Job reservation in private sector for locals – Explained, pointwise


Recently Haryana government notified its Haryana State Employment of Local Candidates Bill, 2020. This bill provides job reservation in the private sector for locals.

Prior to Haryana, States such as Madhya Pradesh, Karnataka, Andhra Pradesh also tried to provide reservation in private jobs. Now the question is whether it is a constitutionally or legally correct move by the state government to provide job reservation in the private sector or not?

About Haryana State Employment of Local Candidates Bill, 2020
  1. It provides for a 75 per cent job quota for local people in private sector jobs which offer a salary of less than Rs. 50,000 a month.
  2. The law applies to private companies, societies, trusts, and partnership firms, among others, located in the state. Furthermore, it is applicable to organizations having 10 or more employees.
  3. Firms and companies need to register all of their employees receiving a gross salary of Rs 50,000 or less on a government portal and update it at regular intervals.
  4. It will be applicable to the new job openings only and won’t affect the outsiders already working in the private sector.
  5. An exemption can be claimed by employers when there enough number of local candidates are not available with the desired skills, qualifications, and proficiency. However, an officer of the rank of deputy commissioner or higher will evaluate such a claim.
  6. Penalty for non-compliance ranges from Rs. 10,000 to Rs. 2,00,000 rupees.
  7. A domicile certificate would be mandatory for the candidate seeking benefit under the law.
Other states tried to provide reservation in private jobs to locals
  1. The MP government in 2018 made it mandatory to give 70% of jobs to locals. But this law was not implemented on the private companies as a whole.
  2. Andhra Pradesh also passed a law to provide job reservation for locals. It reserved 75% private jobs across all categories in industrial units, factories, joint ventures as well as Public-Private Projects. The law passed by the Andhra Pradesh assembly is currently challenged in the court and the court is yet to decide on it.
  3. The Karnataka government also approved a new industrial policy (2020-2025) in 2020. The policy aims to give minimum employment of 70 per cent employment to Kannada people on an overall basis. Further, the reservation went up to 100 per cent in the case of Group C and Group D employees.
Rationale behind such reservation in private jobs
  1. The objective is to empower the local youth by giving them better jobs.
  2. In recent times, the government was not able to generate sufficient employment. So, reservations in private jobs are seen as essential to avoid higher unemployment among local people.
  3. Since the private sector uses public infrastructure in many ways like subsidized allotment of land, tax exemptions etc. The state has a legitimate right to require them to comply with the reservation policy.
  4. The Supreme Court in its earlier judgements has supported domicile reservation in education. So, the state governments assume that the court will allow similar reservations in private jobs as well.
  5. Globally also many countries allow such reservation in private jobs. For example,
    • The US Civil Rights Act of 1964 allows the courts to order monetary damages and relief, for victims of discrimination(i.e local people).
    • The Employment Equity Act in Canada also protects minority groups from job deprivation. The Act protects the native people from discrimination in all the federally regulated industries, even in the private sector.
Legal Provisions related to reservations in employment

The constitution under Article 16 and Article 371 mentions the Reservation in jobs.

  1. Under Article 16, there were 3 sub-clauses dealing with the job reservation. They are,
    • 16(1): It provides for equality of opportunity for all citizens in matters relating to ’employment or appointment’ to any office under the State. 
    • 16(2): It provides that there cannot be any discrimination on grounds only of religion, race, caste, sex, descent, place of birth, residence or any of them. 
    • 16(3): It provides an exception by saying that Parliament may make a law “prescribing” a requirement of residence for jobs in a particular state. This power vests solely in the Parliament, not state legislatures. 
  2. Article 371: Some states have special protections under Article 371. Andhra Pradesh under Section 371(d) has powers to have “direct recruitment of local cadre” in specified areas. 
Supreme Court Judgements regarding reservation in private jobs
  1. Dr. Pradeep Jain v Union of India (1984) case: The Supreme Court discussed the issue of legislation for “sons of the soil”. Further, The court held an opinion that such policies would be unconstitutional but did not expressly rule on it
  2. Sunanda Reddy v State of Andhra Pradesh (1995) case: The Supreme Court repeated its earlier interpretation in Dr Pradeep Jain case. Further, the court strikes down the state government policy that gave 5% extra weightage to candidates who had studied with Telugu as the medium of instruction.
  3. The Rajasthan government gave preference to “people belonging to the concerned district or the rural areas of that district” in appointments. But, in 2002 the Supreme Court invalidated the appointment of government teachers in Rajasthan.
  4. In 2019, the Allahabad High Court struck down a recruitment notification issued by the Uttar Pradesh Subordinate Service Selection Commission. The commission prescribed preference for women who were original residents of the state in job appointments.
Concerns associated with reservation in private jobs
  1. Delaying Economic Recovery: The pandemic scenario has made it imperative for states to focus on fast and effective economic recovery. However, compulsion on companies to employ locals might compromise quality and delay the recovery phase.
  2. Discourage Investment: Compulsions to employ decreases the competitiveness of companies. Apart from that, such measures directly discourage investment potential in a state.
  3. Impracticability: The shortage of qualified workers in a state may impact its implementation. And also, the private sector cannot employ outsiders without the permission of concerned authorities. It might lead to the inspector raj prior to 1991 economic reforms.
  4. A threat to unity: This step would create friction among locals and non-locals in the implementing states. This will shake the fundamental of Indian democracy(Unity in Diversity) in long run. 
  5. Against constitutional provisions: These laws are against the spirit of constitutional provisions:
    • Article 14 allows for equality before the law. But the reservations to locals are against that equality.
    • Reservation to locals also violates Article 19(1)(g) is violated by Haryana’s law as outsiders won’t be able to effectively do any job of their choice in the state. 
    • Article 16(3) allows reservation based on the residence by a parliamentary law in matters of public employment and not in private employment.
  6. Against the reservation ceiling: Giving 75% reservation goes against the Supreme court’s ceiling of 50% for maintaining meritocracy. 
Way Forward
  • The Supreme court must define the question on the reservation in private jobs. If permitted then the constitutional limit of 50% reservation cannot be allowed to breach by State government laws.
    • The law passed by the Andhra Pradesh assembly is already challenged in court. So, the supreme court has to define a clear stand on the reservation in private jobs.
  • There should be voluntary encouragement as various companies are already having 50-60% employees from the local state only (under the salary of 50000 per month).
  • The State government should focus on better education delivery, greater job creation and skill enhancement. It will make companies to employ more local youth automatically.  

Giving reservations in jobs is only a temporary solution, the need of the hour is to focus on better job creation and skill development. A further idea of local reservation also goes against the spirit of Ek Bharat Shreshtha Bharat’ that demands an integrated and mobile labour market within the country.

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