Latest Update on the matter–

A division bench of the Punjab and Haryana High Court has held that the Haryana State Employment of Local Candidates Act, 2020, is unconstitutional and violated Part III of the Constitution. In a setback to the Government of Haryana, the High Court allowed the writ petitions and held that the Act was ineffective from the date it came into force. [IMT Industrial Association v. State of Haryana, CWP Nos. 26573 of 2021 and other connected matters, decided on 17-11-2023]. The judgment of the High Court can be accessed on the link.

Earlier, the State of Haryana had filed an SLP on February 4, 2022, before the Hon’ble Supreme Court against the order of the Punjab and Haryana High Court granting stay on the operation of the Haryana State Employment of Local Candidates Act, 2020. The Hon’ble Supreme Court vide its order dated February 17, 2022, had set aside the interim order of the Punjab and Haryana High Court, noting that the High Court “has not given sufficient reasons for staying the legislation”. The Supreme Court had asked the High Court to decide within four weeks, petitions challenging the validity of the legislation. Meanwhile, the state government had been restrained from taking any coercive steps against the employers under the law during that time. The order of the Supreme Court can be accessed on the link.

It may be noted that the Punjab and Haryana High Court had granted an interim stay on the operation of the Haryana State Employment of Local Candidates Act, 2020[i] (“Act”) in the case of Faridabad Industries Association v. State of Haryana and Another[ii]. The Hon’ble Court noted that the core issue in the case is whether any state can restrict employment (even in the private sector) on the basis of domicile.

The Act enacted by the Haryana Government which came into force[iii] on January 15, 2022, has been at the epicentre of controversy. It had made it mandatory for private sector in the state to provide 75% reservation to locals in jobs where the salary was upto INR 30,000. Industry bodies have raised concerns abouts its practical implementation, its possible unfavourable impact on ease of doing business while certain activists have also labelled it as an election gimmick[iv]. The Confederation of Indian Industry (CII) has also raised concerns about the adverse impact of the law on productivity and industry competitiveness[v]. Such restrictions as envisaged under the law are undesirable when it is important to attract investments at the state level. Subsequently, few industry associations had challenged the Act in the Punjab and Haryana High Court and have secured an interim stay.

The State Government has also issued the Haryana State Employment of Local Candidates Rules, 2021 (“Rules”) and an FAQ has also been uploaded to clarify the issues related to the Act. The FAQ clarifies that the Act does not have retrospective application and the Act applies to new recruitments[vi] only.

The key features of the Act are summarised below: –

1. The Act will be in force for a period of 10 years from January 15, 2022.
2. The Act is applicable to all the Companies, Societies, Trusts, Partnership firms, Limited Liability Partnerships and any person employing ten or more persons on salary, wages, or other remuneration for the purpose of manufacturing or providing any service.
3. The definition of “employer” specifically excludes Central Government or the State Government or any organization owned by them.
4. Every employer must mandatorily register employees receiving gross monthly[vii] salary or wages not exceeding INR 30,000 on the Designated Portal (i.e., https://local.hrylabour.gov.in/)[viii] within 3 months of coming into force of the Act i.e. January 15, 2022. Further, Employers are restricted from employing or engaging any person till the time the registration of all such employees is completed on the Designated Portal.
5. Further, every employer must compulsorily employ 75% Local Candidates on such posts where the gross monthly salary or wages do not exceed the wage threshold[ix] of INR 30,000. An employer has an option to restrict the employment of Local Candidates from any district to 10% of the total number of Local Candidates. Local Candidates who have registered themselves on the Designated Portal will be eligible to avail the benefits under the Act.
6. Local Candidate has been defined as a candidate who is domiciled in the State of Haryana. The test for domicile has been prescribed under the Rules as any person being a bonafide resident of Haryana, who satisfies the conditions issued by the Government from time to time and has a Parivar Pehchan Patra issued under the Haryana Parivar Pehchan Act, 2021.
7. Employers have the right to claim exemption from recruitment of Local Candidates (for a period of one year) as per the procedure prescribed under the Rules if the adequate number of Local Candidates of the desired skill, qualification or proficiency are not available in Haryana.
8. The following categories of employers have been given exemption[x] from the application of the Act:

• New Startups and new IT / ITES employers for a period of 2 years from the date of commencement of work / business / manufacturing process. New Startups and new IT / ITES units are defined as employers who have established / commenced operations within a period of 2 years after the commencement of the Act (i.e., January 15, 2022).
• Short term employment of less than 45 days.
• Employers primarily engaged in agricultural activities.
• Employers for domestic work or services in residential homes.
• Vacancies which are filled up through promotion / transfer / absorption of surplus staff of any unit of the same employer in the state.
• Any class / post / skill / category of employment notified by the Government from time to time, where local candidates are not available.

9. Employers are required to furnish quarterly reports providing details of local candidates employed and appointed during that quarter by 20th day of the following quarter on the Designated Portal.
10. Different penalties ranging from INR 10,000 to INR 5,00,000 have been prescribed for employers for violation of various provisions of the Act. For a violation of the requirement of recruitment of Local Candidates minimum penalty of INR 50,000 is prescribed and which may extend up to INR 2,00,000. The penalty for the offence of knowingly furnishing false records or documents may extend up to INR 50,000 for each offence, and in case of a subsequent offence, a penalty up to INR 5,00,000 may be levied.

We will keep the readers posted about the latest development in the case before the High Court.

[i] https://local.hrylabour.gov.in/uploads_new_2/notifications/1615277534.pdf

[ii] CWP-24967-2021

[iii] https://storage.hrylabour.gov.in/uploads/labour_laws/Y2021/Nov/W2/D08/1636355412.pdf

[iv] https://www.thehindu.com/news/national/other-states/haryana-job-reservation-for-locals-impossible-to-implement/article37723716.ece

[v] https://www.hindustantimes.com/india-news/haryana-private-job-quota-law-takes-effect-from-tomorrow-101642099261802.html

[vi] https://local.hrylabour.gov.in/home/faq

[vii] https://storage.hrylabour.gov.in/uploads/labour_laws/Y2021/Nov/W2/D08/1636355656.pdf

[viii] https://storage.hrylabour.gov.in/uploads/labour_laws/Y2022/Jan/W3/D17/1642411435.pdf

[ix] https://storage.hrylabour.gov.in/uploads/labour_laws/Y2022/Jan/W3/D20/1642678099.pdf

[x] https://local.hrylabour.gov.in/uploads_new_2/notifications/Exemption%20order.pdf