Local Reservation in Private Job- Demand and Challenges- Explained Pointwise

Recently, the Karnataka Cabinet cleared the draft Bill, Karnataka State Employment of Local Candidates in the Industries, Factories and Other Establishments Bill, 2024, to provide for local reservation in private jobs. The Bill mandates the appointment of local candidates in 50% management positions and 70% non-management positions, in industries, factories, and other establishments.

This proposal evoked a sharp response from businesses in Bengaluru, the centre for information technology, startups, global capability centres (GCC) and pharma industries. This has forced the Karnataka Govt to withhold the bill for a more comprehensive review.

What has been the history of implementation of local reservation for private jobs?

The attempts of the state governments to introduce local reservation in private sector is a decade long story.
a. The Maharashtra state government set the ball rolling in 2008, with an attempt to provide 80 per cent reservation to son of soil.
b. The Andhra Pradesh government passed a law mandating75 per cent local reservation in 2019.
c. The Haryana state government provided for 75% local reservation in private sector in 2020. This was held unconstitutional by the Punjab and Haryana HC.

What are the arguments presented in support of local reservation in private jobs? 

1. Protection of Right to livelihood- The State governments contend that the local reservation law intends to protect the right to livelihood of people domiciled in the State.

2. Constitutional Mandate of Article 16(4)- The state governments contend that they are empowered to provide local reservation under Article 16(4) of the Constitution. Art 16(4) stipulates that the right to equality in public employment does not prevent the State from making reservation for any backward class of citizens which are not adequately represented.

3. Solving the rising unemployment problem- One of the central objectives stated by the state governments for providing local reservation is to empower the local youth by giving them employment. For ex- Haryana attempted to introduce local reservation, citing the highest rates of unemployment (9%) in the state as per PLFS 2021-22.

4. Redressal of Local Resentment- The local reservation is attempted by the state to address the resentment of locals against migrant workers taking up their jobs.

5. Legitimate right of the State- The proponents of local reservation argue that the states have a legitimate right to ask private sectors to adhere to the local reservation policy as the private sector utilizes public sector infrastructures.

6. Social Equality- Local Reservation in private sector jobs is needed to achieve substantial social equality, as the proportion of public sector jobs is very low as compared to private sector jobs.

7. Ends private sector’s exploitation of migrant workers- Private employers often exploit the migrant labour market as such workers tend to work long hours for low wages with little or no social protection and benefits.

8. In line with global best practices- US (The US Civil Rights Act of 1964) and Canada (The Employment Equity Act) also provide for reservation in private jobs.

What are the arguments against local reservation in private jobs?

1. Negative effect on the Economy- Local reservation in private sector jobs decreases inter-state mobility of skilled and unskilled labour. This shortage of qualified workers in a state may impact business units and thus the economy of the entire country. For ex- Flight of firms from Gurugram to Noida.

2. Discourages Investment- ‘Compulsory and restricted’ employment choices decreases the competitiveness of companies. It also discourages investment potential in a state by creating compliance burden. For Ex- Haryana’s quarterly compliance report to be submitted by the companies appraising local reservation implementation.

3. Hampers Inclusive Growth- Developed States imposing ‘domicile based employment restrictions‘ reduces the job opportunities of workers from the underdeveloped states like Bihar and UP. For Ex- Increases in the Human development Index (HDI) gap.

4. Threat to National Unity- Local reservation fuels the growth of ‘Sons of Soil’ feeling and breeds antagonistic regionalism. It also increases friction among locals and non-locals, negatively impacting the social fabric of the nation. For ex- Attack on Bihari workers in Maharashtra.

5. Against the reservation ceiling- The provision of 75% reservation goes against the Supreme court’s mandated ceiling of 50% reservation as enunciated in the Indira Sawhney Judgement.

6. Dependence of industries on migrant workers- The majority of MSMEs and large companies in the construction sector are dependent on migrant population. Attempts of introduction of local reservation will negatively impact the growth of this sector.

7. Decreased private industry competitiveness- Private industries operating in competitive markets need the freedom to access the best talent available. Restriction of the talent pool on parochial grounds like local reservation will negatively impinge on efficiency and productivity of the private industry.

What has been the judgement of HC on Local Reservation?

The Punjab and Haryana High Court held the law providing local reservation by the Haryana govt as unconstitutional. The following are the observations made by the HC in its judgement-

What should be the way forward?

1. States must Uphold Uniform Labour Rights- States should ensure that migrant workers enjoy basic labour rights and create a level playing field for both the migrant and local workers. This will also protect the migrant labours from exploitation.

2. Shift of focus from Reservation to Development- The State government must focus on Ease of Doing Business Reforms to attract industries, Skill Development Programs, Infrastructure Development, Education Reforms and Rural Development. It will help solving in the unemployment problem in the long term.

3. Supreme court must lay down the guidelines- As the supreme court laid down the ceiling of reservation in public sector jobs in the Indira Sawhney judgement, it must also give its guidelines on the local reservation in private sector.

4. Promotion of the spirit of ‘Ek Bharat Shrestha Bharat’- The narrow parochial views of regionalism which is propagated by these local reservation must be countered by actively promoting interstate cultural interactions through the ‘Ek Bharat Shrestha Bharat’ Scheme.

5. Greater consultation and deliberations- The legislation providing for local reservation must be consulted in detail and a meeting with the regular stakeholders like industry bodies must be convened to arrive at a consensus.

So far, the states in India have thrived on the multicultural talent that India has to offer. Restriction of employment for narrow political gains is akin to killing a productive golden goose.