Introduction:
The Jharkhand High Court, in a significant interim order, has stayed the implementation of the Jharkhand State Employment of Local Candidates in Private Sector Act, 2021, which mandates 75% reservation for local candidates in private sector jobs offering monthly salaries up to ₹40,000. This stay was granted while hearing a writ petition filed by the Jharkhand Small Industries Association and others, challenging the constitutional validity of the Act. The legislation, applicable to establishments with ten or more employees, requires employers to register on a designated portal and ensure compliance with the reservation mandate. Employers failing to comply face hefty penalties as per Sections 9 to 12 of the Act.
The petitioners, associations representing small and micro industries, argued that the Act violates fundamental rights enshrined in Part III of the Constitution, including Articles 14, 19(1)(g), and 21. They contended that the Act is arbitrary, manifestly unjust, and contrary to the principles of equality and fraternity enshrined in the Preamble. They highlighted notices issued by state authorities threatening coercive action for non-compliance, which they claimed created apprehension and undue pressure on employers. These associations argued that the Act curtails the autonomy of private employers to hire freely from the open market and imposes unjust restrictions on their right to conduct business.
The Jharkhand High Court bench, comprising Chief Justice M.S. Ramachandra Rao and Justice Deepak Roshan, observed that the Act prima facie infringes on fundamental rights guaranteed under Article 19(1)(g) by hampering the discretion of private employers to choose their workforce. It also noted that the Act conflicts with Article 5 of the Constitution, which upholds the principle of single citizenship, and the Preamble, which emphasizes fraternity and unity. The court further emphasized that such legislation risks encouraging other states to enact similar laws, thereby threatening the unity and integrity of India.
The court underscored that the State cannot compel private employers to adhere to restrictions that the State itself is prohibited from imposing under the Constitution. It highlighted that the Act undermines the fundamental rights of citizens residing in other states, treating them as inferior to Jharkhand’s residents, which goes against the spirit of equality. Additionally, the court noted that the implementation of the Act would undermine the competitive edge of private employers by limiting their ability to recruit skilled workers from across India.
Balancing the petitioners’ concerns with public interest, the court observed that penalizing employers under Sections 9 to 12 would cause irreparable harm and disrupt business operations. It stated that the balance of convenience lies with the petitioners and ruled that the implementation of the Act be stayed until further orders. This interim relief, granted on December 11, 2024, ensures that no penalties or coercive actions will be initiated against private employers under the Act until the case is adjudicated. The matter has been listed for the next hearing on January 31, 2025.
Arguments of Both Sides:
The petitioners contended that the Act violates fundamental rights guaranteed by the Constitution, particularly Articles 14, 19(1)(g), and 21, which protect equality, the right to carry on trade or business, and the right to life and personal liberty. They argued that the law is discriminatory as it prioritizes local candidates over skilled workers from other states, undermining the competitive hiring process. The petitioners also expressed concerns about coercive notices issued by the state authorities, which demanded compliance reports and threatened penal action for non-compliance. They emphasized that the financial penalties imposed under the Act are excessive and would severely harm small and micro industries.
On the other hand, the State of Jharkhand defended the Act, asserting that it aims to provide job opportunities to local candidates and address unemployment in the state. The State argued that the legislation is a necessary affirmative action policy to promote local economic growth and ensure that local resources benefit Jharkhand residents. The State maintained that the law does not entirely prevent the hiring of candidates from other states but only seeks to balance the workforce composition in favour of local candidates for lower-salaried positions.
Court’s Judgment:
In its interim order, the Jharkhand High Court found merit in the petitioners’ arguments, holding that the Act prima facie appears to be unconstitutional and discriminatory. The court observed that the legislation restricts the rights of private employers to hire from the open market, thus violating their fundamental right to carry on trade or business under Article 19(1)(g). It further stated that such restrictions are unjustifiable in a free-market economy, where businesses must have the autonomy to select their workforce based on merit and skill.
The court also emphasized that the Act’s implementation would undermine the principle of single citizenship and fraternity as envisioned by the Constitution. It noted that treating citizens from other states as inferior to residents creates artificial barriers and promotes division rather than unity. The court warned that if such laws were enacted across states, it would jeopardize national unity and integrity, contrary to the constitutional goal of fostering harmony.
The bench highlighted the importance of preserving the balance between affirmative action and constitutional rights. While acknowledging the State’s intent to promote local employment, the court stated that such measures cannot infringe on the rights of other citizens or the autonomy of private employers. The judgment underscored that penalizing employers through financial penalties for non-compliance with the Act would cause irreparable harm and disrupt business operations, particularly for small and micro industries.
Based on these considerations, the court stayed the implementation of the Jharkhand State Employment of Local Candidates in Private Sector Act, 2021, until further orders. It directed the state authorities not to take any coercive action against private employers under the Act and listed the matter for further hearing on January 31, 2025.