On January 15, 2022, the Haryana State Employment of Local Candidates Act, 2020 ("Act") read with the Haryana State Employment of Local Candidates Rules, 2021 ("Rules") came into effect vide the Haryana Labour Department Notification no. Lab/25467/2021 dated November 6, 2021.1 The Act aims to tackle the rising unemployment rate in the state by implementing provisions to provide 75% employment to locally domiciled candidates ("Local Candidate") in new employments in private sector enterprises including companies, societies, trusts, and limited liability partnership firms situated in the state of Haryana. The key features of the Act have been discussed below.
Key Highlights of the Act
- Employers: The Act applies to all 'Employers' of the State of Haryana, which include: (i) all companies, partnership firms, societies, trusts, limited liability partnership firms; and (ii) any person/employer employing 10 or more employees for the purposes of manufacturing or providing services or such entity as may be notified by the State government from time to time but does not include the Central Government or the State Government or any organization owned by the Central Government or the State Government;
- New Recruitment Reservation: Every employer shall be required to employ 75 per cent Local Candidates for new recruitments after January 15, 2022, for the posts where the gross monthly salary or wages are not more than INR 30,000 or as notified by the Haryana Government from time to time. The Act applies to new recruitments only and will not be applicable with retrospective effect;
- Registration of existing employees: All employers are required to register their existing employees who are receiving salary/wages of not more than INR 30,000 irrespective of their state of domicile on the designated portal within a period of three months commencing from January 15, 2022. An employer may initiate any new recruitment process after completing the online registration of existing employees. Eligible candidates who wish to be considered for employment under the Act, will need to register on the portal as a Local Candidate;
- Exemptions: Employers may claim an exemption from providing 75% employment in new jobs to Local Candidates if adequate number of such candidates of desired skill, qualification, or proficiency are not available for the available category of jobs. The designated officer after receipt of an application can either reject or accept it or direct the employer to train Local Candidates for the desired skill or proficiency. An employer aggrieved by the order of the designated officer can file an appeal with the appellant authority within a period of 60 days;
- Submission of Quarterly Report: Every employer will have to furnish a quarterly report on the designated portal and mention details about Local Candidates employed and appointed during that period. In addition to having the power of calling for any record, information or document in possession of any employer, the authorized officer will also have the right to enter the employer's work premises to examine any record, register, document if the officer has a reason to believe that the employer has committed an offence under the Act or the Rules;
- Imposition of Penalties: The Act provides for the imposition of monetary penalties ranging from INR 10,000 to INR 5,00,000 for non-compliance with its provisions as also a daily penalty until the contravention is rectified. Furthermore, the Act, inter alia, stipulates that if the offence has been committed by a company, every director, manager, secretary, agent or other officer or person concerned with the management shall be deemed to be guilty of such offence, unless such person proves that the offence was committed without his/her knowledge or consent. Similar provisions impose penalties on individuals vis-à-vis limited liability partnerships, societies and trusts.
As per recent reports2, the Haryana Deputy Chief Minister Dushyant Chautala has inter alia stated that: (i) new startups and new IT/ITES companies will be given an exemption for two years vis-à-vis the requirements of the Act; (ii) short-term works, extending up to 45 days, will also be exempted from the Act; (iii) sowing of crops, embroidery, primary works related to fruit, vegetables, tea leaves, coffee, fish, animals etc. will be exempted; and (iv) domestic servants and industries that face a dearth of skilled workers will also be kept outside the ambit of the Act.
State based reservations imposed on private institutions is a dangerous trend as it not only interferes with the recruitment strategies of private enterprises but also interferes with the constitutional rights of the citizens of India to carry out their business and trade, as provided under Article 19 of the Constitution of India. It promotes discrimination in respect of employment based on citizens' place of birth or residence and therefore, violative of Article 16 (2) of the Constitution of India. Reference may also be made to the Supreme Court's observation in the case of P.A.Inamdar & Ors vs State Of Maharashtra & Ors3 wherein it was held that "imposition of quota of State seats or enforcing reservation policy of the State on available seats in unaided professional institutions are acts constituting serious encroachment on the right and autonomy of private professional educational institutions...".
Alarmingly, many other states have adopted this trend of localized reservations. Recently, the Jharkhand Government has enacted the Jharkhand State Employment of Local Candidates in Private Sector Act, 2021 requiring inter alia every employer to fill up 75% of the total existing vacancies where gross monthly salary or wages are not more than INR 40,000 with local candidates. Similarly, Andhra Pradesh had earlier in 2019 approved an enactment4 under which industries in public sector or in public-private partnerships must reserve 75% of jobs for the locals. Such domicile-based reservations in private sector is not only against the concept of ease of doing business with many fold additional compliances but also a step in the wrong direction of undue interference in the operations and recruitment choices of private sector.
Article 16(3) of the Constitution of India enables the Parliament to enact provisions for domicile-based appointments in regard to a class or classes of employment or appointment to an office under the Government of, or any local or other authority within, a State or Union territory. However, these domicile-based reservations are applicable to only certain-classes of employments and appointments.
Interestingly, on February 3, 2022, the High Court of Punjab and Haryana granted an interim stay on the Act read with the Rules and issued a notice to the state of Haryana in light of the petition filed by Faridabad Industries Association, challenging the Act for being unconstitutional and violating Articles 14, 15, and 19 of the Constitution of India. Even the Andhra Pradesh Employment of Local Candidates in Industries/Factories Act, 2019 is currently under challenge before the Andhra Pradesh High Court and the Andhra Pradesh High Court has observed that the provisions may be unconstitutional and issued a direction to the State government to inform if the law on quota for locals was enacted as per the Constitution.5 It's a long road of challenge ahead for private enterprises.
3 Appeal (Civil) 5041 of 2005
4 The Andhra Pradesh Employment of Local Candidates in Industries/Factories Act, 2019
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