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A job reservation mess in Haryana
The TLDR: Until now, job reservations were limited to government employment. Now, the Haryana government has introduced a new law that requires private companies to reserve 75% of all jobs—which pay Rs 50,000 or less—for state residents. India Inc is up in arms and says it “spells disaster” for both the state and the private sector. Also: the law may be unconstitutional.
What’s this new law?
Here are the basic deets:
Who it covers: All the companies, societies, trusts, limited liability partnership firms, partnership firms and any person employing 10 or more persons in the state of Haryana. Point to note: This law is specifically for private entities and does not cover any state or central organisation.
What it requires: Every employer has to ensure that jobs with a gross monthly salary Rs. 50,000 or less are filled by ‘local candidates’. On paper, a company can claim an exemption—because there aren’t sufficient local candidates to fill the jobs—but it entails a long and tedious process. This includes an inquiry by a ‘designated officer’ into its efforts to hire local talent. More alarmingly: at the end of it all, the said officer may direct the company to train local candidates instead.
Who’s a local candidate: Someone who is “domiciled” in Haryana—and has registered themselves on a designated government portal.
What about compliance? Every employer has to file a quarterly report on the designated portal, listing the local candidates employed during the period. This will then be audited by authorities.
What’s the penalty? Fines ranging from Rs 10,000 to a maximum Rs 2 lakh. Continued failure to comply will attract a fine of Rs 1000/day. And repeat offenders will be fined between Rs 2-5 lakhs.
Point to note: This isn’t the first such state law. Andhra Pradesh instituted a similar 75% quota, and the law is being challenged in the Andhra Pradesh High Court which observed that “it may be unconstitutional.” But there has been no final resolution of the case. And there have been plenty of other such attempts in Karnataka, Gujarat and Maharashtra—which introduced 80% reservation for locals in industries that seek state incentives and tax subsidies in 2008.
Why is the government doing this?
A lot of it has to do with the Deputy Chief Minister Dushyant Chautala—chief of the Jannayak Janta Party (JJP) who has aligned himself with the BJP to give it the majority needed to rule. Chautala emerged as a kingmaker in the last state elections, but his strong showing relied on two promises. #1: Guaranteed Minimum Support Price for his base, i.e Jat farmers. Now, we all know how that has turned out. Hence, Chautala is under great pressure to deliver on the promise. #2: 75% reservation in private sector jobs. And since he’s the one keeping the BJP government in power…
Point to note: As economist Shyam Sundar notes in this Business Today column, governments have been weakening labour laws both at the national and state level—insisting this will attract big companies, and generate many more jobs. Now, the same leaders want these companies to make sure that these jobs go to their electoral base—or at least the netas want to put on a show of doing so. So it may be a left hand/right hand kinda thing.
Why is it unconstitutional?
One: Reservations in government jobs is deemed lawful as per Article 16(4) of the Constitution which says 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.”
But the Constitution is silent on private jobs. Now, the Haryana government sees that omission as a loophole that legitimises its law. Other legal experts disagree—arguing that since the private sector is not explicitly mentioned, it cannot be subject to mandatory quotas.
Two: It may violate the basic fundamental right to equality—by discriminating against non-local candidates. One Supreme Court lawyer told The Wire:
“I don’t think is it at all constitutional or legal. You can have a certain domicile requirement but it can’t be so overwhelming—that 75% of the employees would be from those domiciled in the state of Haryana…
If every state does this then what happens to our constitution under Article 19 which gives us the right to travel and reside in any part of the country. It is a constitutional right but how will you exercise it if you can’t get a job or education anywhere else other than the state you were born in.”
Three: As per the Constitution, the government is tasked with ensuring the equality of all its citizens. And reservations—it can be argued—are one way to achieve that goal. But can the government simply outsource that responsibility to the private sector?
The contrarian view: Since government jobs account for only a tiny fraction of total employment, can the government achieve equality without forcing private companies to do their bit? And why shouldn’t they if the same companies rely on a range of public goods—including infrastructure—to conduct their business?
The companies are upset, of course…
Yup. There are more than 300 Fortune 500 companies headquartered in Gurgaon—which has also emerged as the new ‘Silicon Valley’, attracting IT companies away from Bangalore. Also in Gurgaon: large auto and auto part manufacturers like Maruti, Hero and Honda, and garment export companies. So there’s a lot at stake here.
Garment manufacturers: say that a lot of their factory work involves skilled labour that is impossible to source locally:
“Where are the workers in Haryana who are experts in leather cutting, fabric stitching, cutting, weaving. These jobs need talent [which] is mastered when generations work on the same skill set. This move will destroy the export industry and other manufacturing units in Gurugram and Haryana.”
IT companies: say the rule will be a disaster because nearly 50% of their employees earn less than Rs 50,000—all of them hired “based on merit and not their address.” Also: This year, Indian IT and business process management (BPM) firms are expected to hire 100,000 people—but most of them will be from college campuses, which would violate the Haryana requirement.
And it undermines the key factor that makes Gurgaon attractive: “From virtue of being located within the National Capital Region, Gurugram has enjoyed free flow of talent from not only Delhi but also from the adjoining state of Uttar Pradesh.”
Multinational companies: The law runs counter to the union government’s plan to attract foreign investment and companies, argue India Inc bodies like NASSCOM:
“Companies abroad don’t want to get into such technicalities and their immediate response would be to expand or shift to Mumbai, Bengaluru, Hyderabad. The reservations might have some caveats, but optics are too bad, and don’t augur well for the city.”
The bottomline: For all the fuss over the Haryana law, here’s a reality check from Times of India, which reminds us of the fate of previous such laws:
“The quotas have mostly remained on paper, mainly due to the reluctance of the industries to carry out the policy and also because of an absence of enforcement mechanisms on the part of the state governments.”
Reading list
Firstpost has the most details on the law. Indian Express and The Wire have more on the constitutionality of the law. Economic Times looks at the impact on the IT industry. The Hindu has all the outraged quotes from India Inc. Hindustan Times reports on the actual reasons why the private sector is alarmed.