Haryana State Employment of Local Candidates Act, 2020 and its possible impact

Following the trend of certain other States which had taken similar steps in the past, the State of Haryana on March 02, 2021, notified the Haryana State Employment of Local Candidates Act, 2020 (hereinafter “the Act”), which had received the assent of the Governor of Haryana on February 26, 2021. As per the objects of the Act, the Act has been enacted to provide seventy-five percent (75%) employment to local candidates by employer in the State of Haryana and related matters.

Significant provisions of the Act are as under:

(1) Tenure: It commences from date of notification and cease to have effect on the expiry of ten (10) years from the date of its commencement.

(2) Applicability: This Act applies to an ‘employer’ being a Company, Society, Trust, Limited Liability Partnership (LLP) firms, Partnership firm and any person employing ten (10) or more persons, etc., on salary, wages or other remuneration excluding any Central or State government or an organization owned by Central or State government. Such an employer could be engaged in the activity of manufacturing or providing any service or be any such entity, as may be notified by the Government from time to time.

(3) Compulsory Registration: On and from the date of commencement of this Act, every employer is required to, register such employees receiving gross monthly salary or wages not more than fifty thousand (50,000) Indian Rupees, or as notified by the Government (of Haryana), from time to time, on the designated portal, within three (3) months of this Act coming into force. The proviso to this Section mentions that no person shall be employed or engaged by any employer till the registration of all such employees is completed on the designated portal.

(4) Recruitment of ‘local candidates’: Every ‘employer’ is required to employ seventy-five percent (75%) of local candidates with respect to such posts where the gross monthly salary or wages are not more than fifty thousand (50,000) Indian Rupees or as notified by the Government, from time to time. Provided that the local candidates may be from any district of the State (of Haryana), but the employer may, at his option, restrict the employment of local candidates from any district to ten percent (10%) of the total number of local candidates.

This also comes with the condition that no local candidate is eligible to avail the benefits under the Act, unless he registers himself on the designated portal.

(5) ‘Local Candidate’: means a candidate who is ‘domiciled’ in the State of Haryana.

(6) Exemption: An employer may claim exemption from the requirement of recruitment of local candidates, where adequate number of local candidates of the desired skill, qualification or proficiency are not available by applying to the Designated Officer in such form and manner, as may
be prescribed.

(7) Compliance Requirements: Every employer is required to furnish a quarterly report, by such date, as may be notified by the Government in the Official Gazette, of the local candidates employed and appointed during that quarter on the designated portal in such form, as may be prescribed.

The Act provides the definition of Authorized Officers, who will have the power to examine quarterly reports of employers, call for any record, information, or document for verification and pass orders for compliance with the Act. Such Authorized Officers will also have the power to enter an employer’s premises at mutually acceptable times to conduct inspection to ascertain compliance of the Act.

(b) Penalties for contravention: As per the Act, non-compliance of the requirement of compulsory registration of employees may attract fine within the range of INR 25,000 – INR 1,00,000.

Failure to fill in 75% of the relevant posts for local candidates may lead to fine within the range of INR 50,000 – INR 2,00,000. Additionally, a penalty of Rs 50,000 can be levied on an employer who produces false records or counterfeits or knowingly makes/ produces a false statement.

Significantly, if an offence 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 offence, unless he / she is able to prove that the offence in question was committed without his / her knowledge or consent.

Anhad Law’s Perspective

The Act, which is ‘domicile’ based job quota legislation, a path breaking development, as may be claimed the State Government, to secure employment for persons domiciled in State of Haryana, in private sector companies, etc., is an old concept as similar initiatives have been introduced in some other Indian States in the past.

In the year 1995, State of Gujarat had announced a policy for 85% reservation for locals, however, the policy was never introduced. In 2008, State of Maharashtra had passed a resolution for providing priority in employment to minimum 80% local persons having knowledge in Marathi in all Micro, Small, Medium, Large & Mega Industrial Enterprises, though the resolution was not implemented or enacted into law.

State of Andhra Pradesh became the first State in India to enact such a legislation namely the Employment of Local Candidates in Industries/Factories Act, 2019 which was passed by the Andhra Pradesh assembly. However, the constitutional validity of the same was challenged before the High Court of Andhra Pradesh on the ground that such a statute was beyond the legislative competence of the State apart from violating Articles 14, 16(2) and 16(3) of the Constitution of India. On December 07, 2019, the Government of Karnataka issued a notification amending the Karnataka Industrial Employment (Standing Orders) Rules, 1961 directing requirement for private and public industries in Karnataka to give priority, to Kannada-speaking individuals (Kannadigas), in local jobs. However, the said Notification only required giving priority to Kannadigas at the time of recruitment, but neither made recruitment mandatory nor did it entail any penal consequences if the establishments failed to do so.

While the Act intends to extend the protection to persons ‘domiciled’ in the State of Haryana, it does not provide the definition of ‘domicile’. However, since State Government provides residence certificate, the condition give on the websites of the State of Haryana provides that to be eligible to claim a residence (domicile) certificate, a person should be born in Haryana or have lived there for at least fifteen (15) years. It is being reported in the news that the State government may revise this to five (5) years. However, it is to be seen whether this would be done.

In our opinion, the Act is likely to add more complexities for the companies having operations in the State of Haryana and initially make them subjected to demands, by the authorized government officials, for information / records, and later on inspection.

Given the definition of ‘employer’ in the Act, in our interpretation, a company having operations in the State of Haryana and employing ten (10) or more persons should be subject to obligations under the Act and not merely if it was incorporated in the State of Haryana, however, it would be interesting to see if it is interpreted differently by the concerned officials, unless clarified in the Rules that may be announced.

Since the provisions of the Act are similar to the statute introduced by Andhra Pradesh, it is to be seen if the constitutional validity of the Act will be challenged before the High Court of Punjab and Haryana.

-Manishi Pathak, Founding Partner & Ranjan Jha, Partner

Disclaimer: These are personal views of authors and do not constitute a legal opinion, analysis or interpretation. This is an initiative to share developments in the world of law.