Jharkhand High Court has stayed the implementation of Jharkhand State Employment of Local Candidates in Private Sector Act, 2021, which mandated 75% reservation for local candidates in private sector jobs with salaries up to Rs 40,000. The law was brought to promote employment for locals but was criticised for violating constitutional principles.
Jharkhand High Court verdict on Employment of Locals in Private Sector Act
- Petition by small industries: Jharkhand Small Industries Association filed a petition challenging the law guaranteeing 75 per cent reservation to locals, arguing that it violates the principle of equality and freedom to carry on business. Advocates representing JSSIA argued that the Act unfairly divides local and non-local candidates, and limits employers’ ability to hire freely. The petition cited the Punjab and Haryana High Court’s quashing of the Haryana State Employment of Local Candidates Act, 2020, which was struck down by the Punjab and Haryana High Court as a violation of constitutional rights.
- Jharkhand High Court verdict: Jharkhand High Court stayed the implementation of the Jharkhand State Employment of Local Candidates in Private Sector Company Act, 2021. The court found JSSIA’s argument to be correct that the Act violates the right to equality under Article 14 by discriminating against non-local candidates. It also violates the freedom to practice under Article 19(1)(g) by restricting the hiring options of private companies.
Other states have similar domicile-based reservation laws
- Andhra Pradesh: The Andhra Pradesh Employment of Local Candidates in Industries/Factories Act, 2019 was passed (reserving 75% of jobs in private industries for local residents). The Andhra Pradesh High Court said the law “may be unconstitutional” but is yet to give a final verdict on it.
- Karnataka: The Karnataka State Employment Bill, 2024 was approved for local candidates in industries, factories and other establishments, providing for 50% reservation for locals in management roles and 75% in non-management positions across various sectors. The bill has been subject to considerable controversy and concerns have been raised about its impact on labour mobility and business operations.
Why do states introduce domicile-based reservation in private sector employment
- High unemployment among locals: Locals in many states are facing unemployment, especially in low and semi-skilled positions. Local employment laws are seen as a way to ensure residents have better access to employment opportunities.
- Employment loss due to migrant labour: There is a growing perception that migrant workers from other states are taking away jobs meant for locals. This leads to resentment, especially in more industrialised and economically advanced regions.
- State employment preference: The private sector, as a major job creator, can support social justice by giving preference to locals for employment, especially when it benefits from government incentives such as tax concessions and cheap loans, which justifies positive policies.
- Political pressure and vote banks: State governments face pressure from local populations to prioritise their interests. Enacting reservation laws can be a way to appease voter sentiment and gain political support.
- Skill mismatch and education level: Locals may lack the skills for high-paying jobs, limiting their opportunities. Quotas for low-paying jobs have been introduced to address this skill imbalance and provide more employment to the less educated population.
- Talent retention: By ensuring that local residents have access to jobs, states can retain talent within the region. This is particularly important in regions experiencing a brain drain, where skilled workers move elsewhere for better opportunities.
Reservation based on residence
- Reservation based on residence: This system reserves benefits based on a person’s place of residence. The state may allocate some seats to residents in sectors such as education and public jobs, giving preference to locals. “Place of birth” and “residence” are different concepts, with residence referring to a person’s place of residence rather than his or her place of birth.
- Constitutional provisions: Article 16(3) allows residence-based criteria for government appointments within a state or union territory as may be determined by Parliament. Article 371(d) establishes local cadres in Andhra Pradesh and Telangana, ensuring local representation and opportunities in government jobs. Article 15 prohibits discrimination on the basis of place of birth only, not residence.