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 four Labour Codes, being the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the Occupational Safety, Health and Working Conditions Code, 2020. While the Central Government has brought the Labour Codes into force and effect, along with also bringing into effect the Central Rules under each Code, 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 OSH Code has become paramount in governing the working conditions of workers/ employees, specifically regulating the day-to-day aspects of an employee's 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 understand 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^[1] and Maharashtra^[2].

I. Eight Hours or More? The Working Hours Mismatch

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 forty eight hours in a week. The Maharashtra S&E Act also permits a higher number of working hours as compared to the eight hours mentioned in 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's eight hour day. 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. While it is believed that the state rules will provide the required clarity, the position again comes down to having to read both the enactments and then trying to interpret and decipher what would or rather what should be applicable.

II. Sick and Casual Leave: The Code's Silent Category

A further layer of ambiguity is in relation to the different categories of leave available to workers. The OSH Code provides workers with annual earned leave however 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. This will again result in an employer having to read multiple legislations to finally decide the nature and categories of leave that may be provided.

III. Leave Entitlement & Leave Encashment: An annual entitlement or an exit benefit?

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. Could the interpretation therefore be that a worker in Karnataka is not required to satisfy the pre-conditions to receive annual earned leave while a worker in Maharashtra is required to do so?

Additionally, and as a benefit arising from the annual earned leave, leave encashment forming a part of full and final settlements, has always been an important benefit that was available to employees. Up until the OSH Code was brought into effect, the concept of leave encashment 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, provided that the total number of leaves that could be carried forward was 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 and lying to the employee's credit.

A sharp deviation, however, arises in the provisions governing leave in the OSH Code, wherein the difference is not merely an inconsistency, but rather 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/ workers, 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 further 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 be more beneficial to one set of employees while the other may be more beneficial to 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 specific 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 as to whether the S&E Acts will continue to remain in force as is, be amended, or be entirely repealed, such 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 would be 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.

This article has been contributed by:

Partner, Dua Associates Bengaluru , Janini Somiah. E-mail : janini@duaassociates.com

Senior Associate, Dua Associates Bengaluru, Anvita C Harish. E-mail : anvita@duaassociates.com. Views are personal