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Haryana Governor gave his assent to the Haryana State Employment of Local Candidates Act, 2021, passed by the Vidhan Sabha clearing the way for a 75% quota in private sector for job seekers from Haryana. The Act will remain in force across the state for a period of at least 10 years.

The Act will apply to all the companies, societies, trusts, limited liability partnership firms, partnership firms and any person employing 10 or more persons and an entity as may be notified by the government from time to time.

When was this bill first passed by the Haryana state government?

In November 2020, the state Assembly passed the Haryana State Employment of Local Candidates Bill, 2020 paving way for more employment opportunities for locals in the private sector. On March 2, the Governor gave his assent to the Bill. On the lines of Andhra Pradesh government, Haryana too has announced it wants 75 per cent of private sector jobs in the state, till a certain salary slab, reserved for local candidates.

When a company commits an offence under this Act, every Director, Manager, Secretary, Agent or other officers or person concerned with the management shall be deemed guilty of the offence, unless he/she proves that the offence was committed without his knowledge or consent. In case of an offence committed by limited liability partnership firm – all the partners/ designated partners shall be held guilty of the offence. In case of offence committed by a Society or Trust – every person who was in charge at the time of commission of offence, or the person who was responsible for conduct of the business of the society at the time of commission of offence shall be deemed guilty of the offence. If it is proved that the offence was committed with the consent or connivance of any Director, Manager, Secretary, Trustee or other officer of the society or trust, all of them shall be deemed guilty. No court shall take cognisance of any offence punishable under this Act unless a complaint is made within six months of the date on which the commission of offence came to the knowledge of authorised or designated officer.

Andhra Pradesh’s decision of introducing 75 per cent reservation for local candidates was challenged in the Andhra Pradesh High Court which observed that “it may be unconstitutional”. The Andhra Pradesh High Court had asked state government to inform if the quota-law was enacted as per the Constitution. Similar concerns were raised in Haryana Vidhan Sabha, who called the Bill a violation of Article 16 of the Constitution of India. However, Haryana government claims that while Article 16 talks about the “public employment”, the Bill only pertains to “private sector employment”.

Where this bill applicability can be seen?

All the companies, societies, trusts, limited liability partnership firms, partnership firms and any person employing 10 or more persons and an entity, as may be notified by the government from time to time shall come under the ambit of this Act.

The definition of “employer” given in the Bill means a Company registered under the Companies Act, 2013 (Central Act 18 of 2013) or a Society registered under the Haryana Registration and Regulation of Societies Act, 2012 or a Limited Liability Partnership Firm as defined under the Limited Liability Partnership Act, 2008 (Central Act 6 of 2009) or a Trust defined under the Indian Trust Act, 1882 or a Partnership Firm as defined under Indian Partnership Act, 1932 or any person employing 10 or more persons on salary, wages or other remuneration for the purpose of manufacturing or providing any service or such entity, as may be notified by the government from time to time.

It shall not include the central government or state government or any organisation owned by the central or state government.

A candidate “who is domiciled in State of Haryana” is called a local candidate and shall be able to avail the benefit of this reservation while seeking employment in private sector. The candidate will also mandatorily have to register himself/herself on a designated portal while seeking benefit under this reservation. Employer too will have to make recruitments through this portal, only.

Every employer shall be required to employ 75 per cent local candidates for the posts where the gross monthly salary or wages are not more than Rs. 50,000 or as notified by the government from time to time. The local candidates may be from any district of Haryana, but the employer shall have the discretion to restrict employment of local candidates from any district to 10 per cent of the total number of local candidates. It will, however, be also the employer’s discretion if he wants to recruit above 10 per cent employees from a particular district.

Who will check if employers are abiding by 75% reservation rule?

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. The reports furnished by the employer will be scrutinised by the authorised officers not below the rank of Sub-Divisional Officers. These officers shall have the powers to call for any record, information or document in possession of any employer for the purposes of verifying the report furnished by them. The 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 this Act or the rules made thereunder.

Employer can also claim exemption from this 75% recruitment restriction but only after going through a long procedure and only if the government-appointed officers believe that the employer’s request seeking exemption holds merit. The employer may claim exemption where adequate number of local candidates of a desired skill, qualification or proficiency are not available. The employer will have to apply to a Designated Officer (an officer not below the rank of a Deputy Commissioner), in a particular format (to be drafted later). The Designated Officer shall hold an inquiry and evaluate the attempt made by the employer to recruit local candidates of the desired skill, qualification or proficiency. The Designated Officer may accept/ reject the claim of the employer seeking exemption. The Designated Officer may also direct the employer to train local candidates to achieve the desired skill, qualification or proficiency.

How Reservation in private institutions may violate their right to carry on an occupation or business?

 

The Bill mandates all companies, societies, trusts, partnership firms, or any person in the state of Haryana employing 10 or more persons to provide 75% of the new jobs to local candidates.  Under Article 19(1)(g), all citizens have a fundamental right to practice any profession, or to carry on any occupation, trade or business as a fundamental right.  Mandating private institutions to employ a certain set of candidates may encroach upon an institution’s right to carry on its occupation. 

 

In 2002, the Supreme Court held that unaided private educational institutions must have autonomy in their administration and management. In 2005, the Court ruled that the State cannot insist on private educational institutions which do not receive aid from the State to implement reservation on any criterion except merit.It held that merely because the resources of the State in providing professional education are limited, private educational institutions cannot be forced by the State to provide for reservations.  In doing so, the Court observed that the right to establish and administer an educational institution is also an occupation under Article 19(1)(g).

Subsequently, the 93^rd  Constitutional Amendment Act was passed in 2005 to allow the State to make provisions for the advancement of socially and educationally backward class of citizens or Scheduled Castes and Scheduled Tribes in matters relating to admission in private educational institutions.However, the Amendment does not provide the State with the power to make such provisions for employment in private institutions.  Therefore, the provision for reservation in the Bill may violate Article 19(1)(g) of the Constitution. 

Constitutional issues related to the Bill

The Constitution guarantees certain fundamental rights to all citizens.  These include the right to equality before law, the right to freedom to reside in any part of the country, and the right to practice any occupation or business.  It prohibits any discrimination based on grounds of religion, race, caste, sex, or place of birth.  However, the state may provide for the advancement of certain sections of the society through reservation in education or employment.  This reservation may be on the basis of domicile (residence), or backwardness. 

For instance, the Constitution provides Parliament the power to make a law regarding employment to an office under the State providing requirements such as residence within that state (under Article 16(3)).  The State may make provisions for the advancement of socially and educationally backward class of citizens or Scheduled Castes and Scheduled Tribes (under Article 15(4)).  Further, the State can make provisions for reservation of appointments or posts in favour of any backward classes of citizens who are not adequately represented in the services of the State (under Article 16(4)). 

 

The Bill mandates all private establishments in Haryana to provide 75% of new jobs to local candidates.  This raises three potential issues.  First, reservation in private institutions may violate their right to carry on an occupation or business.  Second, a state law providing for reservation based on domicile may not be constitutional.  Third, 75% reservation in employment may violate the guidelines laid down by the Supreme Court in the past.

State law providing for reservation solely on the basis of domicile may not be constitutional

The Bill mandates establishments to provide reservation in employment to local candidates.  Local candidates are persons who have a domicile in the state of Haryana.  In 1957, the Public Employment (Requirement as to Residence) Act, 1957 was passed to repeal all existing laws prescribing any requirement of residence within a state for public employment.[6]   Further, Article 16(2) of the Constitution specifically prohibits any discrimination based on place of birth or residence in matters of public employment.   However, some states in the past have taken measures to provide for reservation based on domicile.  In these cases, the Supreme Court has held that reservation in employment based solely on domicile is violative of Article 14 (equality before law) and Article 16(2) of the Constitution.  The Court held that domicile in itself does not provide any valid or reasonable classification for providing reservation.

For example, in 2002, the Supreme Court declared the appointment of government teachers in Rajasthan where the state gave preference to applicants belonging to a particular region, as unconstitutional. It held that geographical classification can be used for categorisation of socio-economic backwardness.  However, residence by itself in a state cannot be a ground for reservation, except as provided in Article 16(3).  Note that the power under Article 16(3) to make a law providing for residence as a ground for reservation (in public employment) is vested only with the Parliament.  Similarly, in 1995, the Supreme Court struck down rules by the Andhra Pradesh government providing preference for candidates with Telugu medium in public services.  It held that such provision will weed out the best candidates and would give undue advantage to less meritorious students.

However, in recent years, some other states have also taken measures to provide for reservation for local candidates in the private sector.  In July 2019, the Andhra Pradesh government passed a law to provide for 75% reservation to locals in industries or factories.  The Act has been challenged in the Andhra Pradesh High Court. In May 2020, the High Court observed that quota for locals in private jobs may be unconstitutional, and sought a reply from the government.  The case is currently pending.