Vocal for Local - Overview of the Haryana State Employment of Local Candidates Act 2020

Introduction

The Haryana State Employment of Local Candidates Bill, 2020 (“Bill”), which was passed by the Legislative Assembly of Haryana on November 5, 2020, received the assent of the Governor of Haryana on February 26, 2021. The Haryana State Employment of Local Candidates Act, 2020 (“Act”), has been published for general information in the extraordinary gazette of Haryana on March 2, 2021, and will come into force, once it is notified by the Government of Haryana (“Haryana Government”). The Act is applicable to (i) all companies, societies, trusts, limited liability partnerships, partnership firms, (ii) persons employing 10 (ten) or more persons and (iii) any entity as may be notified by the Haryana Government and will be operational for a period of 10 (ten) years from the date of its commencement. The Act does not apply to the Central or the State Government or any organisation owned by either of them. The draft rules under the Act are currently awaited.

Key Provisions

  1. Compulsory Registration: All eligible employers will have to register all employees earning a gross monthly salary or wages of up to INR 50,000 or such amount as may be notified by the Haryana Government (“Wage Limit”) on a designated portal within 3 (three) months from the commencement of the Act. An employer cannot employ or engage any person till the registration of all such employees has been completed on the designated portal.
  1. Recruitment of Local Candidates: Every employer will have to employ 75% of local candidates for posts where the gross monthly salary or wages are within the Wage Limit. The term ‘local candidate’ has been defined to mean a candidate domiciled[1] in the state of Haryana. An employer may, at its option, restrict the employment of local candidates from any district in Haryana, to 10% of the total number of local candidates. Further, local candidates can avail benefits under the Act, only once they have registered themselves on the designated portal.
  1. Exemption from recruiting local candidates: An employer can claim exemption from recruiting local candidates, if adequate number of local candidates of the desired skill, qualification, or proficiency are not available. In this regard, the employer will have to apply to the designated officer as defined[2] under the Act, (“Designated Officer”) in the prescribed manner. The Designated Officer, after carrying out such inquiry as he deems fit and after evaluating the attempt made by the employer to recruit local candidates of desired skill, qualifications, proficiency, may either accept or reject the employer’s claim for exemption or direct the employer to train local candidates to achieve the desired/ required skill, qualification or proficiency.
  1. Quarterly Reports: Employers will be required to furnish quarterly reports consisting of details regarding the number of local candidates who have been employed, which will be examined by an authorised officer (“Authorised Officer”)[3]. These Authorised Officers will be empowered to call for any records or information from an employer for verifying the quarterly reports and to enter an employer’s work premises to examine any records if they have reason to believe that the employer has committed an offence under the Act or the rules made thereunder.
  1. Penalties: A general monetary penalty of a fine not less INR 10,000, which may extend up to INR 50,000, has been prescribed. Failure to register on the designated portal will attract a fine of not less than INR 25,000, which may extend up to INR 1 lakh. Failure to recruit local candidates as required under the Act will attract a fine of not less than INR 50,000, which may extend up to INR 2 lakhs. Disobeying the orders of the Designated Officer will also attract a penalty ranging between INR 10,000 and INR 50,000. Falsification of records is punishable with a fine extending up to INR 50,000 for the first offence and to a fine ranging between INR 2 lakhs and INR 5 lakhs for any subsequent offence.
  1. Liability in case of offences: In the event of commission of an offence by a company, every director, manager, secretary or person concerned with the management of the company will be deemed guilty of the offence, unless they are able to prove that the offence in question was committed without their knowledge or consent.
  1. Opportunity of hearing: An opportunity of hearing is to be provided to an employer before any order is passed or any penalty is imposed under the Act.
  1. Limitation period for cognizance of offences: Cognizance of an offence can be taken by a court only within a period of 6 (six) months from the date on which the alleged commission of the offence came to the knowledge of the Designated Officer or the Authorised Officer.
  1. Appeal: Any employer aggrieved by an order passed by the Designated Officer or an Authorised Officer can appeal to the designated appellate authority within 60 (sixty) days from such order.

Analysis

The requirement of recruiting local candidates as mandated under the Act will have an impact on an employer’s recruitment strategy going forward. The following points also emerge for consideration:

  • Definition of key terms: While the Act prescribes a Wage Limit, the terms ‘wages’ or ‘salary’ have not been defined. Further, in the absence of definitions for terms such as ‘employee’ and ‘worker’, the Act appears to apply to all category of jobs/ posts in the private sector, irrespective of the nature of the work involved, the level/ designation of the employee, or their skillset, qualifications, etc. From the point of view of a principal employer, it is unclear if contract labour are also required to be considered for compliance under the Act or whether they will be excluded from its purview. The applicability of the Act in respect of employees, who are currently working from home, outside of Haryana, also needs to be clarified.
  • Status of existing employees: There is lack of clarity regarding the status of the existing employees of an employer who are earning less than or equal to the Wage Limit once the Act comes into force. It is unclear if the legislation will apply only to fresh recruits to be hired in the future or will it also apply to existing employees as well. While the Act provides a 3 (three) month period for employers to register on the designated portal, it is unclear as to the timeline within which the employers are required to ensure that 75% of their employees falling within the Wage Limit are local candidates and thus in compliance with the Act.
  • Procedure for claiming exemption: The requirement of claiming an exemption from the Act by applying to the Designated Officer may prove to be cumbersome for employers. The Act also does not stipulate any timeline within which a Designated Officer is required to act upon an application for exemption. Further, in the event that the Designated Officer directs employers to provide for adequate training of local candidates, high costs may have to be incurred by employers.

Various industry bodies have expressed their concerns regarding the practical challenges involved in implementing the requirements under the Act. On August 14, 2019, the Governor of Andhra Pradesh gave his assent to a similar law, namely, the Andhra Pradesh Employment of Local Candidates in Industries/Factories Act, 2019, which requires existing industries, factories, joint ventures and public- private partnership projects to ensure 75% employment to local candidates within a period of 3 (three) years from the date of its commencement. The same has been challenged in the Andhra Pradesh High Court and the case is currently pending.

A writ petition challenging the Act was filed before the Punjab and Haryana High Court, however, we understand that it has been dismissed.[4] At present, various gaps can be observed in the Act, which are expected to be clarified through the rules which are yet to be framed under the Act. Given the present circumstances where employers are gradually moving towards adapting to the ‘new-normal’ in a post-Covid scenario and also gearing up to embrace the labour codes, the implementation of the Act is likely to impose new practical challenges for them.


[1] While the Act does not define the term ‘domicile’, one of the websites of the Haryana Government indicates that a person is considered to qualify for a domicile in Haryana, if he has either been born in Haryana or been residing in the state for at least 15 years as per https://fatehabad.nic.in/service/residence-certificate/ (last accessed on March 12, 2021).

[2] Section 2(c) defines “Designated Officer” as an officer of Haryana Government not below the rank or equivalence of the Deputy Commissioner as may be designated by notification in Official Gazette, by the Haryana Government

[3] Section 2(b) defines an “Authorised Officer” as an officer of the Haryana Government not below the rank or equivalence of the Sub-Divisional Officer (Civil) or any other officer as may be designated as such by notification in Official Gazette, by the Haryana Government for the purpose of Section 7.

[4] M/s A. K. Automatics v. Principal Secretary and Anr., CWP No. 5970 of 2021. As per the case status (available at https://www.phhc.gov.in/enq_caseno.php?var1=CWP&var2=5970&var3=2021- last accessed on March 16, 2021) the petition was dismissed, however, the order regarding the same has not been uploaded as of date.

 

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Photo of Rashmi Pradeep Rashmi Pradeep

Partner in the General Corporate Practice at the Bangalore Office of Cyril Amarchand Mangaldas. Rashmi advises both domestic and international clients on legal aspects of their business strategy in India, including on various commercial arrangements, entry strategy, private equity, mergers, acquisitions, restructuring…

Partner in the General Corporate Practice at the Bangalore Office of Cyril Amarchand Mangaldas. Rashmi advises both domestic and international clients on legal aspects of their business strategy in India, including on various commercial arrangements, entry strategy, private equity, mergers, acquisitions, restructuring, foreign investment and employment matters. Chambers Asia Pacific, 2017 has mentioned her as a ‘Recognised Practitioner’ for Employment. She can be reached at rashmi.pradeep@cyrilshroff.com

Photo of Richa Mohanty Rao Richa Mohanty Rao

Partner in the General Corporate Practice at the Delhi Office of Cyril Amarchand Mangaldas. Richa has advised extensively on matters such as transition of employees in case of mergers and acquisitions, individual and mass redundancies, advisory on sexual harassment matters, employee investigation, social…

Partner in the General Corporate Practice at the Delhi Office of Cyril Amarchand Mangaldas. Richa has advised extensively on matters such as transition of employees in case of mergers and acquisitions, individual and mass redundancies, advisory on sexual harassment matters, employee investigation, social security benefits including provident fund, gratuity, superannuation, etc., contract labour arrangements, trade union issues, conciliation proceedings initiated by workmen, etc. She has also conducted workshops on some of these issues and is currently a member of a Special Taskforce on Employee Relations, at the Confederation of Indian Industry (CII), Northern Region. She can be reached at richa.mohanty@cyrilshroff.com

Photo of Faiza Khan Faiza Khan

Associate in the Employment Law Practice at the Delhi office of Cyril Amarchand Mangaldas. Faiza advises clients on matters involving employment and labour law related issues. She can be reached at faiza.khan@cyrilshroff.com