I. KEY HIGHLIGHTS OF THE ACT
1.1 Time Bound Application:
The Act will be in force for a period of 10 (ten) years from January 15, 2022 and will be considered to be repealed upon the expiry of this period.
The provisions of the Act are applicable to employers, which include companies registered under the Companies Act, 2013, partnerships under the Limited Liability Partnership Act, 2008 and the Partnership Act, 1932, and any person employing ten or more persons on salary, wages, or other remuneration for the purpose of manufacturing or providing any service.
The definition of “employer” specifically excludes Central Government or the State Government or any organization owned by them. Therefore, the Act is applicable only to private employers.
1.3 Compulsory Registration:
The Act makes it obligatory for every employer to register employees receiving gross monthly salary or wages not exceeding INR 50,000/- or such amount as may be notified by the Government of Haryana, on the Designated Portal (i.e., the Haryana Udhyam Memorandum portal). Do note that the Government has presently notified this threshold as INR 30,000/- and therefore, the Act is presently applicable only to employees engaged in positions where the gross monthly salary or wages are up to INR 30,000/-.
Such registration is required to be completed within 3 (three) months from January 15, 2022 as per the process prescribed under the Rules. Employers are restricted from employing or engaging any person till the time the registration of all such employees is completed on the Designated Portal.
1.4 Recruitment of Local Candidates:
Every employer is mandated to employ 75% (seventy-five percent) Local Candidates on such posts where the gross monthly salary or wages do not exceed the aforesaid wage threshold. Only such Local Candidates who have registered themselves on the Designated Portal will be eligible to avail the benefits under the Act.
The term “Local Candidate” has been defined as a candidate who is domiciled in the State of Haryana and hence, they may be from any district in Haryana. The test for domicile has been prescribed under the Rules as any person being a bona fide resident of Haryana, who satisfies the conditions issued by the Government from time to time and has a Parivar Pehchan Patra issued under the Haryana Parivar Pehchan Act, 2021.
An employer has an option to restrict the employment of local Candidates from any district to 10% (ten percent) of the total number of Local Candidates.
Employers will have the right to claim exemption from the aforesaid requirement to recruit Local Candidates (for a period of one year) if the adequate number of Local Candidates of the desired skill, qualification or proficiency are not available in Haryana. For this purpose, the employer may apply to the “Designated Officer” along with grounds for availing the exemption, including details of specific qualifications, skill and experience required for the said post and availability (or otherwise) of the local candidates possessing such qualification skill and experience. The Designated Officer has the discretion to either accept or reject the claim of the employer or direct the employer to train Local Candidates to achieve the desired skill, qualification, or proficiency.
By its order dated January 17, 2022, the Labour Department, Haryana, has granted certain “deemed exemptions” to the following categories of employers from the application of the Act:
(a) New Startups and new IT / ITES employers for a period of two years from the date of commencement of work / business / manufacturing process. New Startups and new IT / ITES units are defined as employers who have established / commenced operations within a period of two years from the commencement of the Act (i.e., January 15, 2022).
(b) Short term employment of up to forty-five days.
(c) Employers primarily engaged in agricultural activities, as explained further in the order.
(d) Employers for domestic work or services in residential homes.
(e) Vacancies which are filled up through promotion / transfer / absorption of surplus staff of any unit of the same employer in Haryana.
(f) Any class / post / skill / category of employment notified by the Government from time to time, where local candidates are not available.
Employers are required to furnish quarterly reports providing details of local candidates employed and appointed during the previous quarter by 20th day of the following quarter on the Designated Portal. Employers are also required to maintain digital records of, inter-alia, the number of employees on the last date of every quarter, number of local candidates appointed every quarter, exemption availed during the quarter, etc. and keep such records available for inspection by authorities, as and when required.
Employers have a right to file an appeal before the “Appellate Authority” against the orders passed by the “designated officer” or the “authorized officer” in accordance with the prescribed procedure.
1.8 Offences and Penalties:
Different penalties have been prescribed for employers for violation of various provisions of the Act, which extend up to INR 2,00,000/- for a violation of the requirement of recruitment of Local Candidates, and in case of continuing offence, a penalty up to INR 1,000/- may be levied for each day for the period of contravention. The penalty for the offence of knowingly furnishing false records or documents may extend up to INR 50,000/-, and in case of a subsequent offence, a penalty up to INR 5,00,000/- may be levied. The Act contains standard provisions for attributing liability on designated individuals for offences committed by corporate entities.
II. LACUNAE OF THE ACT:
2.1 Most importantly, the Act does not define the term ”gross monthly salary or wages” and therefore, it is unclear which components of payments to be considered for computing whether a person falls within the wage threshold of INR 30,000/-.
2.2 While there were certain ambiguities around which provisions of the Act will apply retrospectively and which will apply prospectively, this has been largely clarified by the Government by issuing FAQs on the Act (available at https://local.hrylabour.gov.in/home/faq). One of the said FAQs has clarified that the Act applies to new recruitments made after the commencement of the Act and does not apply with a retrospective effect.
2.3 Besides, the law has received significant pushback from the industry, and multiple litigations have been filed before the Hon’ble High Court of Punjab & Haryana (“High Court“) challenging the Act, as discussed below.
III. JUDICIAL INTERVENTION:
3.1 Various petitions have been filed by different industry associations before the High Court challenging the Act on the grounds that it is politically motivated, interferes with the rights of the employers to freely undertake their business, unavailability of the requisite skill set in Haryana, and that it dilutes the importance of merit-based hiring, to name a few. These bodies include the Gurgaon Industrial Association, Faridabad Industries Association, Rewari Chamber of Commerce and Industries, etc.
3.2 These petitions were last listed for hearing on January 12, 2022 and in view of the COVID-19 outbreak, have now been adjourned to February 2, 2022.
3.3 Hence, unless the High Court interferes in the matter and grants a stay over the enforcement of the Act next month, the Act and Rules are presently in effect.