In order to implement the state government’s pre-election promises, the Haryana State Employment of Local Candidates Act, 2020(Haryana Employment Act) has been made effective on January 15, 2022. It has been enacted to ensure that employers in the state employ at least 75% ‘local candidates.’ The new law’s goal is to provide new job opportunities for the state’s young and to assist the state to become self-sufficient. According to the Haryana Employment Act, all covered companies must register employees whose monthly income or remuneration does not exceed Rs. 30,000 on a government-provided site within three months. The Haryana Employment Act would override any other legislation in the state of Haryana that is in contradiction with the law.
Applicability & key definitions
The Haryana Employment Act will apply to any person employing at least ten persons. The Haryana Employment Act defines ‘employer’ to include companies registered under the Companies Act, 2013 and a limited liability partnership as defined by the Limited Liability Partnership Act, 2008. The Haryana State Employment of Local Candidates Rules, 2021 (Haryana Employment Rules) defines ‘employee’ as “any person employed by the employer on payment of salary or wages or any other remuneration but does not include an apprentice engaged under the Apprentices Act, 1961.”
Who is a local candidate?
Local candidates are defined as those who are ‘domiciled’ in the state of Haryana. A ‘domiciled person,’ according to the Haryana Employment Rules, is someone who is a bona fide resident of Haryana, meets the standards set out by the Haryana government from time to time, and has a ParivarPehcan Patra issued under the Haryana ParivarPehchan Act, 2021.
Employer’s obligations under the law
As per the Haryana Employment Act, employers in the state of Haryana will have to comply with the following important obligations:
- Register on the designated portal all the employees who are receiving salaries of up to Rs. 30,000 per month within 3 months.
- Recruit at least 75% of local candidates who are duly registered on the state government’s portal for posts where the salary is not more than Rs. 30,000 per month.
- Furnish quarterly reports on details of the local candidates appointed during each quarter.
Employers must also keep electronic records covering information such as the number of employees, their occupational data, the number of local applicants hired, and so on.
Penalties for non-compliance
Employers who do not comply with the Haryana Employment Act shall be subjected to monetary penalties. For example, if an employer fails to register an employee, they are penalized with a punishment of Rs. 25,000, which may be increased to Rs. 1,00,000, plus a penalty of Rs. 500 per day in case of a continuing offence after conviction. In cases where an employer fails to recruit local candidates, the employer may be punishable with a fine of Rs. 50,000 which may extend up to Rs. 2,00,000, along with an additional penalty of Rs. 1,000 per day in case of a continuing offence after conviction.
Haryana Employment Rules
On January 10, 2022, the Haryana Employment Rules were published. The procedural components of the law’s execution are outlined in the rules. Employers wishing to be excused from the reservation requirement must submit an application on the authorised site, stating justifiable justifications for the exemption in addition to any special qualification, skill, or experience criteria. Any exception granted will be valid for one year only, and any vacancy that remains unfilled after that time is gone will be classified as a new vacancy. Employees can make complaints against their bosses for breaking the law using the specified site, which must be resolved by the appropriate authorities within 30 days.
Portal for registration
As per the Haryana Employment Act and Rules, the state labour department has approved a designated portal. Furthermore, on the Haryana Udhyam Memorandum Portal, all employers operating in the state of Haryana will be given a unique identification number called the Haryana Udhyam Memorandum Identification Number (HUM-ID). Every employer in the state is obligated to register its local candidates using their HUM-ID. Local candidates seeking work in the state must also register on the official site.
Restrictions and exemptions
The employer is permitted to restrict the employment of local candidates from any specific district in the state of Haryana to 10% of the total number of local candidates. Additionally and by way of an order dated January 17, 2022, the state government has exempted the following categories of employers from the applicability of the Haryana Employment Act:
- Start-ups and IT/ITeS companies, commencing operations after January 15, 2022, shall be exempted from the HSELC Act for 2 years from the date of commencement of business.
- The reservation requirement will also not apply to short-term employment of up to 45 days and vacancies filled through promotion/transfer/absorption of surplus staff of any unit of the same employer in Haryana.
The order also enables the state government to exempt any class, post, skill and category of employment in which local candidates of desired qualifications may not be available.
The Haryana Employment Act will remain operative for ten years from its effective date. Accordingly and given that the law was made effective on January 15, 2022, the law is proposed to apply only until January 14, 2032. The state government hopes that the purposes of the law shall be achieved within this timeline.
Judicial developments and stay order
A writ petition was filed by A.K. Automatics against the Principal Secretary of the Haryana state government and others, challenging the Haryana Employment Act before the High Court of Punjab and Haryana in March 2021. The petition was based on the premise that the law is inter alia unconstitutional, including the fundamental rights enshrined under Articles 14, 15, 16 (2) and 16 (3), 19 (1)(g), 21 of the Constitution of India.
The petitioner believed that the Haryana Employment Act was an attempt to introduce a domicile methodology for securing a job in the private sector, rather than a methodology based on a prospective employee’s education skills and IQ, which would cause havoc in the current industrial employment structure. The petition stated that “The law is an infringement on the constitutional rights of the employers because private-sector jobs are purely based on skills and an analytical bend of mind of employees, who are citizens of India having constitutional rights on the basis of their education to opt for jobs in any part of India.” In the petition, it was also claimed that the law creates unfair competition between deserving local citizens and deserving employees claiming to have a right as an employee on the basis of local residence.
However, the petition was dismissed as the Haryana Employment Act was yet to come into force at that time and hence, according to Chief Justice Ravi Shanker Jha, the petitioner was not affected at that stage. Challenging the constitutionality of the Haryana Employment Act, petitions were filed by the Gurgaon Industrial Association, IMT Industrial Association and Faridabad Industrial Association before the High Court of Punjab and Haryana, which are currently pending further hearing. The High Court of Punjab and Haryana heard the above petitions together on February 3, 2021, and allowed the petitioners’ plea for stay on the operation of the Haryana Employment Act as interim relief. However, the state government has decided to file an appeal to the Supreme Court to challenge the High Court’s stay order.
As per Article 19(1)(g) of the Indian Constitution, every citizen of India has the fundamental right to practice any profession, carry on any occupation, trade or business. However, the concept of ‘reservations’ is not new in India and infact something that has been seen right from the time the country got its independence. Certain employer groups see the Haryana state government’s attempt to enforce quota criteria in private hiring as a backward step. It is believed that private-sector businesses would bear the burden of the rule because positions in such enterprises are generally skill-based, and local resources with such abilities may be limited. Industry groups believe the bill would make it impossible for businesses to stay competitive in the state because it will result in a severe scarcity of competent local labour. Reportedly, the impact of the law is being felt in the industry-rich districts in the state such as Faridabad and Gurugram where some of the employers are looking to move out to locations outside of Haryana state. It could well be the case that the state’s loss would be the gain of other states in the region, especially Punjab and Uttar Pradesh.
Additionally, as businesses recover from the loss of opportunities and revenues suffered due to the ongoing Covid-19 pandemic lockdown, they will need active support from the government, both at the state as well as the national levels to remain competitive. Such a protectionist law could derail the state’s and in turn the country’s overall focus on ensuring ease of doing business. It could also impact India’s ability to attract foreign investment, especially in the areas of technology and outsourcing, where we are facing stiff competition from several south-east Asian countries, Latin America and Eastern Europe, besides the USA. Given the fact that the constitutionality of the law is being questioned for restricting the employers from choosing their employees as they deem fit, it remains to be seen if the legality of the law will be tested in the ongoing cases. The industry could at least have hoped that such laws are applied only prospectively and are linked to employers being entitled to incentives instead of making it mandatory to comply.
Author(s) Name: Dev Shroff (Gujarat National Law University, Gandhinagar)