The Haryana State Employment of Local Candidates Act, 2020 ("Act") was enacted to encourage private employers in Haryana to boost local employment. The Act was called upon for application from January 15, 2022, for a period of 10 years. The constitutionality of the Act was challenged in multiple writ petitions before the Punjab & Haryana High Court ("Court"). The Court stayed the implementation of the Act on February 3, 2022. The Court on November 17, 2023, has declared the law as unconstitutional and ineffective from the date it came into force (i.e., January 15, 2022).
The Act aimed to provide 75% job reservation in the private sector in Haryana to local candidates for posts where gross monthly salary is up to INR 30,000. All private corporations, societies, trusts, limited liability partnerships, firms, and establishments employing 10 (ten) or more persons were required to register themselves in the designated portal and register the names of local candidates employed by them, before April 15, 2022. The Act drew criticism for creating an exclusion policy and interfering with the private employer's ease of doing business and recruitment. The constitutional validity of the Act was challenged before the Court by several industry associations, namely, Faridabad Industries Association, Gurgaon Industrial Association, Integrated Association of Micro, Small and Medium Enterprises of India, and IMT Industrial Association.
The Court held that the State of Haryana ("State") cannot direct private employers to do what has been forbidden to do under the Constitution of India ("Constitution"). The State cannot discriminate against individuals because they do not belong to a certain State and have a negative discrimination against other citizens of India. It is not for the State to direct private employers who it must employ. The restrictions imposed upon private employers under the Act are gross to the extent that a person's right to carry on occupation, trade or business is grossly impaired under Article 19(1)(g) of the Constitution. There is a bar under the Constitution and the State cannot force private employers to employ local candidates as it would lead to large-scale similar legislations across multiple states that would create artificial walls throughout the country. Further, the control of the State, through the designated officer under the Act, to adjudicate the cases of exemption by an employer (due to inadequate number of skilled local candidates) is onerous. The requirement of submitting quarterly reports and the power of the authorized officer to summon records and inspect premises by just giving 1 day's prior notice would be termed as "Inspector Raj" of the State.
The verdict is a win for all employers in the private sector of Haryana, especially the IT/ITES and manufacturing sectors that employ a sizeable workforce who earn up to INR 30,000.
Recent news reports suggest that the state government of Haryana intends to challenge the judgment before the Supreme Court of India. It would be interesting to observe the developments, because a similar legislation was passed by the state government of Andhra Pradesh in 2019, i.e., Andhra Pradesh Employment of Local Candidates in the Industries/Factories Act, 2019 ("APLC Act"). The APLC Act is yet to be implemented in full and all eyes are on the High Court of Andhra Pradesh whether it would also declare the APLC Act as unconstitutional.
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