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The Employee Moonlighting Dilemma

Moonlighting” laws restrict an employer’s ability to take adverse employment decision against an employee who works for a different employer outside his regular work hours if the ancillary employment does not compete or interfere with such employee’s ability to adequately perform his primary job.

In India, certain statutory provisions provide for exclusive service and impose restrictions on double employment such as the Delhi Shops and Establishments Act, 1954, the Factories Act, 1948, and the Industrial Employment (Standing Orders) Central Rules, 1946. Further, restrictive covenants in employment contracts which are intended to operate during the subsistence of an employee’s employment are also enforceable under the Indian laws. Hence, the contractual provisions against moonlighting will be enforceable by employers against a defaulting employee.

In 2016, the Central Government enacted the Model Shops and Establishments Act, to revise the regulatory norms for operating offices and commercial establishments in India. Following this, several States amended their State-specific Shops and Establishments Act to modify the local law requirements in their respective jurisdictions. However, Maharashtra was the first State to repeal and reenact its State-specific Shops and Establishments Act. With this repeal and reenactment, the statutory restriction on double employment under the Bombay Shops and Establishment Act was omitted.

Amongst the labour law reforms that are in the pipeline, the Occupational Safety, Health and Working Conditions Code, 2020 imposes a restriction on double employment in a factory and mine. However, the draft Model Standing Orders for the Services Sector, 2020, which will be applicable to the IT sector too, while retaining the provision on “exclusive service” goes a step ahead by enabling workers to take up an additional job/assignment with their employer’s prior permission and subject to conditions, if any, imposed by their employer.

Job quality and pay issues may, over a period, lead to reduced levels of job satisfaction and loyalty in full-time employees. Such dissatisfied full-time employees become vulnerable and are more likely to fall for opportunist white-collar gig jobs. On the other hand, the entities offering white-collar gig jobs may be oblivious to the job status of their recruits, given that they are saved from having to hire and train freshers as these new recruits, who may be full-time employees of another entity, already have the expertise of quality and trained manpower.
The employer perspective on the issue of moonlighting remains divided. Whereas some regard it as cheating/deceitful and, therefore, unethical, others do not see much harm, provided that the freelance project, or second job, does not impact the full-time employee’s productivity or involve cross-leveraging of confidential data. Consequently, based on business requirements, including confidentiality and intellectual property rights (IPR) issues, an emergence of company policies that are either restricting moonlighting and dismissing defaulting employees from service, or allowing their employees to take up internal or external gigs, is being observed.

Authored by the Minu Dwivedi – Partner, JSA.