When old statutes meet new codes: The conundrum with India’s Labour Codes and State-specific legislations

The field of labour and employment in India has traditionally been vast and fragmented, governed by various legislations at the Central and State level. As a result, there has always existed a wide array of legislations which were required to be examined independently and cohesively, to identify the compliance requirements and the provisions that were applicable to employees.

During the years 2019 and 2020, a progressive and revolutionary step was taken towards attempting to simplify the labour laws in the country by consolidating labour legislations into the four Labour Codes. While the Central government has brought the Labour Codes along with the Central Rules into force and effect, a majority of the states are still in the process of finalising and issuing the final State Rules to each Code.

Among the four Codes, the Occupational Safety, Health and Working Conditions Code, 2020, has become paramount in governing the working conditions of workers/ employees, specifically regulating the day-to-day aspects of employment, such as working hours, leave, etc., and this is being provided for under one specific statute. Therefore, on paper, the introduction of the OSH Code was meant to be a moment of simplification, promising employers a single and predictable compliance framework and allowing employees to easily understad their working conditions and entitlements. In practice, however, the simplification has been incomplete. Most States in India have an independent legislation that governs shops and commercial establishments and in addition to registration requirements, also provide for working hours, leave, process of termination and such other aspects which governs the working conditions of employees. The position that remains now is trying to understand the OSH Code along with the applicable state specific shops and commercial establishments law, taking employers and employees back to the pre-labour code era where multiple legislations were required to be read together to be able to best comply with the applicable law.

One may argue that the Labour Codes have an overreaching effect and will apply notwithstanding any other applicable law, as the repeal provision in the OSH Code relates to the Code stating that it will be the law that is applicable even when there is another law that is inconsistent with the Code. The OSH Code, however, further states that if an employee will receive better benefits in comparison to the Code, the employee should be entitled to the better benefits. This again means that employers will have to read and interpret the OSH Code with the applicable state laws and then decide which provides the better benefit for their employees.

This article seeks to highlight certain ambiguities in the interpretation of the OSH Code and the applicable state shops and commercial establishments acts in the states of Karnataka (Karnataka Shops and Commercial Establishments Act, 1961) and Maharashtra (Maharashtra Shops and Establishments (Regulation of Employment and Conditions of Service) Act, 2017).

The OSH Code caps ordinary working hours of workers at eight hours a day, with rest intervals and spread overs as will be notified by the appropriate Government. The Karnataka S&E Act, in contrast, permits nine working hours a day and the Maharashtra S&E Act also permits a higher number of working hours as compared to the OSH Code. An establishment in Bengaluru or Mumbai, therefore, is confronted with two ceilings that do not match - the working hours prescribed in the state S&E Acts vs. the OSH Code. While the Code sets a stricter limit than the S&E Acts of either state and, in view of employee welfare and the repeal provision of the OSH Code, the more protective figure, i.e., eight hours should apply, neither Karnataka nor Maharashtra has amended the S&E Act to reconcile the varying thresholds, leaving employers to wade through the conflict themselves, rather than being handed a clean answer by either enactment.

Apart from impacting the actual working hours, the question of overtime, what should be considered overtime, and when the overtime wages should be paid also arise due to the ambiguity in the working hours.

A further layer of ambiguity relates to the categories of leave available to workers. The OSH Code provides workers with annual earned leave. However, it remains silent in relation to any other categories of leave available to workers. On the contrary, the Karnataka S&E Act specifically provides leave to be availed for sickness/ accidents/ other reasonable causes, and the Maharashtra S&E Act also benefits workers by providing a set ‘casual leave’. Although it can and will be argued that as the OSH Code is silent on this specific entitlement, the state S&E Acts continue to operate unchallenged, the silence itself gives rise to the question of whether the decision to keep the OSH Code silent on this category of leave is a deliberate decision, and if so, whether this field has been entirely left to the discretion of the States.

An interesting aspect in relation to annual earned leave in terms of the OSH Code vs. the S&E Acts is the pre-requisites based on which an employee is entitled to the same. The OSH Code requires a worker to have worked for a minimum number of days in the establishment prior to such leave being allotted, and the Maharashtra S&E Act also has a similar requirement, albeit with a larger threshold of the number of days that a worker is required to have worked. In Karnataka, however, no such minimum requirement exists. It therefore remains to be seen how such annual earned leave is to be calculated for employees and the harmonious approach that will be taken by employers to strike a balance between the OSH Code and the S&E Acts.  

Additionally, and as a benefit arising from the annual earned leave, leave encashment has always been an important benefit that was available to employees. Up until the OSH Code was brought into effect, this concept was rather simple. In Karnataka and Maharashtra, if an employee did not avail the entirety of the annual earned leave available to them in a calendar year, the employee had the option of carrying the same forward to the succeeding year, with the permitted carry forward being a maximum of forty five days. During the employee’s separation, the employee was then entitled to wages for the period of annual earned leave that was unutilised by them.

A sharp deviation arises in the provisions of the OSH Code, wherein the difference appears to be a divergence in the earlier understanding of what kind of benefit annual earned leave is. Firstly, the OSH Code caps the carry forward of unused annual earned leave at thirty days into the following calendar year, thereby bringing to fore the question of what would be more ‘beneficial’ to employees, carry forward of thirty days as set out in the OSH Code or forty five days as set out in the state S&E Acts. Secondly and most importantly, the OSH Code, in addition to encashment of leave at the time of separation from a company, introduces the concept of annual encashment. This concept permits a worker, at their demand, to encash their annual earned leave at the end of a calendar year and also entitles the workers to encash any annual earned leave that exceeds the thirty day carry forward limit imposed. While the details will be provided for in the state rules under the OSH Code, the confusion remains as to which is more beneficial, one may benefit one set of employees while the other may benefit another set of employees. The other question that arises is whether the aspect of which is more beneficial should be answered by the employer and be imposed on all workers/ employees, or rather one that a worker/ employee themselves should decide?

The above are just a few examples to demonstrate how the OSH Code may not entirely coexist peacefully with State statutes. The aspect of what happens in States where both a Central and State statute govern identical subject matters, such as in Karnataka and Maharashtra, is still open. It is yet to be understood whether the S&E Acts will continue to remain in force as is, be amended, or be entirely repealed, as in the case of the State of Bihar. It is pertinent to note that the State of Maharashtra has, in April 2026, issued a clarification relating to the registration requirements under the OSH Code and the S&E Act, to remove ambiguities on whether establishments are required to obtain licenses/ registrations under both statutes. This clarification clearly reflects that while the State of Maharashtra is moving towards removing ambiguities between the two legislations, it does not, at present, intend to repeal the S&E Act.

About the authors: Janini Somiah is a Partner and Anvita C Harish is a Senior Associate at Dua Associates.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

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