- In IMT Industrial Association and another Vs. State of Haryana and another (17.11.2023) (Punjab & Haryana HC) (Bench of Justices GS Sandhawalia and Harpreet Kaur Jeewan)
- In a batch of cases
- Court quashed a law passed by the Haryana government in 2020 that guaranteed 75% reservation to locals in private sector jobs in Haryana
- Government cannot discriminate against individuals who do not belong to Haryana
Haryana State Employment of Local Candidates Act, 2020, was unconstitutional and to be violative of Part III of the Constitution, which contains fundamental rights
Law would be ineffective “from the date it came into force”
What was this law?
- In November 2020, the Haryana Assembly passed the Haryana State Employment of Local Candidates Bill reserved 75% jobs in the private sector that offered a monthly salary of less than Rs.30,000 (originally Rs.50,000) for residents of Haryana
- On 02.03.2021, the Bill received the Governor’s assent, and came into effect on 15.01.2022
Have other States enacted such laws?
- States such as Maharashtra, Madhya Pradesh, Karnataka, Andhra Pradesh and Jharkhand have enacted laws providing reservations for their local residents in the private sector
- Maharashtra: Private sector to employ 80% domiciled workers (resident of the State for at least 15 years); Status: Planned, not implemented
- Madhya Pradesh: 70% quota in pvt sector jobs for locals; only 'children of MP' to be eligible for state govt jobs; Status: 70% quota applied, 'children of MP' at planning stage
- Karnataka: December 2019, Karnataka government amended the Karnataka Industrial Employment (Standing Orders) Rules, 1961, to make it mandatory for Pvt industries to give priority to Kannadigas in clerical and shop-floor jobs (residing in Karnataka for not less than 15 years who can read, write, talk and understand Kannada are eligible for these jobs); Status: Rules amended, follow-up law not passed yet
- In November 2019, the Andhra Pradesh Assembly had passed the Andhra Pradesh Employment of Local Candidates in the Industries/Factories Bill, 2019, reserving three-fourths of jobs for local candidates within three years of the commencement of the Act
- Law was subsequently challenged in the Andhra Pradesh High Court, which observed that “it may be unconstitutional”
- The challenge is yet to be heard on merits
- Jharkhand had passed the Jharkhand State Employment of Local Candidates in Private Sector Act, 2021: provides 75% employment of local candidates in private sector by employer in the State of Jharkhand
Who challenged the law and on what grounds?
- The Faridabad Industries Association and other Haryana-based associations challenged the validity of law
- Haryana wanted to create reservations in private sector
By introducing a policy of “sons of the soil”
An infringement of the constitutional rights of employers
Private sector jobs are purely based on skills and an analytical bent of mind, and employees have a fundamental right to work in any part of India
- Act violates Article 19 of the Constitution, which guarantees the right to freedom, including to reside and settle in any part of the Indian territory and practice any profession, business or trade
- Law was an infringement of Article 14 (equality before the law)
- And Article 15, which prohibits discrimination on various grounds such as religion, race, caste, sex or place of birth
- The court was also apprised that the reservation creates a wedge between persons domiciled in different States and is contrary to the concept of common citizenship envisaged in the Constitution
- Prima facie, Act of the respondent (government) is violation of the federal structure framed by the Constitution of India
- Government cannot act contrary to public interest and cannot benefit one class
How has the State defended it?
- Law intends to ‘protect the right to livelihood of people domiciled in the State’, and that the enactment was rooted in the rising unemployment in Haryana
- Source: State had the power to create such reservations under Article 16(4) of the Constitution, which stipulates that the right to equality in public employment does not prevent the State from ‘making any provision for the reservation of appointments or posts in favour of any backward class of citizens which, in the opinion of the State, is not adequately represented in the services under the State’.
What else did the Haryana law say?
- All companies, societies, trusts, limited liability partnership firms, partnership firms, and large individual employers- covered under the Act
- Any person employing 10 or more people on salary, wages or other renumeration for manufacturing or providing any service, as well as any entity that may be notified by the government, were included
- Central or state governments or organisations owned by them were kept outside the ambit of the Act
- According to the law, a candidate “domiciled in State of Haryana” for the past five years, called a “local candidate”, could avail of the reservation after registering themselves on a designated online portal
- Employers were required to make recruitments only through this portal
- Companies can seek an exemption if they do not find local candidates of a desired skill or qualification, but this claim can be rejected by government officials if they doubt its legitimacy
- Employers found to be violating the Act are liable to a fine between Rs.10,000 and Rs.2 lakh
Why did the High court quash it?
- The law was unconstitutional to the extent that ‘a person’s right to carry on occupation, trade, or business’ under Article 19(1)(g) of the Constitution was being impaired
- It also highlighted that the law discriminates against individuals who do not belong to a certain State by ‘putting up artificial walls throughout the country’
- Placing reliance on Article 35 of the constitution, the court outlined that the provision bars the State legislature from legislating on matters that fall within the purview of Article 16(3) of the constitution (equality of opportunity in matters of public employment) since only the Parliament can pass laws on such subjects
- Referring to Section 6: required employers to submit quarterly reports with details of local candidates employed and appointed
- Section 8- authorised officers could call for documents or verification to ensure the law was being implemented, these restrictions amounted to ‘Inspector Raj’
- Bar under Section 20 of the Act on legal proceedings against any authorised or designated officer acting in “good faith” tied the employer’s hands
The court ruled that the state’s action amounted to exercising “absolute control over a private employer,” which is “forbidden for public employment.”
Has the Supreme Court intervened?
- On 03.02.2022, the HC had stayed this law in an interim order
- But the division bench of the Supreme Court in State of Haryana Vs. Faridabad Industries Association & Anr. (17.02.2023) (SLP 1917/2022) set it aside
- Bench headed by Justice L Nageswara Rao- HC “has not given sufficient reasons for staying the legislation”
- Further, directed the HC to expeditiously decide the validity of the Act within four weeks
- Directed the Haryana government to not take any coercive steps against companies for non-compliance until the matter is finally decided upon.
