Explained | Haryana’s private sector reservation law and the skepticism around it

The law makes it mandatory for employers in the State to reserve 75% of jobs paying less than ₹30,000 a month, for local residents.

The law makes it mandatory for employers in the State to reserve 75% of jobs paying less than ₹30,000 a month, for local residents.

The story so far: Setting aside an interim order passed by the Punjab and Haryana High Court on February 3 staying the State law that reserves 75% of private sector jobs paying up to 30,000 a month for Haryana’s local residents, the Supreme Court said on February 17 that the High Court had not provided “sufficient reasons” for putting the law on hold. 

Steering clear of getting into the merits of the case, the apex court asked the High Court to expeditiously decide on the writ petition filed before it by industry bodies, not exceeding a period of four weeks from February 17. The Bench of Justices L Nageswara Rao and Pamidighantam Sri Narasimha also directed the Haryana government to not take coercive steps against those companies who do not comply with the law till the matter is resolved. 

While hearing the petition filed by the Faridabad Industries Association and two other industry associations from Haryana, who challenged the constitutionality of the law, a Bench of the Punjab and Haryana High Court had said: “The core issue is whether any State can restrict employment (even in the private sector) on the basis of domicile”, adding that keeping this issue in mind, it was constrained to stay the law. 

While Industry bodies have contended that the law will adversely affect industrial growth, the Haryana government, a coalition of the BJP and Jannayak Janata Party meanwhile, maintains that the act will open up ample employment opportunities for the youth in the state. 

What does the reservation law entail? 

The Haryana State Employment of Local Candidates Act, 2020, which was enacted in November last year and came into force on January 15 this year, makes it mandatory for employers in the State to reserve 75% of jobs paying less than ₹30,000 a month, for local residents. The State government originally said that the reservation would apply to jobs paying up to ₹50,000, but later revised the upper limit to ₹30,000, on receiving opposition from industrialists. 

The 75% domicile quota in private sector employment was an election promise made in 2019 Assembly elections by Jannayak Janata party leader and Haryana Deputy Chief Minister Dushyant Chautala. The Bill was passed by the State Legislative Assembly in November 2020, and given the Governor’s assent in March 2021. 

All private entities considered as “employers” in the state fall under the ambit of the law, meaning it will apply to all companies, trusts, societies, partnerships and limited liability partnerships. Any individual or employer who has 10 or more persons working under them in any factory, trade, business or enterprise will also be covered under the law.

Under the law, a “local candidate” would be defined as anyone domiciled in the State of Haryana. The original draft of the Bill had the condition that only those who have resided in the State for the past 15 years would be considered local candidates but this was later revised to 5 years. 

The act requires job seekers to register themselves on the government’s designated online portal to avail the benefits of the reservation, and companies can only hire new eligible employees through the said portal. 

Meanwhile, employers would have to register the employees already working with them in the ₹30,000 monthly salary bracket, and can only start recruiting new employees in the category after completing the registration process. The law would be applicable on new recruitments and would not be effective retrospectively. The act would not be a permanent legislation but remain in force for 10 years of being enacted. 

Employers have also been directed to file quarterly reports on the digital portal, updating it with details of local residents recruited and appointed in the prescribed salary bracket in the previous quarter. These reports would be subject to scrutiny by designated officials, who will be empowered to ask the employer to furnish the documents or conduct verification. The companies found to be violating the Act are liable to a fine between ₹10,000 and ₹2 Lakh. 

Companies could seek exemption if they do not find the adequate number of local candidates for a particular skill or job role, but this claim can be rejected by concerned government officials if they doubt its legitimacy. Employers can also be directed to train local youth in the required skill in the event of inadequate eligible candidates. 

Deputy CM Mr. Chautala also spoke of the provision in the law under which Information Technology (IT) firms and start-ups established after January 15 this year, would be exempted from the law for the next two years. 

What are the legal qualms raised about it? 

Job reservation Bills or laws for domiciles have also been announced in other States including Andhra Pradesh, Madhya Pradesh and Jharkhand. The job quota Bill passed in the Andhra Pradesh Legislative Assembly in 2019, also reserving three-fourths of private jobs for locals, was challenged in the State’s High Court, which observed that “it may be unconstitutional”. 

The plea moved in the Haryana and Punjab High Court by the State’s industry associations challenges the constitutional validity of the law, arguing that it stands in violation of Article 19 of the Indian Constitution, which guarantees the right to freedom, including to reside and settle in any part of the Indian territory and practise any profession, business or trade. The plea also states that the act violates Article 14 (equality before law) and Article 15, which prohibits discrimination on various grounds religion, race, caste, sex or place of birth. 

They also argued that the reservation was being introduced by way of a “sons of the soil” policy, which infringed upon the constitutional rights of both employers and employees to work anywhere in the country. Besides, the petitioners also pointed out that jobs in the private sector are based “purely” on the “skills and the analytical bent” of the employee. 

Legal commentators like Supreme Court lawyer Colin Gonsalves have been quoted by The Wire, referring to the law as “unconstitutional” adding that the domicile requirement as high as 75% was “overwhelming”. 

The question of permissibility also arises if the Indira Sawhney vs Union of India case is considered, where the Supreme Court had capped the reservation limit in public sector jobs at 50% in 1992. Legal experts have said that one may then contend that the reservation limit in private sector employment should not exceed that prescribed for public services. 

Why are industrialists skeptical? 

Industrialists and industry bodies have expressed discontent with the law as they fear that it would affect the competitiveness of private businesses by artificially controlling their internal functioning. Industrialists have said that it will also impact the ease of doing business in the State, aside from increasing the compliance burden on employers. 

The Federation of Indian Chambers of Commerce and Industry (FICCI) has said that the law would “spell disaster” for private investment in the State and impede industrial development. 

Manmohan Gaind, general secretary, Manesar Industries Welfare Association, an industry body in the state, had earlier told The Hindu that the law was “very very myopic of the political class”, adding that almost all of the employees in MSMEs fell under the ₹30,000 pay bracket and considering that such industries hire and let go of workers as per demand, it would not always be possible to find local employees when required.

What is the government’s argument? 

The Haryana Government, while insisting that it has the support of the industry barring a handful of entities, has said that the law will benefit the youth of the State. 

It submitted in the High Court that the law has been brought in to “protect the right to life/livelihood of people domiciled in the State”, adding that the enactment was rooted in the problem of rising unemployment in Haryana. 

“Industrialisation and urbanisation in the State has led to huge land acquisition which resultantly has reduced growth and employment opportunities in the agriculture sector,” the government said, arguing that the law will create new jobs for local youth. 

It has also said that the legislation will help decrease the dependence of businesses on migrant workers, pointing out that one of the biggest industries operating out of the State, Maruti Udyog Limited., “does not even have 20% staff from Haryana”. 

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Printable version | Feb 20, 2022 4:45:44 pm |