Summary: Moonlighting, or dual employment, involves individuals taking on additional jobs outside their primary employment hours. In India, this practice has gained traction, especially with the rise of work-from-home policies during the pandemic. People moonlight for various reasons, including financial stability, career change, and personal fulfillment. However, it raises concerns for employers regarding confidentiality, productivity, and compliance with employment agreements, often leading to termination if such clauses are violated. Indian labor laws do not explicitly prohibit moonlighting, but certain provisions under the Factories Act, 1948, and other specific laws regulate dual employment. Judicial precedents have generally supported the termination of employees for moonlighting if it conflicts with their primary employment terms. Internationally, the approach varies, with the US and EU having specific regulations allowing for multiple employments under certain conditions. The debate on moonlighting continues, balancing the interests of employers and the rights of employees in a changing work environment.
Page Contents
Understanding Moonlighting: Meaning and Concept
Moonlighting, also known as dual employment, is a term used to describe when an individual takes on two full-time roles, usually after the regular working hours of their primary job.[1] There are various reasons why individuals may choose to moonlight, such as seeking additional income, advancing their career, exploring entrepreneurial activities, finding job satisfaction, diversifying their skill set, networking, repaying debts, or reaching specific financial goals.[2]
In India, moonlighting is often seen as a way to supplement income and enhance skills, especially among certain skilled employment categories. The concept has gained momentum, particularly with the introduction of ‘Work-From-Home’ (“WFH“) policies during the pandemic. Different companies have responded to this trend in various ways.[3] However, moonlighting has been more prevalent in the unskilled sector due to job insecurity and low wages. The motivations behind moonlighting vary across different sectors of the labor market.[4]
Currently, there are few active provisions that explicitly prohibit moonlighting. However, many companies use contractual restrictions to prevent their employees from engaging in moonlighting.[5] Employment agreements often include clauses that forbid employees from taking up other employment during their term of employment. Consequently, employees caught moonlighting in such companies could face termination for breaching the terms of their employment.[6]
It’s important to note that while “moonlighting” and “dual employment” are often used interchangeably, they are not always the same. Dual employment typically involves a formal employer-employee relationship with legal obligations such as minimum salary, provident fund, gratuity, etc.[7] On the other hand, moonlighting may involve a second job entirely, or even just side projects or freelance work that the primary employer may not be aware of. Examples of moonlighting include doctors working in private clinics after hospital hours, professors providing private tuition, and professionals taking on part-time freelance work.[8]
Moonlighting can raise concerns for employers regarding the protection of their interests, especially if the employee works for a competitor or if their work productivity is affected. Employers also have valid concerns about issues like confidentiality, non-compete agreements, intellectual property ownership, and participation in employment social benefit schemes such as those covered by the Employees’ State Insurance Act of 1948[9] or the Employees’ Provident Funds and Miscellaneous Provisions Act of 1952,[10] which may be impacted by moonlighting. At times, moonlighting is also referred to as “over-employment.”[11]
Why does Moonlighting Occur?
Moonlighting, often criticized as unethical and a threat to company productivity and policies, can be better understood when viewed from the perspective of those engaged in dual employment. Here are some reasons why individuals might choose to moonlight:
1. Plan B / Additional Income Sources: Having a backup plan or an additional source of income is a wise step towards financial stability and a secure future, as any financial expert would advise. The global economy has faced challenges unseen since World War II, leading to job losses and pushing many to the brink of poverty.[12]
In September 2022, India’s unemployment rate, according to the Centre for Monitoring Indian Economy, was 6.50%.[13] In urban areas, it reached 7.70%, while in rural regions it stood at 6.00%. In such circumstances, it is natural for people to seek backup plans.[14]
2. Layoffs: Layoffs occur when employees are temporarily or permanently discharged from a company. Massive layoffs have become a common occurrence in today’s economy. Reports indicate that more than 15,000 employees have been laid off this year, including in unicorn start-ups like BYJU and Meesho.[15] Such events create economically and mentally vulnerable situations, leading employees to seek second jobs they can rely on in case of layoffs.
3. Career Change: Individuals looking to change their career paths often take on a second job to gain familiarity with the new industry. If someone lacks formal background in their desired field, they may moonlight in a related job to gain the experience needed for better opportunities later on.[16]
They can continue working in their current job while exploring side jobs or freelancing opportunities in their desired industry.[17] Many use moonlighting as a way to gain the experience required for lucrative employment in their desired field.
4. Passion/Creativity: Sometimes, an employee’s primary job becomes monotonous and mundane, affecting both productivity and mental well-being. To break away from the routine tasks and infuse some passion and creativity into their work life, employees take on jobs that interest them.[18]
Moonlighting, despite its criticisms, often serves as a lifeline for individuals navigating uncertain economic landscapes. It offers a sense of security, a path for career growth, and a means to pursue passions outside of the main job.
Why is Moonlighting a Problem?
Moonlighting, the practice of employees taking on secondary jobs outside of their primary employment, has sparked varied opinions within the IT sector. Some tech companies strongly condemn moonlighting, labeling it as cheating and a breach of the employee-employer contract. They argue that it poses a threat to privacy and confidentiality.[19]
Others criticize moonlighting for its potential harm to employee productivity, which could ultimately affect a company’s overall productivity. A July survey by Kotak Institutional Equities of 400 employees in the IT & ITES industry found that “65% were aware of individuals seeking part-time jobs or moonlighting while working from home.”[20]
This trend seems to have been exacerbated during the COVID-19 era when remote work was widespread, and many people were facing financial challenges.[21]
Wipro recently terminated approximately 300 employees for their involvement in moonlighting. This move aligns with a broader trend in IT services firms taking a firm stance against staff engaging in secondary employment beyond regular working hours.[22] Wipro’s chairman, Rishal Premji, commented on the decision, stating, “Wipro does not condone employees working directly with competitors while remaining on the company’s payroll.”[23]
The concerns raised by Wipro are not unique, with IBM also issuing warnings against moonlighting, describing it as a “complete violation of integrity.”[24] However, not all companies oppose this trend. Swiggy, for instance, introduced an “industry-first Moonlighting policy” in August 2022. [25] This policy allows employees to take on supplementary projects outside of their regular working hours, with projects categorized into two groups: high-sensitive professional endeavors (List A) and non-professional projects aligned with personal interests and hobbies (List B).[26]
These recent events have reignited the ongoing debate about balancing employer interests with the rights and welfare of employees in today’s workforce. Major IT firms, such as TCS, Wipro, and Infosys,[27] have announced delays or reductions in variable payouts for the first quarter of FY 2023 due to decreased margins. As a result, moonlighting among employees is expected to increase further.[28]
ANALYZING LEGALITY OF MOONLIGHTING IN INDIA: A THREE-FETTERED APPROACH
Moonlighting, the practice of employees taking on secondary jobs outside of their primary employment, is not explicitly defined or prohibited by Indian legislation. However, certain practices resembling moonlighting are regulated to a limited extent by various specific laws.
Indian law does not provide a clear definition or address dual employment. However, Section 27 of the Indian Contract Act, 1872[29] prohibits the inclusion of a non-compete clause in employment contracts. This clause prevents employees from starting their own business or accepting offers from competitors, thereby restricting them from competing with their employer or leaking confidential information during or after employment.[30]
Accepting dual employment could be seen as violating the non-compete clause in an employment contract.[31] Nevertheless, the legal stance on this issue in India is not entirely settled. Some regulations related to dual employment include:
- Factories Act, 1948 (Section 60): This law restricts employees of a factory from engaging in double employment in India while already working in a factory.[32]
- Delhi Shops and Establishments Act, 1954 (Section 9): Employees are restricted from working in two or more establishments beyond the period they are lawfully employed under this legislation. While this provision appears to restrict dual employment, it could also be interpreted as a restriction on overtime work, as it is tied to the period during which an employee may legally work.[33]
- Industrial Employment (Standing Order) Rules, 1946 (Schedule I-B): These rules restrict workers from taking up any employment that may prejudice the interests of the industrial establishment where they are employed.[34]
- Draft Model Standing Orders for Service Sector, 2020 (Clause 22): Although these model standing orders are not yet notified under the Industrial Relations Code, 2020, they state that a worker should refrain from working against the interests of their employer’s establishment. The clause specifies that a worker should not take up any other employment that could adversely impact their employer’s interests. However, a worker may engage in additional employment, with or without conditions, after obtaining permission from their employer.[35]
The new labor codes seem to acknowledge the reality of the industrial sector, where workers often engage in dual employment, particularly in establishments with gig workers.[36] These regulations and laws aim to balance the interests of employers and employees in the evolving landscape of modern employment practices.
Judicial Precedents on Moonlighting
In numerous instances, Indian courts have upheld the termination of employees for engaging in moonlighting or dual employment. One significant case is Niranjan Shankar Golikari v. The Century Spinning & Mfg. Co.,[37] where the Supreme Court upheld a non-compete clause in an employment contract. This clause prevented an employee from joining a competitor of their employer during the term of the contract. The court emphasized that a negative covenant can be enforced only if it is reasonable and not excessively harsh or one-sided.[38]
Similarly, the High Court of Punjab and Haryana supported the dismissal of an employee for moonlighting in the case of Gulbahar v. Presiding Officer.[39] The Bombay High Court, in Manubhai Gorbhandas v. Arvind Mills Company,[40] held that the dismissal of a factory worker for double employment under Section 60 of the Factories Act, 1948 was reasonable.[41] The court reasoned that the worker was depriving the employer of their best services by working two jobs, as it is humanly challenging to maintain the same level of quality and efficiency continuously for long periods.
The Kerala High Court, in P.A. Kunjumuhammed v. Sub Inspector of Police and Others,[42] also restricted moonlighting. Additionally, in M. Neelakandan v. The Presiding Officer, Labour Court (II Additional District Judge),[43] the courts upheld a circumstance where a company’s approved standing orders explicitly prohibited simultaneous employment, viewing it as misconduct.
Courts have recognized moonlighting as wrongdoing that could render any relief null and void if proven beyond a reasonable doubt. For example, in Manager, Pyarchand Kesarimal Ponwal Bidi Factory v. Omkar Laxman Thange and Others,[44] the Supreme Court observed that “the general rule regarding the relationship between an employer and an employee is that an existing employment contract with one employer prevents simultaneous employment with another, unless the contract stipulates otherwise or the employer gives consent.
Regarding the Supreme Court’s decision, the Madras High Court, in Government of Tamil Nadu v. Tamil Nadu Racecourse General Employees Union,[45] ruled that “there may not be any prohibition against having dual employers if the employment contract specifies otherwise or if the employer consents.” The Delhi High Court, in Wipro Limited v. Beckman Coulter International SA,[46] held that non-solicitation clauses imposing a duty upon the employee to not disclose and solicit clients are permitted.
However, there is a contradiction between these legal perspectives and Article 21 of the Indian Constitution, which includes the right to life and personal liberty.[47] The right to life has been interpreted broadly to include the right to livelihood, as seen in the case of Board of Trustees of the Port of Bombay v. Dilipkumar Raghavendranath Nandkarni.[48] The court concluded that “the right to life” guaranteed by Article 21 encompasses “the right to livelihood.”[49] These two perspectives of the court inherently contradict each other, presenting a complex legal landscape surrounding moonlighting in India.
Moonlighting: Present Position
In recent times, moonlighting has become more prevalent as a side effect of the pandemic, prompting various companies across industries to adopt different approaches to address this issue. Publicly available information suggests that some companies have allowed employees to take on additional projects or designated certain roles as ‘side gigs’ within the organization, outside of regular business hours, to facilitate skill development. On the other hand, some companies have taken a strict stance against dual employment, leading to the termination of employees found to be moonlighting, citing a breach of their contracts.
Confidentiality, non-compete agreements, ownership, and assignment of intellectual property, as well as contributions to employment social benefit schemes under acts like the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952,[50] or the Employees’ State Insurance Act, 1948,[51] are significant concerns for employers when dealing with employees engaged in dual employment. These areas present grey areas and legitimate worries for employers.
Certain companies have already implemented measures to address these concerns. They regulate how employees may engage in dual employment by:[52]
- Demarcating projects that require approval and those that do not, primarily based on economic considerations and the area of business.
- Requiring strict adherence to confidentiality and non-compete obligations, ensuring that the additional project does not affect the employee’s performance or attendance.
- Treating violations of dual employment terms as misconduct, which could result in disciplinary action or termination, depending on the severity of the violation.
These measures aim to balance the interests of both employers and employees while addressing the complexities surrounding moonlighting in the modern workplace.
ANALYSIS OF MOONLIGHTING POLICIES IN INTERNATIONAL JURISDICTIONS
United States of America:
In the United States, moonlighting is a common practice, particularly among lower-class workers, and it constitutes a significant portion of the labor market.[53] While most federal employees are not subject to specific moonlighting clauses at the federal level, there may be varying regulations at the state level.[54]
For example, in California, the Labor Code section 96 is often used to penalize workers who engage in moonlighting, with some exceptions.[55] These exceptions may include prohibitions on illegal activities, using company resources or time for moonlighting, poor job performance due to lack of sleep, disclosing trade secrets, or having conflicts of interest. Section 16600 of the California Business and Professions Code also provides for similar provisions.[56] Similarly, the District of Columbia clearly prohibits companies from preventing current employees from working for another employer concurrently.[57] In contrast, the state of Washington generally prohibits employers from restricting workers who make less than twice the state minimum hourly wage from working multiple jobs, being self-employed, working as independent contractors, or supplementing their income with another job.[58]
Empirical research conducted in the U.S., such as the study “Understanding Alternative Work Arrangements” by American economists Lawrence F. Katz and Alan B. Krueger published in 2019, shows an increase in the percentage of multiple job-holders.[59] The study found that the percentage rose from 39% in 2013 to 77% in 2018. Data collected from the tax department also indicates that a majority of the workforce is engaged as independent contractors, contract workers, temporary help agency workers, and on-call workers.[60]
European Union:
In 2019, the European Directive on Transparent and Predictable Working Conditions (the “Directive”) was adopted.[61] This Directive includes new guidelines for working for other firms in addition to one’s primary employment, along with various measures aimed at providing employees with more stable and secure working conditions.
Under this Directive, EU member states are required to ensure that an employer cannot forbid a worker from working for themselves or for another business outside of their scheduled working hours. [62]
United Kingdom:
In the United Kingdom, there are no specific restrictions on holding multiple employments, and such situations do not typically affect payroll status.[63] Moonlighting in the UK must also be understood in the context of the “Working Time Regulations,” which establish a 48-hour workweek cap.[64] Additionally, the law prohibits exclusive zero-hour contracts that restrict workers from seeking additional work elsewhere.[65]
MOONLIGHTING THE PATH AHEAD
Future Challenges of Moonlighting
The legal position on moonlighting in India currently prohibits non-compete clauses, which implies that moonlighting is often seen as a violation of employment contracts. However, legal experts argue that this prohibition unjustly interferes with individuals’ liberty in entering contracts and affects trade. The Law Commission of India, in its 13th report in 1958, recommended reviewing Section 27[66] to include reasonable restrictions, indicating a need for a nuanced approach.[67]
Moonlighting could potentially be permitted if there were well-defined policies regarding the nature of agreements employees can enter into during and post-employment. This would provide clarity for both employers and employees and help in regulating moonlighting activities.
Moonlighting: Path Forward
Moonlighting has become increasingly prevalent, particularly due to the work-from-home model adopted during the COVID-19 pandemic.[68] This trend has normalized the practice among Indian professionals. The absence of concrete legislation has left companies grappling with its implications. Judicial precedents in India generally support employers’ actions against moonlighting, emphasizing the need for employees to seek authorization for secondary employment.
Internationally, moonlighting policies vary. In the United States, it is common with some state-specific regulations, while Europe has adopted directives to provide employees with more stable working conditions.[69] The UK places restrictions on working hours and zero-hour contracts.[70]
Dealing with moonlighting is complex for companies. The absence of concrete laws can lead to mismanagement and chaos, potentially impacting the economy. There is a need for effective laws to regulate moonlighting while protecting fundamental rights.
As moonlighting continues to grow, companies and policymakers must find a balance that respects both employer interests and employee rights. Legislative measures could provide clearer guidelines and protections in India.
Considerations for Employers
In the meantime, it is essential for employers to define their stance on moonlighting in their HR policies. Companies can adopt a moonlighting policy based on their nature of service and employment conditions. Some steps employers can take include:[71]
- Contractual Protection: Incorporate suitable contractual provisions in employment terms, such as non-compete clauses, which are enforceable during employment.
- Vigilance: Employers should track employees’ performance, invest in cybersecurity, and create awareness among employees, especially for companies dealing with sensitive data.
- Moonlighting Policy: If allowing moonlighting, implement a policy outlining approvals and projects employees can undertake. The policy should mandate transparency and ensure adherence to confidentiality and non-compete obligations.
These measures would enable regulated moonlighting while protecting company interests. More organizations are likely to adopt such policies as the need for skilled labor or gig workers rises.
Note:-
[1] Moonlighting, Cambridge Dictionary, https://dictionary.cambridge.org/dictionary/english/moonlighting ,
[2] Natasha Mahajan, Dual Employment Or Moonlighting In India – Contract of Employment – India, Mondaq (Apr. 13, 2023), https://www.mondaq.com/india/contract-of-employment/1304076/dual-employment-or-moonlighting-in-india.
[3] Work From Home During the COVID-19 Outbreak: The Impact on Employees’ Remote Work Productivity, Engagement, and Stress, PubMed Central (PMC), https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8247534/ (last visited Mar. 10, 2024).
[4] Ibid.
[5] Supra, note 1.
[6] Supra, note 1.
[7] Supra, note 3.
[8] Supra, note 1.
[9] Employees’ State Insurance Act of 1948 (India).
[10] Employees’ Provident Funds and Miscellaneous Provisions Act of 1952 (India).
[11] Explained: What is moonlighting and if it’s legal in India – Times of India, The Times of India, https://timesofindia.indiatimes.com/business/india-business/explained-what-is-moonlighting-and-is-it-legal-in-india/articleshow/93704728.cms (last visited Mar. 12, 2024).
[13] Unemployment rate surges to 7.77% in Oct against 6.43% in Sept: CMIE, The Economic Times, https://m.economictimes.com/news/economy/indicators/unemployment-rate-surges-to-7-77-in-oct-against-6-43-in-sept-cmie/articleshow/95274073.cms (last visited Mar. 8, 2024).
[14] Supra, note 13.
[15] Legal positing on moonlighting in India – The Leaflet, The Leaflet – An independent platform for cutting-edge, progressive, legal, and political opinion., https://theleaflet.in/legal-positing-on-moonlighting-in-india/ (last visited Mar. 8, 2024).
[16] Supra, note 2.
[17] Supra, note 1.
[18] Explained: What is moonlighting? Is it ethical to do more than one job in India?, Live Mint, https://www.livemint.com/news/india/explained-what-is-moonlighting-is-it-ethical-to-do-more-than-one-job-in-india-11661748291458.html (last visited Mar. 12, 2024)..
[19] Supra, note 12.
[20] Home – International Journal of Innovative Technology and Exploring Engineering (IJITEE), https://www.ijitee.org/wp-content/uploads/papers/v8i7s2/G10350587S219.pdf (last visited Mar. 10, 2024).
[21] Supra, note 2.
[22] Divya Bhati, Wipro fired 300 people for moonlighting, INDIA TODAY (2022), https://www.indiatoday.in/technology/news/story/wipro-fired-300-people-for-moonlighting-how-did-the-company-catch-these-employees-2284309-2022-10-12.
[23] Ibid.
[24] IBM India warns employees against moonlighting, says its violation of trust, BusinessLine, https://www.thehindubusinessline.com/info-tech/ibm-india-warns-employees-against-moonlighting-says-its-violation-of-trust/article66057305.ece (last visited Mar. 10, 2024).
[25] Priyanka Praveen, Swiggy’s new policy enables employees to pick up gigs outside the company, SWIGGY DIARIES (2022), https://blog.swiggy.com/2022/08/03/swiggys-new-policy-enables-employees-to-pick-up-gigs-outside-the-company/.
[26] Ibid.
[27] Aakanksha Cahturvedi, Why majors Infosys, Wipro, and TCS are scaling back on variable payout, BUISNESS TODAY (2022), https://www.businesstoday.in/latest/corporate/story/why-it-majors-infosys-wipro-and-tcs-are-scaling-back-on-variable-payout-345309-2022-08-23.
[28] Ibid.
[29] Indian Contract Act, 1872, § 27, Acts of Parliament (India).
[30] Ibid.
[31] Supra, note 2.
[32] The Factories Act, 1948, § 60, Acts of Parliament (India) < https://labour.gov.in/sites/default/files/factories_act_1948.pdf >
[33] The Delhi Shops and Establishments Act, 1954, § 9, (India) < https://www.indiacode.nic.in/bitstream/123456789/13587/1/delhishopsnestablishmentsact.pdf >
[34] The Industrial Employment (Standing Orders) Act, 1946, Schedule I-B, Acts of Parliament (India) < https://labour.gov.in/sites/default/files/Industrial-Employment-Standing-Orders-Act-1946.pdf >
[35] Draft Model Standing Orders for Service Sector, 2020, Cl. 22 < https://labour.gov.in/sites/default/files/224080_compressed.pdf >
[36] New labor codes, < https://labour.gov.in/sites/default/files/labour_code_eng.pdf >.
[37] AIR 1967 S.C. 1098.
[38] Ibid.
[39] 2016 SCC OnLine P&H 2069
[40] (1956) IILLJ 554 Bom
[41] Factories Act, 1948, 60.
[42] (2019) 3 KLT 826.
[43] (2012) 3 CTC 170.
[44] AIR 1970 SC 823.
[45] 1993 ILLJ 977 Mad.
[46] AIR 1983 SC 109.
[47] The Constitution of India, Art 21.
[48] (1983) 1 SCC 124.
[49] The Constitution of India, Art 21.
[50] Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (India).
[51] Employees’ State Insurance Act, 1948 (India).
[52] Supra, note 2.
[53] Upjohn Research | W.E. Upjohn Institute for Employment Research Research, https://research.upjohn.org/cgi/viewcontent.cgi?article=1063&context=empl_research (last visited Mar. 12, 2024).
[54] Ibid.
[55] California Labor Code, § 96
[56] California Business and Professions Code Section, § 16600.
[57] Ban on Non-Compete Agreements Amendment Act of 2020, D.C. Law 23-209
[58] The Washington State non-compete law, 2020 < https://app.leg.wa.gov/RCW/default.aspx?cite=49.62 >
[59] National Bureau of Economic Research | NBER, https://www.nber.org/system/files/working_papers/w25425/w25425.pdf (last visited Mar. 8, 2024).
[60] Ibid.
[61] The European Directive on Transparent and Predictable Working Conditions, < https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32019L1152 >
[62] Ibid.
[63] Supra, note 15.
[64] The Working Time regulations (1998), No. 1833, The United Kingdom < https://www.legislation.gov.uk/uksi/1998/1833/made >
[65] Ibid.
[66] Supra, note 29.
[67] Thirteenth Law Commission, https://lawcommissionofindia.nic.in/report_thirteenth/ (last visited Mar. 10, 2024).
[68] Ban, regulate or look the other way? How IT firms are adapting to moonlighting | 5paisa, 5paisa, https://www.5paisa.com/blog/ban-regulate-or-look-the-other-way-how-it-firms-are-adapting-to-moonlighting (last visited Mar. 12, 2024).
[69] Supra, note 54.
[70] Supra, note 65.
[71] Supra, note 2.
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