If you run a shop, office or commercial establishment in Karnataka, a set of changes came into force on 4 September 2026 that affects everyday HR practice, especially at joining and at exit.
The Karnataka Shops and Commercial Establishments (Amendment) Act, 2026 received the Governor's assent on 3 September 2026 and was notified the next day, with immediate effect.
The changes that matter most
1. Registration: simpler, and no more renewals
- Registration now stays valid until the business closes. Periodic renewals are no longer needed.
- Establishments with 10 or more workers that are already registered under the OSH Code, 2020 are exempt from separate registration under the Shops Act.
- A godown or storage space within 100 metres of the main establishment does not need its own registration.
- Certain registration matters must be decided within 7 days, down from 30.
2. Service certificates within 7 days
When an employee asks for a service certificate, you must issue it within seven days of the request.
In practice, many companies delay the experience or relieving letter until the full-and-final settlement is done, or use it as leverage. That approach now carries real legal risk in Karnataka.
3. No holding original documents
New provisions bar employers from keeping employees' original documents, such as educational certificates and experience certificates, whether at the time of joining or during employment.
Some employers still collect original certificates "for safekeeping", or hold them to discourage people from leaving. That practice now has to stop.
4. Higher penalties
- Breaches of key provisions now attract a minimum fine of ₹10,000.
- The fine for obstructing an Inspector rises from ₹500 to ₹10,000.
- First offences can be compounded on payment of 50% of the fine, and second or later offences at 75%. An offence committed more than twice in a year cannot be compounded.
What to do this month
- Check your registration status. If you are registered under the OSH Code with 10 or more workers, confirm the exemption applies to you.
- Return any original documents you are holding, and get the employee's acknowledgement.
- Update your joining process: verify originals, keep self-attested copies, and hand the originals back the same day.
- Set a 7-day rule for service certificates, with a named owner in HR.
- Update your offer and appointment letters if they mention depositing original certificates.
- Brief your managers, because exits often go wrong at the team level, not in HR.
Why this is good practice anyway
Even outside Karnataka, both rules reflect good HR. Holding someone's certificates or delaying their experience letter rarely keeps a good employee. It damages your reputation, and in a tight talent market, word travels fast.
This article is for general information and is not legal advice. Check the notified text of the Act and take professional advice for your situation.
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