Shaky law, unsound for investment in Karnataka Premium

The Karnataka Cabinet approved and then put on hold a Bill mandating reservation in private sector jobs for local residents. The Bill not only makes the State unattractive for investments, but may also violate the Constitution.

The Karnataka Cabinet approved and then put on hold a Bill mandating reservation in private sector jobs for local residents. The Bill not only makes the State unattractive for investments, but may also violate the Constitution.

The Bill defines a local candidate as anyone who was born in Karnataka, has been residing in the State for the last 15 years, and has studied Kannada as a subject at the secondary level or passed a language proficiency test. The Bill reserves half the seats at the managerial level and 70% at lower levels for all private sector establishments. It excludes State and Central government entities.

EDITORIAL | Wrongheaded policy: On the Karnataka jobs-for-locals bill

Bills that require reservation for locals have been passed in recent years by Andhra Pradesh (AP), Jharkhand, and Haryana. The AP (2019) and Haryana (2020) laws require 75% reservation for locals. Unlike the Karnataka Bill, these laws have quotas based solely on residency, and do not have a requirement of language proficiency. The Haryana law was struck down by the Punjab and Haryana High Court, while the AP law has been challenged in the Andhra Pradesh High Court. Jharkhand passed a Bill in 2023 requiring 100% reservation for locals in Class-III and Class-IV State government jobs, but has not implemented it yet.

The Karnataka Bill may breach the Constitution in four ways. First, requiring private sector entities to provide reservation may infringe upon their fundamental right to do occupation, trade, or business under Article 19(1)(g) of the Constitution. In two judgements — in 2002 (T.M.A. Pai) and 2005 (P.A. Inamdar) — the Supreme Court held that unaided educational institutions cannot be asked to implement reservation on any criterion except merit. It observed that establishing and administering an educational institution was an occupation under Article 19(1)(g), and thus protected from government interference. Subsequently, the 93rd Amendment to the Constitution allowed reservation for Scheduled Castes, Scheduled Tribes, and Other Backward Classes for education in private institutions. As this Amendment is restricted to admissions in educational institutions, the Karnataka Bill would infringe on the right to trade and business.

Second, Article 16(2) of the Constitution prohibits discrimination in public employment on the basis of residence. While Article 16(3) allows for reservation based on residence, this can be made only for public employment, and by a law made by Parliament and not the State Legislature. State laws providing reservation based on residence have been struck down by the Supreme Court in the past. For example, in 2002, the Court struck down provisions in Rajasthan for preferential employment of teachers from a particular region.

Third, the Bill may violate Articles 19(1)(d) and 19(1)(e) which provide every citizen the right to move freely, and reside and settle anywhere in India. This right implicitly (and read with the right to carry out an occupation) allows any citizen to work anywhere in India. The Bill would also violate Article 14 (right to equality) in two ways: it discriminates between residents and non-residents, and between those proficient in Kannada and others.