Haryana’s New Job Reservation Law May Derail India’s Ease of Doing Business & Foreign Investments 352

Sayantani Saha, Associate, Nishith Desai Associates and Preetha Soman, Leader – HR Law Practice, Nishith Desai Associates

The Haryana State Employment of Local Candidates Act, 2020 (“HSELC Act”) along with the Haryana State Employment of Local Candidates Rules, 2021 (“Rules”) has come into effect from January 15, 2022

The HSELC Act and Rules provide for 75 percent employment of ‘local candidates’ (that is, candidates ‘domiciled’ in the state of Haryana) in posts having gross monthly wages up to INR 30,000 (approx. USD 400). This reservation requirement would apply to employers across the state of Haryana including private employers. The Rules clarify that a ‘domiciled person’ will be one who is a bonafide resident of Haryana satisfying the conditions prescribed in this respect by the Haryana government from time to time and having a Parivar Pehcan Patra issued under the Haryana Parivar Pehchan Act, 2021.

The HSELC Act has an overriding effect on any other law inconsistent therewith in the state of Haryana and will operate for a period of ten years from its effective date. 

Non-compliance with the HSELC Act and Rules can lead to a penalty ranging between INR 10,000 (USD 140 approx.) to INR 2,00,000 (USD 2,700 approx.).

Employer Obligations:

The employer obligations under the HSELC Act and Rules include the following:

  1. Procure a unique identification number on the Haryana Udhyam Memorandum Portal, called the Haryana Udhyam Memorandum Identification Number (HUM ID).
  2. Use the HUM ID and register details of all existing employees receiving gross monthly salary up to Rs. 30,000 (USD 400 approx.) within three months of commencement of the HSELC Act and Rules on https://local.hrylabour.gov.in/ (Designated Portal).
  3. Recruit at least 75 percent of local candidates who are duly registered on the Designated Portal for posts in which the gross monthly salary does not exceed INR 30,000 (USD 400 approx.). 
  4. Furnish quarterly reports setting out details of local candidates appointed during the respective quarter.
  5. Submit all records, information, or documents as required by the Authorised Officer appointed under the HSELC Act.

“The HSELC Act and Rules provide for 75 percent employment of ‘local candidates’ (that is, candidates ‘domiciled’ in the state of Haryana) in posts having gross monthly wages up to INR 30,000 (approx. USD 400). This reservation requirement would apply to employers across the state of Haryana including private employers.”

Exemptions:

The state government of Haryana has, vide a separate order dated January 17, 2022 (Exemption Order), exempted certain categories of employers/vacancies from the applicability of the HSELC Act including (a) startups and IT/ITeS employers commencing operations before January 15, 2024, for a period of 2 years from the date of commencement of their business; (b) short term employment of up to 45 days; (c) vacancies filled through promotion/transfer/absorption of surplus staff of any unit of the same employer in Haryana. 

The HSELC Act and Rules also enable employers to apply for an exemption where an adequate number of local candidates with the desired skill, qualification, and proficiency may not be available. Employers seeking such exemption are required to make an application to this effect on the Designated Portal in the prescribed manner, furnishing inter alia reasonable grounds for the exemption besides any specific qualification, skill, and experience requirements. 

The Designated Officer after conducting the necessary investigations, may accept or reject such application and/or direct the employer to train local candidates to the desired level of skill and proficiency. Accordingly, the Exemption Order states that the Haryana government may notify any class, post, skill, and category of employment in which local candidates of desired qualifications may not be available, as exempt from the requirements of the HSELC Act.

Any exemption granted under the HSELC Act will be valid only for a period of up to one year and any unfilled vacancy upon expiry of the one year from the grant of exemption will be treated as a fresh vacancy and be subject to compliance requirements under the HSELC Act.

Other Recent Developments:

At present, a petition has been filed by the Gurgaon Industrial Association challenging the constitutionality of the HSELC Act, which is pending before the Punjab and Haryana High Court. Reportedly similar petitions have been filed by other industrial associations of Rewari and Faridabad

Analysis

While the state government has envisioned a self-sustained state, on the flip side, a protectionist law like this is likely to derail India’s overall focus on ease of doing business in the country and attracting foreign investment. 

Sayantani Saha
Preetha Soman

While the Haryana state government firmly believes that the HSELC Act will go a long way in opening new avenues of employment for the state youth, this law is being perceived by multiple stakeholders including employer associations as a draconic step. Industry associations believe that the HSELC Act will make it difficult for industries in Haryana to remain competitive in the market with an acute shortage of skilled local manpower.

However, the government is targeting conducting a statewide skill-gap analysis and ensuring that the local youth is trained, has employable skills, and there is no shortage of manpower in the state. While the government has been reassuring employers that they will work in close coordination with industries, industry associations and employers now eagerly await the High Court hearings hoping for some relief.

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Sayantani specialises in labour and employment laws and has been advising clients on a wide range of employment law matters including matters relating to workforce management, compensation and benefits, reductions in force, disciplinary inquiries, etc. Preetha Soman has worked on a wide range of complex and intricate labour law matters from routine compliance matters to matters involving hiring, workforce management, retention and strategy, employee reorganisations and reductions in force, etc.

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