While this progressive step aims to enhance employee protection and operational stability, significant concerns remain unresolved, which could jeopardize the amendment's intent. The gaps in regulatory clarity undermine the effectiveness of the amendment and place businesses at risk of non-compliance due to the uncertainty surrounding the precise nature of the insurance obligations.
The Maharashtra Shops and Establishments (Regulation of Employment and Conditions of Service) Act, 2017 ("MSE Act"), governs the conditions of service and standards for employees engaged in various commercial establishments across Maharashtra.
The MSE Act is designed to safeguard service conditions by regulating critical aspects such as working hours, rest intervals, leaves, etc.
Pursuant to the powers conferred by Section 37(1) of the Maharashtra Shops and Establishments Act, 2017, the Government of Maharashtra issued a notification on August 2, 2023, publishing draft amendments to certain statutory forms ("Forms") prescribed under the Maharashtra Shops and Establishments (Regulation of Employment and Conditions of Service) Rules, 2018 ("MSE Rules") and sought comments thereon from stakeholders.
The draft amendments envisaged the introduction of mandatory insurance requirements for all shops and establishments regulated under the MSE Act.
Following the notification on August 2, 2023, a forty-five day period was allotted for public comments and recommendations.
Almost a year later, on July 22, 2024, the Maharashtra government issued Notification No. MS&EA-08/2021/C.R.153/Labour-10, which appears to have amended the Forms prescribed under the MSE Rules. This amendment mandates that all regulated establishments must now provide details of the insurance policy obtained by it as part of the application for registration (form A), application for renewal (Form D), intimation of details (Form F) and annual returns (Form R).
Rationale and Implications
The introduction of mandatory insurance marks a significant step in regulating the safety and compliance of establishments within Maharashtra, making it the first state in India to implement such a requirement for shops and establishments.
The primary aim of this legislative change is likely to enhance protection for employees. By requiring establishments to secure and maintain insurance coverage, the amendment aims to create a safety net for employees, thereby improving their security and welfare.
Implications
Regulated establishments are now required to obtain and maintain valid insurance policies. Notably, the amendment does not specify any terms or conditions related to the insurance required. Critical details such as the type of insurance required, the scope of coverage and coverage thresholds are not specified.
Further, there is uncertainty regarding this amendment as it has not been widely published and our informal queries with the officials at the labour department have gone unanswered and there is a general lack of awareness regarding the same.
This lack of clarity may lead to establishments finding themselves puzzled in deciding what would be adequate insurance and could open doors for insurance agents and insurance companies exploiting this uncertainty by offering over exuberant insurance products, potentially imposing financial strain especially on smaller businesses who may find it challenging to bear the additional costs of securing and maintaining such insurance.
Establishments might obtain insurance policies solely to meet technical compliance with the Forms, which could undermine the objective of the amendment. Thus, clear guidance about the terms and conditions for such insurance must be issued by the authorities.
Conclusion
The amendment represents a substantial shift in regulatory oversight by introducing mandatory insurance requirements for all regulated commercial establishments in Maharashtra.
While this progressive step aims to enhance employee protection and operational stability, significant concerns remain unresolved, which could jeopardize the amendment's intent. The gaps in regulatory clarity undermine the effectiveness of the amendment and place businesses at risk of non-compliance due to the uncertainty surrounding the precise nature of the insurance obligations.
In light of the above, it is imperative that detailed guidance on the mandatory insurance requirements should be issued promptly to address the existing ambiguities. This should at the bare minimum specify things like type of insurance coverage required, scope and monetary threshold. With clear guidelines in place, the objective of the amendment can be met and compliance will become more feasible.
Originally published in ET Government
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