Employment Law Newsletter: Moonlighting – December 2022
Moonlighting also known as ‘dual employment’ is a concept where an employee works for more than one employer at any given point in time. Moonlighting as a concept has always attracted divided opinions. In the recent past, especially after the pandemic, quite many organisations have started to come across cases of moonlighting.
Recently, ‘moonlighting’ related debates have again gained momentum in the labour market especially after the tech majors declared ‘moonlighting’ as an unacceptable practice unless done with prior consent for the primary employer. Considering that work from home had become a norm in majority of the workplaces (especially IT industry) during the COVID-19 pandemic, the graph of moonlighting cases has seen an upward trend given less or no surveillance on the day-to-day activities of an employee working remotely.
We have closely analysed the concept of ‘moonlighting’ after several of our clients’ reported cases of dual employment. Shockingly, one of our clients reported a case where an employee was engaged with as many as 20 organisations simultaneously without obtaining any authorisation from the employer. Such practice puts a big question mark on the integrity of an employee and business interest of an employer.
Moonlighting poses a direct threat to the business interests of an employer, such as:
- The confidential information and IP of the employers are put to threat and misuse.
- Time theft by employees and misuse of resources of one employer for benefit of other or for personal gains.
- Employees who moonlight tend to underperform and less focused towards their work (especially the primary employer) which results overall reduction in productivity.
We will explain the legal position of ‘moonlighting’ or ‘dual employment’ in India, the way forward and the essential safeguards that an employer needs to take to prevent an unfavourable situation.
In India certain labour laws recognize the concept of ‘dual employment’ such as:
- Section 60 of the Factories Act, 1948 (“Factories Act”) states that “no adult worker shall be required or allowed to work in any factory on any day on which he has already been working in any other factory, save in such circumstances as may be prescribed”.
- Entry 8 of Schedule 1-B of the Industrial Employment (Standing Orders) Central Rules, 1846 (“SO Rules”) states that “workman shall not at any time work against the interest of the industrial establishment in which he is employed and shall not take any employment in addition to his job in the establishment, which may adversely affect the interest of his employer”.
- Section 9 of the Delhi Shops and Establishment Act, 1954 (only applicable to establishments in Delhi) prescribes a direct restriction on dual employment and states that “no person shall work about the business of an establishment or two or more establishments or an establishment and a factory in excess of the period during which he may be lawfully employed under the Act.”
Further, the issue of dual employment was also discussed in Manager, Pyarchand Kesarimal Ponwal Bidi Factory vs. Omkar Laxman Thange and Ors., wherein the hon’ble Supreme Court held that the general rule in respect of relationship of master and servant is that if a subsisting contract of service with one master is a bar to service with any other master unless the contract otherwise provides or the master, consents.
Furthermore, in Dashrath Ramlal Garandwal and others vs. Ahmednagar Forgings Ltd., Aurangabad it was held that one employee can have only one employer and further that double employment is an act of misconduct. A similar view was also observed in M. Neelakanda vs.The Presiding Officer, Labour Court (II Additional District Judge), Puducherry.
Accordingly, in absence of a blanket ban on ‘dual employment’ in India, unless prohibited by a written contract or applicable law, it will be inferred that it has been allowed by an employer. Therefore, we recommend that an employer documents this understanding and prohibit moonlighting clearly and unambiguously in the contract of employment.
If an employer is desirous of hiring a consultant and has no objection to such consultant providing service to multiple organizations parallelly, then it is advisable to such understanding about the non-exclusive relationship accurately in the contract of engagement.
Treatment of Prohibition on Dual Employment under Section 27 of the Indian Contract Act, 1872
As per Section 27 Indian Contract Act, 1872 (“Contract Act”) every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is, to that extent, void. Therefore, question arises whether prohibiting an employee from moonlighting or working with another employer during the course of his employment with the primary employer, is allowed under Section of 27 of the Contract Act or not.
In Niranjan Shankar Golikari vs. The Century Spinning and Mfg. Co. Ltd. it was ruled that a restraint by which a person binds himself during the term of his agreement directly or indirectly not to take service with any other employer or be engaged by a third party has been held not to be void and not against section 27 of the Contract Act. Similar view was observed in Superintendence Company of India (P) Ltd. vs Krishan Murgai wherein hon’ble Supreme Court of India held that agreements of service, containing a negative covenant preventing the employee from working elsewhere during the term covered by the agreement, are not void under Section 27 of the Contract Act, on the ground that they are in restraint of trade. Such agreements are enforceable.
Further, in Ambiance India Pvt. Ltd. vs. Naveen Jain the Delhi High Court stated that during the subsistence of one’s employment, the employee may be compelled not to get engaged in any other work or not to divulge the business/trade secrets of his employer to others and, especially, the competitors.
Therefore, such prohibition on moonlighting in the contract of employment will not be void under Section 27 of the Contract Act given that it is a reasonable restriction to protect the interest of the employer.
Way Forward and Essential Safeguards
As moonlighting is not explicitly prohibited for all sectors in India, employers need to think carefully on how they structure their employment related documentation and policies to avoid undue exposure and incur losses.
An employer can take the following safeguards to ensure that its employees are not involved in moonlighting practices:
Specific Clause in Contract of Employment:
Unless expressly prohibited by an employer, moonlighting will be deemed allowed. Therefore, it is pertinent to include a clearly worded and watertight clause in the contract of employment to safeguard the rights of the employer.
Dedicated Policy on Moonlighting:
Having a dedicated policy will help the employees understand what amounts to moonlighting, what is allowed, what is NOT allowed, consequences of moonlighting, measures to be taken by employees etc. Such policy will help in clear communication of intent of the employer to the employee.
Conduct Periodic Background Checks:
Usually employers conduct background verification only at the time of initial recruitment process. However, it is recommended to conduct background checks of employees at regular intervals to ensure that the employees are not indulging in moonlighting. It is also recommended to get a declaration on annual basis (or such other preferred frequency) from all the employees stating that they are not indulging in moonlighting or any other parallel activities in the course of his/her employment.
Keep a Check on PF Account:
Every employee has a UAN (Universal Account Number) linked to their provident fund (PF) account and the details of all employers who make contributions in such employee’s PF account automatically get reflected on the portal (including both past and current). Therefore, an employer may periodically check the PF account of an employee to see how many employers he/she is getting contributions from. Provided, this safeguard can only be taken for employees because the employees taking side gigs NOT as employees or as consultants, freelancers etc. or the ones who do not receive any PF contribution, will not be tracked by the PF account.
Ask for Exit Documentation from Previous Employer:
Unless, an employee is a fresh hire, at the time of initial recruitment procedure, an employer shall always ask for exit documents (such as relieving letter, exit letter, service and experience certification or separation and release agreement etc.) from an employee of his/her previous employment. Further, an employer after receiving such documents shall also take appropriate steps to check the veracity of such documents to ensure that the employee is not submitting forged documents.
For the employers who allow remote work, it is recommended for them to make their employees maintain proper timesheet/worksheet reflecting their daily work to keep a check on how they use their official working hours.
Observe Behavior and Performance of Employee:
Intermittent availability, avoiding work on one or the other pretext, not performing as per the acceptable standards of the employer, delayed response, giving excuses to declare their ongoing engagement with an employer on a social media platform such as LinkedIn, are some of the common behavioral patterns observed of an employee indulging dual employment. Therefore, an employer should look for such red flags and take appropriate measures to conduct an inquiry on such matters.
Periodic Training and Awareness Session:
To ensure that the employees understand the policies, far and near, it is important for an employer to conduct periodic training and awareness sessions for the employees.
SELF-ASSESSMENT QUESTIONNAIRE FOR EMPLOYERS
- Does your organisation allow moonlighting? If not, does your organisation specifically prohibit it?
- Does your organisation have an anti- moonlighting policy?
- Do you ensure that an employee does not engage in dual employment without your consent? If yes, how?
- Does your employment agreement or appointment letter specifically prohibit/allow moonlighting?
- If you find your employee moonlighting, what steps do you take?
- Do you engage gig workers/consultants? If yes, do you allow them to moonlight?