Human resources. What the law says on moonlighting

The long-standing debate around moonlighting — an informal expression for having a second job secretly — has intensified in recent times after Wipro fired several employees on these grounds.

Some employers are curtailing work-from-home facility to ensure employees work exclusively for them on their premises. These developments call for some serious thinking. Prime Minister Narendra Modi recently emphasised the need for flexible work practices. Recent changes to labour legislation also highlight how gig workers are specifically recognised under the new labour codes (yet to be brought into force).

Employers may differ in their views and approach to moonlighting. Under Swiggy’s moonlighting policy, for example, the employer’s consent is required if the additional project is highly sensitive and leverages professional know-how. However, it is different if an employee is pursuing an interest or hobby.

Central government employees are explicitly restricted from engaging in certain activities but are allowed to undertake honorary work of a social or charitable nature, occasional work of a literary, artistic, or scientific character, or participate in sports activities as an amateur without the permission of the government.

However, the government may ask the member(s) to discontinue such activities at any time.

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Indian laws do not define ‘moonlighting’. However, the laws mentioned below regulate dual or double employment to a certain extent.

The Factories Act, 1948, restricts an employer from requiring or allowing an adult worker to work in the factory on any day on which they have already been working in another factory. The restriction under the Occupational Safety, Health and Working Conditions (OSH) Code is broadly similar to the one prescribed under the Factories Act and is limited to dual employment in a mine or factory.

The Industrial Employment (Standing Orders) Rules, 1946, prescribes additional items applicable to all industries, which provide that a workman shall not work against the interest of the industrial establishment and shall not take any additional employment that may adversely affect the interest of their employer.

The draft model standing orders under the Industrial Relations (IR) Code contain a similar restriction; however, the employer may, at their discretion, permit the worker to take up an additional job or assignment with or without conditions.

The above laws have limited application as they do not cover certain establishments and categories of employees.

Legal take

Employees of retail stores, restaurants, theatres, and other public amusement or entertainment facilities, information technology, and information technology-enabled services are governed by the Shops and Establishments Act. This is different in each state. For example, dual employment is prohibited by the Delhi Shops and Establishments Act, 1954.

The Supreme Court, while deciding the eligibility of an LIC employee for the membership of a local authority, observed that the restriction is not on the candidature for election but on the nature of employment itself.

The court further observed that if the employee participates in local administration or other elections, they may well have to forfeit their position as a government servant if handling two positions affects their efficiency. They might also be subject to disciplinary action.

The High Court of Punjab and Haryana upheld the termination of employment of a driver who had engaged in dual employment.

Moonlighting may also be coupled with other issues such as a conflict of interest, breach of confidentiality and/or proprietary information, competition, solicitation of co-employees or vendors, compromise of intellectual properties, and attrition.

These issues expose businesses to higher risks, and the appropriate process to protect business interests should be in place. Regarding the legality of these concerns, Indian courts have recognised non-compete restrictions during the employment period. Also, the confidentiality of information and intellectual property of an employer is protected under Indian laws. Non-solicitation covenants are enforceable to the extent they are reasonable.

Way forward

Companies must identify the activities of employees they intend to permit beyond work hours. If the job is exclusive, it should be mentioned in the employment contract. Companies should also consider having robust employment contracts and HR policies that clearly define the terms of employment, including the obligations and restrictions on employees, and what would constitute ‘misconduct’ necessitating disciplinary action. However, any action by the employer should be fair and reasonable to ensure it is upheld by the courts.

Furthermore, moonlighting may be considered unethical if an employee’s contract includes non-compete clauses and exclusive employment, as is the case with the vast majority of traditional employment contracts.

If employment contracts do not include this clause or provide exceptions, it may not be considered a breach of confidence or trust by the employees.

(The writer is Partner, King Stubb & Kasiva, a law firm)