Constitutionality of State Residence Reservation – UPSC GS2

Context: The Supreme Court will be hearing a petition to remove the stay on the Haryana State Employment of Local Candidates Act.
Haryana State Employment of Local Candidates Act
  • The Act reserves 75% of jobs in the private sector in the State for local residents.
  • The Act applies to jobs that pay up to ₹30,000 per month, and employers have to register all such employees on a designated portal.
  • The Government may exempt a few industries and has exempted new start-ups and new Information Technology Enabled Services (ITES) companies, along with farm labour, domestic work, and promotions and transfers within the State.
Similar acts in other states
  • The Jharkhand State Employment of Local Candidates Bill, 2021
    • Every employer shall fill up 75% of the total existing vacancies by local candidates to such posts where the gross monthly salary or wages are less than ₹40,000.
  • A.P. Employment of Local Candidates in Industries/Factories Act
    • The Andhra Pradesh law, passed by the Assembly in July 2019, reserved 75% of jobs for locals in industries and factories, including any joint venture and project taken up under the public-private partnership (PPP) mode.
Constitutional questions arising from these Acts:
  • Against Article 19(1)(g)
    • Article 19(1)(g) of the Constitution guarantees freedom to carry out any occupation, trade or business.
    • Reasonable restrictions include public interest, and in particular related to specifying any professional or technical qualifications, or to reserve a sector for government monopoly.
    • These Acts, by imposing private businesses to reserve 75% of lower-end jobs for locals, encroach their right to carry out any occupation.
  • The provision of reservation based on domicile or residence is unconstitutional
    • Article 16 of the Constitution provides for equality of opportunity for all citizens in public employment. It prohibits discrimination on several grounds including place of birth and residence.
    • However, it permits Parliament to make a law that requires residence within a State for appointment to a public office.
    • This provision is for public employment and not for private-sector jobs and the law needs to be made by Parliament, and not by a State legislature.
  • The questions on 75% reservation
    • In the Indra Sawhney case in 1992, the Supreme Court capped reservations in public services at 50%. However, it said that there may be extraordinary situations that may need relaxation in this rule.
    • Telangana, Rajasthan and Maharashtra have passed Acts that breach the 50% limit.
    • Recently a Maharashtra Act was struck down by the Supreme Court on grounds of breaching the 50% limit which said “to fulfill the objective of equality”, and that to breach the limit “is to have a society which is not founded on equality but on caste rule”.
Important judgements by the Court:
  • M.A. Pai Foundation case, 2002: The Supreme Court stated that private educational institutions have autonomy in their administration and management.
  • P.A. Inamdar case, 2005: S.C. said that reservation cannot be mandated on educational institutions that do not receive financial aid from the state, as that would affect the freedom of occupation.
  • The Supreme Court, in 2002: Said that preference given to applicants from a particular region of Rajasthan for appointment as government teachers was unconstitutional. Further added that reservations can be made for backward classes but this cannot be solely on account of residence or domicile.
  • In 1995, Rules in Andhra Pradesh that gave preference to candidates who had studied in the Telugu medium were struck down on grounds that it was discriminatory against meritorious candidates.
Against Equality:
  • The Haryana Act is against the notion of equality of all citizens of India.
  • The Haryana Act is about private sector employment and is questioned that any reservation requirement imposed on the private sector should not be higher than the limits on the public sector.
  • The Constitution conceptualises India as one nation with all citizens having equal rights to live, travel and work anywhere in the country. These State laws go against this vision by restricting the right of out-of-State citizens to find employment in the State.
  • The restrictions also affect the right to reside across India as finding employment becomes difficult.
The act is against the ideal enshrined in the Constitution and will have social as well as adverse economic implications on society. The courts along with looking at the fundamental rights perspective, should also look at whether these Acts breach the basic structure of the Constitution that views India as one nation which is a union of States.