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75% DOMICILE RESERVATION IN PRIVATE SECTOR

Author: Abhijeet Pratap Shahi, I year of B.A.LL.B.(Hons.) from Himachal Pradesh National Law University, Shimla


Recently in the news, there is a controversial law that has been passed in the State of Haryana, which is the Haryana State Employment of Local Candidates Act, 2020. The bill mandates for 75% reservation in new jobs for local residents of Haryana in the Private Sector. The said bill was passed by Haryana State Assembly on November 5, 2020, and was given assent by Hon’ble Governor of Haryana Mr. Satyadev Narayan Arya on March 5, 2021. The move is not unprecedented as many other states like Andhra Pradesh, Karnataka, etc. have put forward a similar kind of law to curb rising unemployment in their states. From the time when it was an Act, it has raised many problems regarding its constitutionality. Let see in detail the nooks and corners of this act and what can it carry.


Which Sectors will it affect?

As per Section 1(5) of the Act :

This Act applies to all the Companies, Societies, Trusts, Limited Liability Partnership firms, Partnership Firm and any person employing ten or more persons and an entity, as may be notified by the Government, from time to time.

Let’s see the definition of each word as per Section 2(e) of the Act:

  • Society: It refers to a society registered under the Haryana Registration and Regulation of Societies Act, 2012.

  • Limited Liability Partnership Firm: It refers to Limited Liability Partnership as defined under the Limited Liability Partnership Act, 2008 (Central Act 6 of 2009).

  • Employer: It refers to a Company registered under the Companies Act, 2013 (Central Act 18 of 2013).

  • Trust: It refers to trust as defined under the Indian Trust Act, 1882.

  • Partnership Firm: It refers to Partnership Firm as defined under the Indian Partnership Act, 1932.


For how long is the Act applicable?

As per Section 1(4) of the Act:

It shall cease to have an effect on the expiry of ten years from the date of its commencement, except as respect to the things to be done or omitted to be done before such cesser, and upon such cesser section 6 of the General Clauses Act, 1897 (Central Act 10 of 1897), shall apply as if this Act had then been repealed by a Central or State Act, as the case may be


Now it has clearly been stated that the said act expires within 10 years but it will depend on the political will at the time so as to decide whether the extension is required for the Act.


What is the Government’s rationale behind the law?

The main reason as given by the government for the Act is the growing unemployment in Haryana. The situation is serious as the Haryana unemployment rate is 26.4%, the highest in India where the national average is 6.9% in the month of February 2021.



The second reason is that as per the 2011 census, the in-migration in the State is the fourth highest, i.e., there has been a large influx of migrants from other states for low-paid jobs so to keep check on the large influx of people such law becomes a necessity.


What is the crux of the law?

The crux of the law can be found in Section 4 of the Act which states that:

After the commencement of this Act, every employer shall employ seventy-five percent of the local candidates concerning such posts where the gross monthly salary or wages are not more than fifty thousand rupees or as notified by the Government,


Is there an exemption?

Yes, there is an exemption to the said law but it can only be availed after a long procedure. The exemption can be claimed by an employer only if there is non-availability of people having the desired skill, qualification or proficiency. The claim will be evaluated by a Government-appointed officer having a rank of Deputy Commissioner or higher and he (officer) has three options:

  1. Accept

  2. Reject

  3. Direct the employer to train people to reach the desired skill and proficiency.


What are Constitutional issues related to it?

The Act raises three main issues which are:

  1. It violates the right of a private institution to carry on an occupation or business. (Art. 19(1)(g) )

  2. A state law providing for reservation based on domicile may not be constitutional.

  3. The 75% mark may violate previous Supreme Courts guidelines.

Let us see in detail each of these issues:


Reservation in a private institution may violate their right. On many occasion, the Hon’ble Supreme Court has held that the State cannot insist on a private educational institution which don does not receive aid from State to implement reservation on any criterion except merit, but, after the 93rd Constitutional Amendment Act gives the State to make provisions for the advancement of socially and educationally backward class of citizen or Scheduled Castes and Scheduled Tribes in matters relating to admission in the private educational institution.


However, the Amendment does not give the State power to make similar provisions concerning employment in the private sector. Hence, it may violate Article 19(1)(g) of the Indian Constitution.


ARTICLE 19(1)(g)- (g) to practise any profession, or to carry on any occupation, trade or business


(I) State law providing reservation based on domicile may not be constitutional

The Bill provides reservation in employment to local candidates in private sector. Local candidates here means person who have domicile in 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.


Also the Indian Constitution by Article 16(2) prohibits discrimination on basis of place of birth or residence in public employment. Though, there were some states that passed similar laws but in these cases Hon’ble Supreme Court that such law is violative of Article 14 and Article 16(2) of Indian Constitution and some similar cases are pending, for example, the law passed by Andhra Pradesh Government in July 2019.


ARTICLE 14- The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India.


ARTICLE 16(2)- No citizen shall, on grounds only of religion, race, caste, sex, descent, place of birth, residence or any of them, be ineligible for, or discriminated against in respect of, any employment or office under the State.


Government’s defence for Art. 16 violation

The government’s defence for the violation of Article 16 is that Art. 16 talks about ‘Public employment’ while the Bill talks about ‘Private sector employment.


Reservation of 75% may violate previous Supreme Court guidelines. Now, the reservation of 75% may violate earlier guidelines laid down by the Supreme Court in the Indra Sawhney Case in which the Hon’ble court held that reservation under Article 16(4) cannot exceed the 50% benchmark. Though the court also stated that the 50% benchmark may be relaxed in the extraordinary situation but it remains to be seen whether or not the Act will be considered under extraordinary circumstances or not.


What will be its socio-economic impact?

Let’s first talk about the economic impact. The economic impact will be huge. Lack of adequate skilled labour may hurt the efficiency and competitiveness also restriction in a pool of candidates may lead the companies unable to hire the best candidates for the job. The same points were discussed by Economic Survey 2019-20 that government intervention causes a decrease in investments and economic growth and hence such intervention needs to be minimized. The bill will also decrease the ease of doing business in the state. Now, this needs to be kept in mind as Haryana accounts for more than half of India’s automobile manufacturing and is the headquarters of 75 percent of the Fortune 500 companies present in India.


The social impact will also be great as it will give rise to another basis of discrimination in the country which can be taken advantage of by maligned as well as separatist institution and will give rise to discrimination which is already a rampant problem in a diverse country like India. As many of the companies are situated in Haryana, hence the passed law will cause many sparks in the minds of people of other states against those of Haryana. Also if similar law is passed by all the other states it will result in complete chaos and this chaos might lead to violent protest across the country.


Now all these impacts and many more will be observed only when the law passes the constitutionality test which according to many is not possible for the legislation. The exact effects can only be observed in the future and the above are just some precognition.