OVERVIEW OF THE HARYANA STATE EMPLOYMENT OF LOCAL CANDIDATES ACT, 2020
In order to ensure the vision of an unemployment free State by the year 2024 and to make the youth of the state employable by training them and promoting skill education,[1] the Haryana government enacted the Haryana State Employment of Local Candidates Act, 2020 (“Act”) which has come into force since January 15, 2022.[2]
The Act applies to all the companies, societies, trusts, limited liability partnership firms, partnership firms and any person employing ten or more persons. (“Employers”)[3] operating within the territory of the state of Haryana. As per the Act, 75% of the total employees[4] who receive gross monthly salary or wages less than INR 30,000 shall have to be local candidates[5]. All Employers need to register their enterprise on the designated portal[6] by acquiring a Haryana Udhyam Memorandum (HUM) Identification Number. The Government has also made the residency (domicile) requirement to 5 years for a person to obtain a residency certificate.
Key Compliances
| Sr. No. | Particulars | Compliance | Penalty |
| 1) | Registration through the designated portal | Employers are mandatorily required to register all their employees receiving a gross monthly salary or wages of not more than INR 30,000[7] through the designated portal by the April 15, 2022 (within three months from the date of notification of the Act). Until this registration process is completed, the employer cannot employ or engage any other person[8]. | If the Employer does not complete the registration process within the designated time period, a minimum penalty of INR 25,000 which can be extended to INR 1,00,000. For every day of continuing non-compliance, the Employer may be fined up until INR 500 for each day till the date of compliance[9]. |
| 2) | Ensuring hiring 75% of local candidates and process for claiming exemption | Employers is required to fill up 75% of the posts in the enterprise with Local Candidates for positions wherein the salary or wage is below INR 30,000 per month. The employer is allowed to employ 10% of the total employees from a certain district.[10] | The minimum penalty is INR 50,000 and can extend up to INR 2,00,000. For every day of continuing non-compliance, the Employer may be fined up until INR 1,000 for each day till the date of compliance.[11]
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| Application for exemption: In cases where the adequate number of local candidates are not available for a certain desired proficiency, skill, or qualification, the Employer can file an application for exemption to the designated officer[12]. The designated officer at this discretion, may either accept or reject the Employer’s claim for exemption or direct the employer to train local candidates to achieve the desired/required skill, qualification, or proficiency.[13] | If the Employer fails to obey the order of the designated officer, a minimum penalty of INR 10,000 which can extend up to INR 50,000 may be imposed by the designated officer. Further, For every day of continuing non-compliance, the Employer may be fined up until INR 100 for each day till the date of compliance.[14] | ||
| 3) | Furnishing and maintenance of quarterly reports | The Employer is required to furnish and upload a quarterly report of the local candidates employed and appointed during each quarter on the portal within 20 days of the following quarter. Furthermore, it is required to maintain the said records in digital form in case of an inspection by the authorities.[15] | Failure to comply may lead to a minimum penalty of INR 10,000 which can extend up to INR 50,000. Further, For every day of continuing non-compliance, the Employer may be fined up until INR 100 for each day till the date of compliance.[16] |
4) Penalty for falsification of records and documents: Any person who falsifies records or documents in relation to compliance under the Act shall be punished with a penalty of up until INR 50,000 for the first offence. For the second offence, the penalty shall be a minimum of INR 1,00,000 and may extend up until INR 5,00,000.
5) Offences by Companies: Under the Act, every director, manager, secretary or agent or person involved in the management of the company may be deemed to be guilty for an offence under the Act, unless they can prove that such an offence was committed without their knowledge or consent.
6) Offences by LLPs: Under the Act, every partner, partners or designated partner shall be guilty of an offence under the Act, unless they can prove that such an offence was committed without their knowledge or consent.
7) Offences by Societies and Trusts: Under the Act, every person involved in the business of the society or trust, shall be deemed to be guilty of an offence under the Act, unless they can prove that such an offence was committed without their knowledge or consent.
8) General Penalty: If any of the provisions mentioned in the Act or the Haryana State Employment Local Candidates Rules are not complied by the Employer, a minimum penalty of INR 10,000 which may extend up to INR 50,000 may be imposed. For every day of continuing non-compliance, the Employer may be fined up until INR 100 for each day till the date of compliance.[17]
The Haryana government has granted deemed exemption to certain categories of employers from the applicability of the Act in a recent order[18]. Amongst other categories, a notable exemption is for new startups and new IT/ITES for a period of 2 years from the date of the commencement of the Act.
Takeaways
The Act imposes significant burden on Employers as well as officers of Employers in terms of compliance and also imposes penalties within the range of INR 10,000 to INR 5,00,000 for a few offences. This Act although passed with the intention of ensuring jobs for the youth of the state, shall have a significant impact on the burgeoning startup ecosystem in metropolitan areas like Gurugram. This Act may have an adverse impact on investments into the startups operating out of the state of Haryana.
If you have any questions about the above mentioned, please contact Vivek Balakrishnan, Principal Associate, Inventus Law, India at vivek@inventuslaw.in, or Dhaval Mehta, Associate, Inventus Law, India at dhaval@inventuslaw.in.
Disclaimer: This Memo is being provided for information purposes only and is drafted entirely on the basis of public resources. Information contained on or made available herein is not intended to and does not constitute legal advice, recommendations, mediation, or counselling under any circumstance. This information and your use thereof do not create an attorney-client relationship. You should not act or rely on any information provided herein without seeking the advice of a competent advocate licensed to practice in your jurisdiction for your particular business.
[1] Press Releases, CHIEF MINISTER OFFICE HARYANA (Jan 17, 2022, 14:35 P.M), https://haryanacmoffice.gov.in/06-november-2021-0.
[2] Haryana Government Notification No. Lab/25467/2021 on November 6, 2021.
[3] Section 1(5) of HSELC Act, 2020
[4] As per HSELC Rules, Rule 2(1)(c), “employee” means any person employed by the employer on payment of salary or wages or any other remuneration, but does not include an apprentice engaged under the Apprentices Act, 1961
[5] Section 2 (g) of HSELC Act, 2020
[6] Portal may be accessed at http://harudhyam.edisha.gov.in/
[7] Haryana Government Notification No. Lab./25478/2021 on November 6, 2021.
[8] Section 3 of HSELC Act, 2020
[9] Section 11 of HSELC Act, 2020
[10] Section 4 of HSELC Act, 2020
[11] Section 12 of HSELC Act, 2020
[12] Section 2 (c) of HSELC Act, 2020
[13] Section 5 of HSELC Act, 2020
[14] Section 13 of HSELC Act, 2020
[15] Section 6 of HSELC Act, 2020
[16] Section 10 of HSELC Act, 2020
[17] Section 10 of HSELC Act, 2020
[18] https://local.hrylabour.gov.in/uploads_new_2/notifications/Exemption%20order.pdf
