Analysis: Haryana State Employment of Local Candidates Act, 2020
Introduction
The State of Haryana passed the Haryana State Employment of Local Candidates Act, 2020 in November 2020 and enacted this law on 6th November, 2021 and has come into effect from 15 January 2022. This law made mandates a reservation of 75% of new jobs for local candidates in the private sector establishments such as companies, societies, trusts, limited liability partnership etc. situated in Haryana. According to the State Government, this law aims to discourage influx of migrants seeking low-paying jobs, which has a substantial impact on the local infrastructure. As per 2011 Census, the net in-migration for Haryana during 2002-2011 was eight lakh people, being the fourth highest in the country (after Maharashtra, Gujarat, and Delhi). This 75% quota will initially be applicable for a period of 10 years.
Key features of the Law
Registration of Employees – The law has a mandate that all the Covered Employers have to register on the government’s designated portal, and such employees in their establishment who earn gross ‘salary or wages’ up to INR 30,000 per month. Such registration must be completed within three months of the commencement of the statute as per the timeline provided. The definition for the words ‘salaries’ or ‘wages’ has not been given in the Act.
Exemption - Covered Employers under the Law are required to reserve 75% of the posts – in which the monthly wages do not exceed INR 30,000 – for persons domiciled in the state of Haryana. In the event that a Covered Employer wishes to recruit from outside the state on the ground that there is a lack or dearth of local candidates who possess the requisite skill, qualifications or expertise, it would be required to apply to the Designated Officer appointed under the Law. The Designated Officer is mandated to assess whether the Covered Employer made attempts to recruit local candidates of the favoured skill, qualifications, or proficiency, before deciding on the application. The Designated Officer can not only accept or reject the application, but may also direct the Covered Employer to train local candidates so that they fulfil the requirements.
Reporting requirements – As per the Law, the Covered Employers are required to furnish quarterly reports regarding local candidates recruited by them in the manner prescribed by the state government in its rules.
Penalties for contravention - Non-compliance with the prerequisite of registration of employees may lead to the imposition of a fine ranging from INR 25,000 - INR 1,00,000. In the same manner, failure to provide 75% of the new employment and relevant posts for local candidates in the manner laid down as per the law may attract fines in the range of INR 50,000 - INR 2,00,000. Notably, if an offense has been committed by a company, every director, manager, secretary or person concerned with the management of the company would be deemed guilty of the offense, unless they are able to prove that the offense in question was committed without their knowledge or consent.
General Analysis
Under Article 19(1)(g) of the Constitution of India, all citizens have the fundamental right to practice any profession, or to carry on any occupation, trade or business as a fundamental right. Instructing private institutions to employ a certain set of candidates may infringe 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[1]. 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.
The law implemented may have substantial ramifications, especially in terms of the ease of doing business. Haryana as a state, and Gurugram in particular, is one of the largest and commercially significant hubs for multinational companies in India, including the automobile and the IT/ITeS sector. Often, the success of these sectors is largely dependent on the extent of government interference or non-interference in business operations. If an entity is mandated to justify its position and claim exemption from the government every time it plans to hire an employee from outside the state in excess of the 25% window, the business environment may not remain conducive, ultimately affecting investments in the region. The private sector may then be compelled to look for alternative locations to carry on business operations. In addition to the above, the ongoing situation of COVID-19 pandemic cannot be forgotten. The outbreak of the pandemic has adversely impacted several companies in terms of their financial position, and this law passed is expected to significantly augment the costs of businesses on several fronts, including training of local candidates and displacement of the present non-local workforce. The provisions of the law passed raise certain challenges. For instance, it does not limit the reservation in terms of the nature of job and applies across all kinds of jobs regardless of the degree of skill, complexity, capability, and experience that a particular kind of job would entail. Further, there is no express window in terms of the time period within which an entity can transition from NIL to 75% reservation. This will create several practical challenges including treatment of the non-local workforce who are presently employed in private sector entities.
Impact on commercial establishments operating out of Gurugram/Gurgaon
As many as 73 companies who participated in a NASSCOM survey, said they are worried about the impact of this law. The survey also indicated that it will impact 1.5 lakh jobs in the state.
The Law mandates that all companies, societies, trusts, partnership firms or any person in the state of Haryana employing 10 or more persons to provide 75% of new jobs to local candidates. Placing restraints on businesses in hiring may lead to an adverse effect on them as: (i) adequate skilled domestic labour may not be available which in turn may negatively affect their competitiveness and overall competence, and (ii) it places a restriction on the set of candidates they may be allowed to hire from, which means they may not be able to employ the best or most suited candidate for the job.
According to news reports, industrial and corporate bodies have raised apprehensions regarding the Act due to dearth of skilled labour[2]. The lack of a skilled domestic workforce can adversely impact the productivity of the private industry[3] and make them noncompetitive in comparison to industries prevalent in other states or countries. The Economic Survey 2019-20 perceives that government intervention often acts as an obstacle that ends up discouraging the ability of markets to spur investments and economic growth. It is recommended that such interventions need to be minimised[4].
The employer can be permitted to claim exemption according to the Law implemented if the requisite number of local candidates possessing the desired skill set are not available. However, this exemption will be granted based on the decision of the designated officer. The designated officer may also direct the company claiming an exemption to train local candidates in the required skills. This will lead to additional cost burden for commercial establishments operating in Haryana. It is noteworthy that non-compliance with any provision of the law enacted is punishable with a penalty between Rs 10,000 and Rs 50,000, with an additional penalty for every day till the contravention continues.
Conclusion
Under this Law, the authorities may not compel an employer to terminate the services of its existing non-local workforce so as to meet the 75% reservation requirement. This is a silver lining that may act as a protection against prosecution, the law passed provides that no order or penalty thereunder shall be passed against the employer unless an opportunity of being heard is duly provided, in the case where the non-local workforce has been employed by the establishment prior to the commencement of the statute. Meanwhile, it remains to be seen how this state specific law is implemented and how responsive the state will be to industry feedback.
Reference
[1] T.M.A. Pai Foundation vs. State of Karnataka (2003), AIR 2003 SC 355. [2] CII red-flags Haryana govt on 75% quota to locals in private firm jobs [3] “Employers feel reservation in private sector could hamper Gurugram’s economic recovery”, Hindustan Times, July 2020. [4] “Undermining Markets: When Government Intervention Hurts More Than It Helps”, Economic Survey 2019-20.
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