Challenges with Moonlighting by Employees in India

A Detailed Deliberation on Moonlighting

Moonlighting is undoubtedly the new hot topic that has got everybody talking, so here's a detailed legal deliberation on it.

Published on https://www.thinkbridge.com/blog-post/a-deliberation-on-moonlighting

August 30, 2024

Ankit, a CA by profession resides in the capital city of Delhi, and he works for one of the Big Four accounting firms. While he earns a seven-figure salary, he still decided to take up a side gig because well we all want more and more!

So for the past year, he has been slyly rendering his consultancy services and his clientele has increased steadily, but his employers have no idea about this. Ankit feels that there's no harm in making that extra income as he does his private consultancy work on weekends, whereas on weekdays, he ensures to put his best foot forward in his regular job.

And well this is where the new white-collar evil moonlighting seeps into the picture but is it really an evil? To understand that in a better way, let us delve into this pressing concern, and have a detailed deliberation whilst also checking upon the legal considerations moonlighting in the Indian work sphere.

What is Moonlighting ?

Moonlighting is the colloquial term that refers to the practice of employees soliciting and working a second job, in addition to their existing job. Therefore, an individual may have a regular 9-to-5 job wherefrom they draw their primary source of income, and in addition to this, they also hold another part-time job that takes place after their regular work hours, or maybe during the weekends.

While a handful of employers are fine with their employees moonlighting, a majority of employers usually condemn and strictly prohibit this practice. This is primarily due to conflict of interests, breach of fiduciary duty, violation of a company's policies and employment contract, and also misuse of an employer's resources.

It is interesting to refer to the findings of the survey that was conducted by the Kotak Institutional Equities where a whopping 65% out of the 400 individuals working in the IT and ITES space disclosed that they were either themselves or that they knew somebody pursuing part-time job opportunities, and thus moonlighting whilst working from home.

Organizations have divided opinions on moonlighting. Swiggy, a renowned food delivery platform, announced an industry-first moonlighting policy for its employees, allowing them to have a side-hustle. This policy is essentially available for all the full-time employees associated with Bundl Technologies, the parent company of Swiggy, including all of its subsidiaries, associate, affiliates, and other related group companies. On the contrary Rishad Premji, Wipro's executive chairman, termed moonlighting as plain "cheating" by employees. The organization went a step further and abruptly fired 300 employees who were secretly moonlighting for other companies. This sparked a big debate, and Premji received a lot of flak for firing his employees, but he stands strong by his decision, and now other IT companies such as IBM and Infosys have also hinted at taking stringent measures against their employees in order to deter moonlighting.

This controversial discussion on moonlighting has brought to the forefront the cardinal question of whether moonlighting is permissible under law. Mentioned below is a detailed overview of the Indian labor and employment laws regarding moonlighting, and also the contractual remedies that companies can use to diminish such practices.

Indian Laws on Moonlighting

Indian laws have not expressly defined the concept of dual or double employment. However, in the case of Manager, Pyarchand Kesarimal Ponwal Bidi Factory vs. Omkar Laxman Thange and Ors. (AIR 1970 SC 823), the Apex Court held that a subsisting contract of service with one master is an explicit bar to service with another master unless the service contract otherwise provides, or if the master renders his consent.

Furthermore, the Hon'ble Madras High Court in the case of Government of Tamil Nadu vs. Tamil Nadu Race Course General Employees Union (1993 I LLJ 977 Mad), referred to the ratio of the Apex Court judgment cited supra, and held that if in case the master consents, or if the contract otherwise provides, then there may not be any bar against dual employment.

Therefore, dual employment is very much permitted under Indian laws, but this is subject to the employment arrangement, and/or with the prior consent of the existing employers. The Industrial Employment (Standing Orders) Act, 1948 i.e. abbreviated as the IESO Act states the same.

Section 60 of The Factories Act, 1948 restrains an employer from enabling an adult worker to work in a factory on any day when he has already worked in any other factory. The Act imposes restrictions on the number of working hours, even though the Act does not explicitly explain the concept of double employment or state that the same is permissible. The legislation simply provides that an employer shall be barred from engaging an employee to work beyond stipulated working hours with regards to all his other employments with varied establishments.

It is pertinent to note that the laws cited above hold no sway in cases of certain establishments and categories of employees that are not covered under the same. For example, The Factories Act does not apply to IT companies in a few states. Similarly, employees working in restaurants, theaters, retail stores, public amusement parks, or entertainment facilities are governed by the Shops and Establishments Act, and this is different in each state.

Having said that, explicit contractual terms that bar dual employment are very much enforceable under Indian laws, and the Supreme Court has time and again upheld the validity of non-compete clauses in employment agreements that are very much operative during the tenure of an individual’s employment agreement.

Why Moonlight?

According to a report published in The Huffington Post, about one out of two Indians hold more than one job for extra income, and acquiring new skills.

Employees could be moonlighting simply to earn more and to have multiple sources of income, or to pay off any debts or fat medical bills. Also, some additional reasons can be a strong desire to master some new skills, or just because somebody wants to make better use of his time. Moonlighting can thus be an escape route to prevent disengagement, hone a skill set, develop one's passion whilst remaining productive, and on toes. However, moonlighting can take a toll on the mental and physical well-being of employees, and can often lead to extreme burnout. Furthermore, it can be alarming for an employer to lose out sensitive information, data, knowledge and technology to his fellow competitors.

 

Reasons Moonlighting Troubles Employers

Employers are usually averse to the practice of moonlighting and this is primarily because of the following reasons -

Security: It is probable an existing employee can intentionally or unintentionally reveal sensitive information about their organization, and this would indeed be disastrous for the company.

Inappropriate Use of Company's Resources: An employee may end up exploiting the company by rendering his professional services to other organizations while inappropriately using his existing employer's company resources. This thus benefits other organizations at the cost of an existing employer. (and )

Employees’ Health Depreciates: Well, employees too, are humans, not machines. These employees thus have a threshold beyond which they cannot function, and too many exhausting work hours is not a healthy practice. This is bound to make a person lethargic and experience fatigue, and this would in turn diminish the overall work productivity. Also, this would impact not just the performance of the employee, but also the entire company at large.

What To Do If Your Employees Are Moonlighting?

Mentioned below are five tips that would help you tackle moonlighting  -

Verify Your Findings

We can't stress enough how important it is to verify and authenticate your finding about an employee moonlighting prior to initiating an action against them. As an employer, you must double-check the information obtained and refrain from hurling frivolous accusations, especially if they aren’t even true.

Communication is the Key

Once you have confirmed that your employee is moonlighting, don't blow up with an avalanche of anger and hatred towards your employee. Instead, talk to your employee as communication is the key to assessing such situations. Make your employee feel comfortable and understand the reasons that led to them picking up a part-time job. Employees are one of the most valuable assets of an organization and so you must understand their point of view. Try to evaluate the situation from their perspective, thereby offering alternative solutions, if possible.

This would not only help address your concern regarding moonlighting, but would also help you instill a greater degree of loyalty, trust, and commitment in your employees.

Come to a Truce

If you feel that as an employer your organization would not be able to entertain moonlighting and that the employee would continue doing so, then please don't condemn him as he might have his own reasons. Instead, you should reach a mutual agreement. Also, make sure to draft and include explicit non-compete and security clauses in the employment agreement so as to deter your existing employees from moonlighting.

Evaluate Your Employee Performance

When all is said and done, it can be intolerable to witness poor results due to ebbing productivity levels. You must not turn a Nelson's eye to deteriorating productivity levels. Make sure to monitor your employee's performance in order to ascertain and evaluate if the work pressure of the second job is hampering their overall work performance, and thereby impacting the output of your organization.

Carefully Draft Your Employment Contracts

Organizations that want to restrain their employees from moonlighting should specifically prohibit such practices by stating the same in their employment contracts by way of an exclusivity provision, thereby stating that any breach of the same would tantamount to gross misconduct, and expulsion, if need be. Such an exclusivity clause must be carefully drafted in order to address two pertinent nuances. The first one being a clear prohibition from taking up any work during the duration of their employment with an organization, and not just during their work hours. An exclusivity clause that is operational only during an employee's work hours would enable them to accept other engagements after work hours. Secondly, the bar on all other engagements should extend to not just employment relations, but also to advisory and consultancy arrangements. This prohibition may be extended to shareholding and directorships etc. It is pertinent to mention that such prohibitions are very much valid and enforceable under law, and would thus bind your employees.

Solutions to Regulate Moonlighting

If, as an employer, you wish to permit moonlighting, then you must ensure that there is a well-defined policy within the extent of which your employees may be permitted to solicit and enter into other engagements. Important concerns that must be regulated under such a policy include the following :

Applicability on the Employees

Organizations may be apprehensive and could find it daunting to permit senior-level employees, KMP's, or the employees associated with confidential projects to have secondary professional engagements. Therefore, such a policy must clarify who all within an organization may or may not be permitted to enter into other work engagements.

Explain the Process

Transparency plays the most pivotal role in ensuring that the sanction to moonlighting is not misused or abused. Companies must explicitly clarify and shed light on the process by which their employees can solicit secondary engagements. It must be explained to all employees if they are required to officially obtain prior approval for dual engagements, or if they are just required to notify certain persons within the organization.

Nature of Secondary Engagement

Such a policy must set out the nature of secondary engagement that a full-time employee may undertake, and there must not be any conflict of interest in rendering their obligation to their employers. One golden key to nip the evil of moonlighting into the bud is to actually permit moonlighting that is not detrimental to a business concern. Accordingly, the scope of such permitted dual engagements and the extent of such dual employment commitments must be clearly stated.

Safeguarding the Proprietary Information

An express restraint must be imposed on employees with regards to divulging sensitive and confidential information of an existing employer as this is one of the most cardinal concerns of any employer who permits moonlighting.

Define the Type of Legal Relationship

If an individual is employed or associated with more than one organization, then it may lead to certain complications. Therefore, employers must specifically state the nature of the legal relationship that an individual holds with their organization, that is if the individual is working as a full-time employee or if he is associated as a consultant or if he is working on freelance basis.

It is only in recent times that moonlighting has erupted as a new evil in the white-collar world. However, it is not just a pursuit for better pay, but it allows individuals to explore their career options and be their professional best by sampling and honing their skills. The moonlighting debate is undoubtedly the loudest in the IT and software sector where it is easier for employees to work remotely, but the situation can be alarming for organizations as moonlighting can lead to proprietary information breaches. However, in several cases there are no negative consequences, and most employers have also acknowledged the rampant pervasiveness of moonlighting. In some cases, employers have gone a step further and have even accepted moonlighting as a part of the evolving employment landscape. If you are concerned that secondary engagements are deteriorating your employee's work performance, then it is in the best interest of your organization to implement a robust moonlighting policy so as to restrain your employees from taking up other work commitments.

Moonlighting is truly like a double-edged sword, and there's also no denying the fact that it is regressive to put your employees on a tight leash and control them even post their job hours. Furthermore, substantial evidence exists that exhibits how moonlighting helps organizations in terms of greater employee retention, enhanced employee skill set, larger networks, and stronger trust. Thus, it is also extremely important to exercise a certain degree of caution whilst implementing any kind of aggressive anti-moonlighting policy.

Now, we’ve taken you down the rabbit hole of moonlighting in India, but what about in other countries? Are the policies similar? Are the laws the same? These questions among many others will be answered in a future blog where we explore the world of moonlighting in the United States. To find that upcoming blog along with our other content, keep an eye on our insights page where we delve into all sorts of subject matter that may pique your interest.