India: Haryana State Employment Of Local Candidates Act, 2020: Private Sectors Flummoxed

The Haryana state assembly passed the Haryana State Employment of Local Candidates Bill, 2020 on November 05, 2020 which further received the assent of the Governor on February 26, 2021. The Haryana State Employment of Local Candidates Act, 2020 (“Act”) was further published in the extraordinary gazette for general information on March 02, 2021.¹ The Act is yet to be published in the gazette and be brought into force.

Objective

The Act aims to reserve 75% of new jobs with compensation below Rs 50,000 per month for candidates having domicile of the state of Haryana.

Similar reservations in other states

Amidst the rising in-migration in varied metro cities, the state governments have in the past few years been keener towards safeguarding the interest of the local citizens by way of reservations. While reservation in public employment is not news to the country, the state governments have encroached their reservation policy on the private sector.

In 2016, Karnataka planned to provide 100% reservation for the local candidates in mainly blue-collar jobs in private sector industries vide the draft of Karnataka Industrial Employment (Standing Orders) Rules of 1961. However, the said rules could not be brought into force. In 2019, the Government of Andhra Pradesh (Government) notified and brought into effect the Andhra Pradesh Employment of Local Candidates in the Industries/Factories Rules, 2019 making it mandatory for existing and upcoming factories, industries, joint ventures and public-private partnership projects to reserve 75% of employment for local candidates.

Therefore, the Haryana law is not a new reservation law brought in by the state government in the country. However, Haryana has definitely notched the reservation law a bit to cover not the factories and industries but the companies and firms that are involved in the information technology and technical sphere.

Features of the Act

Applicability: The Act is applicable to all the Companies, Societies, Trusts, Limited Liability Partnership firms, Partnership Firm and any person employing ten or more persons in the State of Haryana and an entity, as may be notified by the government, from time to time. Further, the Act is required to be effective for a period of 10 years from the day of its commencement.

Actions to be undertaken by the Employer: The Act mandates every employer to register all employees receiving gross monthly salary or wages not more than INR 50,000 on the designated portal (“Portal”) within 3 months from the commencement of the Act. Further, the employers are restricted from employing any new employee until the completion of registration on the Portal. The Act, further mandates the employer to hire 75% of local candidates to any and all positions where the gross monthly salary being received by such employee is not more than INR 50,000. Local candidate for the purpose of this Act means a candidate having domicile of the state of Haryana. The employers are further restricted from hiring any employee not registered on the said Portal. Subject to the 75% reservation cap, the employers are permitted to restrict the employment of local candidates from any specific district to 10% reservation only.  

Local Candidate: For the purpose of this Act, a local candidate is a candidate who is domiciled in the State of Haryana.

Exemptions: Act provides for an exemption available to be claimed by an employer, in case an adequate number of local candidates of the desired skill, qualification, or proficiency are not available. However, such exemption shall only be permitted post inquiry by a designated officer.

Compliances: The employers are mandated to submit a quarterly report detailing the local candidates employed and appointed during that quarter on the designated portal. The designated officer shall have the right to call for any additional information with regard to the quarterly reports from an employer and also visit the employer's premise to examine any record if they have reason to believe that an offence under this Act has been committed by the employer.

Analysis

Lack of Clarity: The Act fails to provide clarity to various words being used, thereby leading to the same being widely interpreted by the interested parties for their own benefits. For instance, the Act frequently uses words like salary, wages, employees, however, no reference to any other law has been made to imply the definition of such words. In absence of the definition, the Act fails to clarify what kind of employees the Act is applicable to and therefore brings into its ambit all permanent and temporary employees. Further, the status of contract labours under this Act is neglected. In addition to the lack of clarity on certain important terms, the Act also fails to elucidate on who would be considered as a “candidate who is domiciled in the state”. The State Government will have to clarify what would constitute a person having domicile of the State of Haryana and what are the documents that the person may be required to furnish to establish the same.

Constitutionality: Reservation by the State Government in a private establishment is highly likely to violate Article 19(1)(g) of the Constitution of India i.e., the right to carry on an occupation or business of the employers. While the 93rd Constitutional Amendment Act does provide the state government right to make provisions for socially and educationally backward class of citizens of SC/ST, the provision permitted only for admission in private educational institutions and does not in any way permit reservation for employment in private institutions. The Act places its reliance on the domicile of the candidate for the purpose of reservation while Article 16(2) of the Constitution specifically prohibits any discrimination based on place of birth or residence in matters of public employment. Further, the Act provides for a reservation of 75% while the Apex Court in varied judgements² has clearly laid down that reservations cannot exceed more than 50% unless otherwise in exceptional circumstances. The State of Haryana will have to establish their exceptional circumstances to stand above this violation, however, the Act will still remain in violation of Article 16(2) and 19(1)(g) of the Constitution.

Existing Employees: The Act restricts the employer from employing any employees other than those registered on the Portal and ensuring compliance with 75% of the total candidates being local candidates. However, the Act fails to clarify the status of the already employed candidates. Does the State of Haryana expect the employer to terminate most of its existing employees or hire an additional local candidate in order to abide by the 75% mark? Either of the above-mentioned options is an additional unwarranted expense for the employers.

Compromised Quality: The constraint on the employers to hire local candidates further restrains them from hiring the best candidate despite the availability of the same in the market. While their competitors in the same market but placed at a different geographical location shall have the benefit of employing the best available candidates, the employers in the State of Haryana shall be restricted from the same. While an employer can claim an exemption on the ground of lack of desired skill, qualification or proficiency among the available local candidates, the designated officer, may upon examination of the exemption claim, direct the employer to train local candidates to achieve the desired skill, qualification or proficiency. Such a direction is not only an additional cost to the employer but also not a duty of the employer by any means.

Conclusion

State governments have undertaken varied measures to empower the local population of their state and increase the employment ratio. The Act seems to be a positive step in the same direction. However, favouring a certain section of the society on the basis of their domicile over the other sections, in areas requiring proficiency and skills is only likely to hamper the quality of the industry and market. Best candidates may be refrained from being employed at certain companies and contribute to the economy of the country and raise the quality market only on the ground of not being a domicile of a certain state. Further, the private sectors may not appreciate such high intervention from the government wherein they will have to not only compromise on the quality of candidates being hired but also incur additional expense on training the candidates for the required skill set. Private entities may rather look for a shift in their office locations to a neighbouring state thereby leading to a large impact on not only the local employment of such state but also impact on the real estate sector. State Governments should empower their local population with skills and proficiency than advocating reservations.

Footnotes

1 http://storage.hrylabour.gov.in/uploads/labour_laws/Y2021/March/W2/D09/1615277534.pdf

2 Laxmanrao Patil vs. The Chief Minister and Anr. 2020(5) ALLMR607

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