forward unused up to 45 days and encash the entire balance upon separation. reduces the to 30 days and introduces a radical new option: . Workers can now demand encashment of their accumulated leave at the end of each calendar year, and any leave exceeding the 30-day carry-forward limit must be encashed.
This change transforms from a primarily into a recurring cash entitlement. For employers, the financial and administrative implications are substantial. Moreover, the “better benefits” rule creates a further complication. If a state law allows 45 days of carry-forward without , and allows 30 days with , which regime is more beneficial to the worker? The answer may depend on the employee’s personal preferences—some may prefer accumulating leave, others may need the cash. does not specify whether the employer or the employee should choose. This ambiguity could lead to individual disputes and inconsistent practices across establishments.
State Responses: Partial Clarity, No Comprehensive Fix
To date, only a few states have taken steps to reconcile the contradictions. Bihar has repealed its state S&E Act entirely, adopting as the sole governing law. Maharashtra, in , issued a clarification that establishments need not obtain separate registrations under both and the state S&E Act—a move that removes one layer of duplication but leaves substantive conflicts unresolved. Karnataka has yet to issue any formal guidance. The state rules under , which are expected to provide further details on working hours, leave, and encashment mechanics, are still pending in most jurisdictions.
The practical implication for legal professionals is that compliance advice must remain jurisdiction-specific. An employer in Bengaluru cannot simply rely on ; the must be read alongside it. In many cases, the employer will have to adopt the more generous provision—for instance, the higher carry-forward limit under state law—to avoid claims of providing lesser benefits. But this patchwork approach defeats ’s purpose of uniformity and predictability.
The Road Ahead
The current situation underscores the difficulty of federal legislative reform in a field where states have traditionally exercised independent regulatory power. Until states either repeal their S&E Acts (as Bihar has done) or amend them to align with , employers and their legal advisors will continue to operate in a grey area. The “better benefits” principle, while well-intentioned, cannot resolve conflicts over fundamentally different policy choices—such as whether leave should be a benefit that accumulates over a career or a resource that is periodically cashed out.
For the legal community, this is a developing area that demands close monitoring. Clarity may eventually come through state-level notifications, judicial interpretation, or further central legislation. In the meantime, ’s promise of simplification remains unfulfilled, and the burden of navigating these overlapping statutes falls squarely on the employers and the lawyers who guide them.
