Rajasthan brings e-tail under shops law

The Indian e-commerce sector, mostly funded by marquee foreign investors, has largely remained outside the domain of rulebooks so far. But that may change. The Rajasthan government, for instance, is about to bring the estimated $4 billion e-commerce industry under flexible labour laws.

The e-commerce universe, with firms such as Amazon, Flipkart, Snapdeal, Paytm and now Alibaba set to join the list, is not defined as a sector under any labour laws at present. But, for the first time, it has found a place in the proposed amendments to the Rajasthan Shops and Commercial Establishments Act (RSCE) 1958. No central labour law defines e-commerce as an establishment, according to people in the know.

WIDENING THE NET

• E-commerce isn’t defined as an establishment in both central and state labour laws
• However, e-tailers setting up shops or offices are covered under various labour laws
• E-tailers register themselves as retail network or services company offering goods online
• Experts say coming under the Shops and Commercial Establishment Act of states will give e-commerce firms more clarity and flexibility

The proposal says "any premises where any trade or business or e-commerce is carried on, which is not covered under a shop or a commercial establishment" will come under the proposed RSCE Act. This will make it mandatory for e-commerce companies to follow rules for basic working conditions like working hours, wages for overtime work, weekly holidays, and annual leave with wages.

"E-commerce is an extremely important sector in India and they need to have registration," said a senior Rajasthan labour department official.

Internet companies, including e-commerce firms, have been in the news for large-scale hiring at various levels and they figure among coveted employers at top business school placements. E-commerce market leaders have set ambitious targets for increasing their workforce by many thousands this year.

"Bringing e-commerce under labour laws is important for the safety and basic working conditions of the workers," said Manish Sabharwal, chairman of recruitment firm Teamlease. According to reports, more than 400 delivery men employed by various e-retail companies in Mumbai went on a strike protesting lack of basic working rights. The news report further said the workers demanded fixed duty hours, overtime allowance, proper uniform, and weekly holidays from their companies. While some of them were on company rolls, others were hired through third-party vendors on contract.

State governments have their own rules related to shops and establishments. The law lays down statutory obligations and rights of employers and employees.

At present, physical shops or workplaces employing workers are covered under the RSCE Act. This means e-commerce companies that have set up offices in various parts of the state are covered under the state-specific labour law.

"However, their identification as an industry is not specified anywhere. Most e-commerce firms register themselves as retail network or services companies offering goods online and will not be covered under the law. The category of e-commerce was not identified while the labour laws were written, as a result companies could align themselves to a definition that suited their requirement," said Rituparna Chakraborty, president of the Indian Staffing Federation. Experts believe bringing e-commerce firms under state-specific laws will give them more breathing space and bring clarity in the regulatory framework.

"Any e-commerce company will either have to be covered under the Factories Act (a central legislation) or the Shops and Commercial Establishment Act of the state. While the former has been amended only three times since Independence, the latter has gone through changes more than a hundred times in the past and would be far better for e-commerce firms. It clarifies the regulatory framework for the companies and makes it more flexible, local and finite," said Sabharwal.

E-commerce companies have been able to grow at a rapid pace without too many laws coming in their way. Foreign direct investment (FDI) in the sector is one example. Although FDI is not permitted in e-commerce, most companies have been able to route foreign money through a different structuring. Marketplaces hosting sellers on websites have emerged as a model of choice for e-commerce companies, where FDI rules do not apply.

There have been protests against deep discounts offered by these companies as well, with brick-and-mortar retailers knocking on the doors of the Competition Commission of India. But neither the government nor the competition watchdog has found any ground for action against e-commerce companies. The industry has, however, come under the scrutiny of tax laws of some states, and the issue is yet to be resolved.