75% job reservation: Is practising parochialism good for the development of the country?

The 75 per cent job reservation requirement, prima facie is in violation of Article 19, Article 16(2) and Article 14 of the constitution. Since Article 19 confers to any person the right to reside and settle in any part or territory of India, this job quota requirement will indirectly curtail this right.

Haryana 75% job reservation bill 2020- Boon or bane

“If this law comes into compliance, there is a fear of unionisation,” says Retired Major KC Sandal, Vice President of Gurgaon Industrial Association, an apex industry body in Haryana and owner of a mementos and souvenirs manufacturing company.

“Hiring too many local workers in order to comply with the 75 per cent quota can lead to union formation. And usually, the locals or villagers are under lumberdars (head of the village), and in case of any demands, just or not, they will come together saying iska to ye kaam hai, uska woh nahi hua…. They will unnecessarily create pressure on the management, and it can end up badly for that particular company or industry,” Sandal said while discussing the 75 per cent job quota decision by the Haryana government.

Ever since the 75 per cent job reservation bill, which is a disputed bill, has been formulated, Industry apex bodies, associations and businesses are not pleased. This bill is called the ‘Haryana State Employment of Local Candidates Bill 2020’.

Sonica Aron, Founder & Managing Partner at Marching Sheep, an HR advisory firm also spoke to us on the bill from the viewpoint of an expert in the HR field. Talking about the bill, she also feels that it is somewhat problematic when the government wants to implement an overwhelming 75 per cent quota for any particular group. She too foresees the same outcome as the one feared by Sandal. “While hiring too many local people may provide for smoother functioning and better collaboration within the unit, this is only one side of the coin,” she says.

“The flip side of hiring too many local people is that when you have a majority of people with the same mindset and thought process, and if they get together for any demand, fair or unfair, it can lead to group thinking and collectivism. In this scenario, the role of HR becomes extremely crucial as they will need to ensure that there is no miscommunication and mindful people management will become a strategic priority,” she continues.

The question here is why is this 75 per cent job reservation bill so controversial? Industries and associations have been opposing it, demanding its reversal. While the matter is now in court and the matter is sub judice, field experts continue to discuss it.

What the bill says

This bill is timelined for ten years, will provide 75 per cent reservation for those who have a domicile certificate and are seeking private-sector jobs that provide a monthly salary of less than Rs 50,000. If the law comes into compliance, companies, societies, trusts, limited liability partnership firms and partnership firms employing 10 or more people in the state will come under it.

Let us see what this bill is all about.


Decoding the bill

When experts were asked to decipher the bill, they called this bill excessive, discriminatory and a means to practice the policy of exclusion.

“Yes, the 75 per cent job quota in the private sector, trusts, and/or societies prima facie is excessive, discriminatory and exclusionary. However, since the matter is sub judice, it would not be ideal to comment on whether the decision is constitutional or not,” Neeraj Dubey, Partner—corporate law at Singh & Associates said to us while discussing the bill.

“However, the 75 per cent job quota requirement, prima facie is in violation of Article 19, Article 16(2) and Article 14 of the constitution,” he said.

Since Article 19 confers to everyone the right to reside and settle in any part or territory of India, this quota policy will indirectly curtail this right because if employment in a specific territory is restricted, that would simultaneously deter people from other territories to reside in that particular territory.

The bill talks about 75 per cent of jobs in an entity, which is an overwhelming number and covers more than the majority of jobs in a company, right from the entry level to middle management. This is going to create inclusivity for the youth but at the same time will exclude talent from the rest of the country.

Aron, adding to it, says that exclusion by all means is discriminatory in nature. “In the absence of adequate local talent trained and skilled enough to fulfil available job opportunities, the outside talent pool might come at a higher salary for the same job, due to this sense of exclusion. Job reservations create artificial boundaries between states and fragment the labour market, leading to restriction of movement of talent and industry.”

Dubey, also talking about other legal aspects of this issue contends that this reservation bill violates civil rights, which might further aggravate the inherent problems that already exist due to the implementation of this bill.

“Imposing quota policy in the private sector violates the fundamental right to practice any profession or occupation freely. Also, it violates the basic fundamental principle enshrined in Article 14 of the constitution, which prohibits any kind of discrimination on grounds of place of birth. It violates the rights given in Article 15 (1) and (2), which emphasise that no citizen shall be discriminated against on the grounds of place of birth. Though the powers given under Article 16(3) allow Parliament to promulgate any law with residence qualifications necessary for government jobs (i.e., domicile-based preferential treatment), the same cannot be extended to the private sectors,” he said.

For the people, by the people

Apparently, a detailed analysis and exposition of the Haryana bill has brought to light various discrepancies in the blueprint of the bill and requires a lot of work to rectify them. If this is the case, then it forces us to think about why the government is so keen to implement it as a law.

The government cites its concern for the interests of the general public as the reason for the passing of this bill. The bill reads as follows, “The bill will provide tremendous benefits to private employers directly or indirectly through a qualified and trained local workforce. Availability of a suitable workforce locally would enhance the efficiency of Industry as the workforce is one of the major components for the development of any industrial organisation.’’

This can be taken as a valid point, given that Haryana’s unemployment rate peaked last year as compared to other states. In April 2019, Haryana had an unemployment rate of 26.5 per cent, which further rose to 43.2 per cent in April 2020. Currently, it is back at 26.4 per cent as of February 2021.

But these reasons and justifications are not going down well with people.

Politically, the general perception of the people is that the quota move is a tactic to appease the local vote bank. Whereas the bigger question that industry is asking is where are they going to hire the required talent from? Or whether the youth of Haryana is actually interested in jobs that pay under Rs 50,000 a month?

“In 2005, when carmaker Maruti Suzuki planned to train local people on the work floors, the plan backfired, because no one was interested in industrial training. Rather, the talent pool was moving towards other jobs and industrial skills were not available. The scenario has not changed today either,” says Sandal.

Sandal also tells us that new industries and companies are going to suffer if the law comes into force as they will not get the skilled workforce that they are looking for in the state. “As far as local residents are concerned, the Haryanvi youth is not technically trained for industries. They are more prone towards sports activities, agriculture, the property business and the army. I meant to say that they are more into the infrastructure industries and prefer to manage their own businesses.”

Ease of doing business will be compromised

Industry feels that Gurugram is going to bear the brunt of the fallout from this issue because Haryana as a state and Gurugram in particular is one of the biggest hubs for multinational companies in India, including the IT/ITeS sector.

According to an analysis from Khaitan & Co., once in effect, the bill may have significant ramifications in terms of the ease of doing business. “Often, the success of these sectors is inversely proportional to the extent of government interference in business operations. If an entity is mandated to justify its position and claim exemption from the government every time it intends to hire from outside the state in excess of the 25 per cent window, the business environment may not remain conducive, ultimately impacting investments in the region. The private sector may then be constrained to look for alternative locations to carry on operations.”

This means there will be a gradual shift of businesses to places where they do not have this job quota policy. There will be a huge economic impact on the state’s exchequer. The private sector can move the courts challenging the state government’s quota policy, says Dubey of Singh & Associates.

It would also have an impact on the ease of doing business index at a time when Haryana’s ranking is already down to 16th place from its earlier third rank.

Dubey tells us, “It would create difficulties for the employers to employ only local people for certain positions and if they are not skilled/qualified, provide them with the necessary training. Article 16(2) of the Constitution states that no citizen shall be discriminated against on the grounds of religion, race, caste, sex, descent, place of birth and residence. The discriminatory provisions of this local job quota are in violation of this Article. Article 14, which enshrines the right to equality is also being violated.”

Not wanting to be named, a component manufacturer feels the same. He says, “Businesses are going to shift, especially they will prefer Rajasthan. And there are quite a few good reasons for this. Firstly, because of this bill, new businesses are going to invest elsewhere. Secondly, if the law comes into force there will be no skilled workforce available here. Thirdly, Rajasthan has a conducive business environment as manpower is much cheaper there. I mean to say, ease of doing business is imperative.”

Deciphering the bill Aron points out that the bill is going to cause companies to be buried in more paperwork. “Hiring non-Haryana candidates will also become stringent and expensive. As per the notification, it will become mandatory for industry to register vacancies on the job portal of the Haryana government. If a particular industry is not able to find suitable talent, they have to apply for permission from the District Magistrate for exemption. Registrations, permissions and explanations will add several layers of compliance for the firms, impacting the smaller one’s severely.”

Experts at the same time are also not losing sight of the ongoing pandemic, which has jolted the growth trajectory of many industries, impacting their financial positions. The compliance of this bill is likely to significantly increase the costs of businesses on several fronts, including the resources spent on the training of local candidates and the displacement of the present non-local workforce.

Finally, reservation in the private sector, should it be done or not?

At first glance, experts contend that whether there should be reservation in the private sector will ultimately depend on industry.

“On the other hand, if a particular industry requires general workers without a specific/special skill set, then the state government could impose the requirement of job quota. However, it should not be as onerous as 75 per cent. It will certainly stifle competitiveness in Industry,” says Dubey.

Key industries in Haryana include automotive, the manufacturing and agro-based industries, IT and ITeS, oil refining, biotechnology and petrochemicals. All these fields require a certain expertise and a highly skilled workforce to operate these industries. This is the factor that has pushed businesses in Haryana to ask for a reassessment of the reservation bill.

Industry association CII’s Director General Chandrajit Banerjee in a statement said, “At a time when it is important to attract investments at the state level, the Haryana government could have avoided imposing restrictions on industry. Reservation affects productivity and industry competitiveness. We hope the state government of Haryana takes a relook at the legislation.”

Competitiveness in Industries is often characterized and fuelled by the talent pool they have. If the Industries are forced to hire from the local state, they would be forced to hire sub-standard staff and make compromises on quality. “This would result in sub-standard output from those Industries located in that particular territory and they will lag behind Industries where such a job-quota requirement does not exist,” says law expert Dubey.

Sandal of GIA also adds that they are continuously conducting meetings with government officials and leaders while also writing letters for the reversal of this bill. “The new industries will find it difficult to do business here. Even companies like us who are already doing business depend upon a trained and skilled workforce. Why would anybody want to bring in a workforce that is untrained? We don’t train people because of a lack of time.”

While Aron of Marching Sheep believes that the state government’s decision of reservation of jobs in the private sector can be seen as both a progressive and a restrictive move. While it builds inclusivity for the local talent pool, it increases the caste and geographical divide in our country.

“The government should look at striking a balance between too much and too little. Reservation is okay up to a certain extent, but it should not amount to the exclusion of people from the rest of the country. The intention should be to include and not to exclude.”

Sonica Aron, Managing Partner, MarchingSheep

Going forward, this bill requires much more work in its blueprint, as the provisions are not clear and there are questions about the intent, creating further challenges. For instance, the bill does not mention the nature of jobs in its ambit and the reservation applies across all kinds of jobs irrespective of the degree of skill, complexity, dexterity, and experience that a particular kind of job would entail.

Further, there is no set timeframe mentioned within which an entity has to transition from zero to 75 per cent reservation. This will create several practical challenges including the treatment of the non-local workforce who are presently employed in private sector entities.

Other factors include the presumption that authorities may not force companies to fire the existing non-local workforce, just to fulfil the new ratio. This may imply that businesses are only bound to follow this rule when they have vacant posts. In fact, the provision may act as a safeguard against immediate prosecution, especially in a scenario where the non-local workforce has been employed by the organisation prior to the commencement of the statute.

The biggest fear

Haryana is not the only state that has brought in such a bill. In 2019, Andhra Pradesh brought the 75 per cent reservation bill for locals in industries/factories including the PPP mode. This matter is in court. Karnataka also talked about a 100 per cent quota for blue-collar jobs in 2016, however this was only a draft. Now the most recent addition is Jharkhand, which through its employment policy has allocated 75 per cent of the jobs paying up to Rs 30,000 per month in the private sector for the local populace.

Other states such as Rajasthan, Maharashtra and Telangana also have a domicile requirement but in the public sector, which is fine as per the constitution of this country.

The Supreme court in multiple precedents has already warned states against ‘Parochialism.’ If every state started to play the localism card, it is going to be a serious challenge as Article 19 will be at stake. If people cannot get a job of their choice anywhere but in their own state, it will be akin to taking away their freedom of movement and their right to choose the place of their residence. This will certainly go against the interests of the public.

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