Jharkhand HC Stays Law Giving 75% Quota To Locals In Private Jobs, Says Employers Can't Be Prevented From Recruiting Based On Choice

In an interim order passed on Wednesday (December 11) the Jharkhand High Court stayed the operation of the state law mandating employment of 75% local candidates in private sector against the total notified vacancies. after observing that the law restricts the right of a private employer to recruit from the open market employees. 

The high court passed the order while hearing a writ petition challenging the constitutional validity of the Jharkhand State Employment of Local Candidates in Private Sector Act, 2021. This Act applies to every such establishment in the State where 10 or more workforce is employed. Every such establishment has to register itself on a portal and mandates that every such employer, if there are vacancies for recruitment for the manpower having monthly salary upto Rs.40,000 p.m shall have to ensure that 75% recruitment is made of local candidates against total vacancies notified. It further states that the local candidates who wish to benefited from the Act shall have to register themselves on Rojgar Portal. The Act also provides for hefty financial penalties in case of violations. 

A division bench of Chief Justice M.S. Ramachandra Rao and Justice Deepak Roshan in its order said, "Prima facie, we are of the opinion that the State of Jharkhand could not have enacted the impugned law and restrict the right of a private employer to recruit from the open market employees who would receive less than Rs.40,000/- pm. This is because a private employer -5 of 11- cannot be compelled to do by the State what the State itself is forbidden to do by the Constitution". 

The further underscored that the State cannot be permitted to "virtually build a wall around it's territory of this nature" preventing private employers who have a fundamental right to carry on business anywhere in the territory of India to take into their employment persons "of their choice skilled to do a particular work", and which workers also have a fundamental right to reside or settle anywhere and carry on their trade and occupation.

"The effect of allowing the Act's implementation is that the employer's discretion to choose his work force gets severely hampered. Thus the right guaranteed by Art.19(1)(g) of the Constitution on private employers would get grossly impaired," it underscored. 

It said that if the act is implemented, "prima facie, the concept of one citizenship for all citizens" who have a domicile in the territory of India envisaged by Article 5 of the Constitution and "concept of 'Fraternity' (common brotherhood) mentioned in the Preamble to the Constitution of India would be defeated".

It emphasized that citizens residing in other States of the country cannot prima facie be treated "as inferior to the local people of Jharkhand" and discriminated against. The court said that then other States also would be encouraged to enact similar laws to protect their local residents and the unity and integrity of the country will be seriously jeopardised. 

The Petitioners, who are Associations of Small and Micro Industries, contended that the Act is manifestly unjust, glaringly unconstitutional and arbitrary. They said that the State authorities had issued notices to certain members of petitioner Associations on December 3 demanding filing of reports under Section 6 of the Act for the quarter July to September and threatening coercive action on failure to do so. Another notice of December 10 demanding details of local persons employed and threatening to initiate penal action if details are not furnished was issued. They claimed that it is just and necessary to stay the implementation of the Act. 

Finding the act "prima facie manifestly unjust and discriminatory" violating Part III of the Constitution of India (fundamental rights) the court said that its implementation is not in public interest.

"If the implementation of the Act is not stayed, undoubtedly the State authorities would start penalising the private employers by levying hefty financial penalties mentioned in Sections 9 to 12 of the Act. The notices dt. 03.12.2024 and 10.12.2024 filed by counsel for petitioners corroborate the serious apprehensions they entertain about the intention of the respondents to levy such penalties since they mention of such penal action. Balance of convenience is therefore in favour of members of petitioner Associations and irreparable injury would be caused to them if the implementation of the Act is not stayed. Therefore, there shall be interim stay of implementation of the Act by the respondents until further orders," the court directed. 

The matter is next listed on January 31, 2025. 

Case title: Jharkhand Small Industries Association and others v. State of Jharkhand and Others

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