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The Trending Moonlighting Era: Reflecting the light for a New Perspective

Legacy > Chamunda Ropeway Project Concessionaire  > The Trending Moonlighting Era: Reflecting the light for a New Perspective

The Trending Moonlighting Era: Reflecting the light for a New Perspective

To read the article on Legal 500,  click here

“It all started with a second pandemic, and the moon kept shining thereon”

The year 2020 became infamous for several reasons and the most significant one being the Covid-19 pandemic that led to never-ending, exhausting, and draining lockdowns. These lockdowns not only gave a glimpse into what an apocalypse may appear like but also put an embargo on usual social interactions and confined individuals to their homes by hindering their access to the outside world. Under such unprecedented circumstances, the economy was dwindling and fading away into the melancholy and void created by the continuous lockdowns. The series of unpleasant events created an altogether different scenario for corporates/ businesses and necessitated the need of a revival where it became necessary to discover and adapt to new ways for carrying on their business activities in a smooth manner to ensure that continuity in business was maintained and the turnover of such businesses could pick up.

After much contemplation and deliberation, the global business scenario saw a transition to the work-from-home (WFH) model on a large scale. The WFH model brought around a revolution and created an immensely positive impact  on a significant fraction of conglomerates, including the likes of Alphabet Inc. (Google), Tata Steel, Amazon, Microsoft, Twitter, Facebook, etc., which made a full-fletched adaptation to the WFH model, thereby closing their actual physical offices indefinitely.

In the long term, the WFH model had a lot of advantages for employers, including cost-effectiveness with regard to the rent and lease expenditure, as well as a supposed decrease in the requirement of human resources. The WFH model equally benefitted employees, who could cut down on their transportation/fuel costs and were able to carry out their duties from their homes or dwelling places.

However, amongst all the apparent advantages of the WFH model, one of the most significant disadvantages of the WFH model was the ability of the employee to work freely, without hinges, for more than one employer. This ability led to the employees being easily able to violate the conditions of ‘exclusivity’ that formed an integral part of their employment contracts.  Such a way of working simultaneously for more than one employer was named ‘moonlighting’, a term with an ancient origin but a technologically elaborated meaning.

The practice of moonlighting emanates primarily from financial insecurities. Through this way of working, employees, majorly the ones working in Information Technology (IT) and IT-based sectors, were able to work simultaneously for two or more companies by simply carrying out multi-tasking on two laptops at concurrent hours, with the primary employer being unable to gauge that such employee was engaged in two employments at one time.

The laws of India do not define ‘‘moonlighting’’, but they do control the concept of “dual or double employment” to some extent. For instance, the Factories Act, 1948; the Industrial Employment (Standing Orders) Central Rules, 1946 (Industrial Rules); and the Delhi Shops and Establishments Act, 1954 regulates dual employment. The aforementioned laws apply to “Workmen” as defined under the Industrial Disputes Act, 1947 and have no applicability on the set of employees working as professionals or in supervisory or administrative positions or those excluded from the purview of the aforesaid Acts. It may be noted that there is no overreaching law prohibiting dual employment or moonlighting in the IT sector.

In light of such limited enforceability, the need for updating laws in line with the technological and necessary work requirements with the inclusion of moonlighting in the form of a new statute or a provision in a pre-existing law is now being gradually felt across the spectrum of labour and employment laws.

Standard Employment Contracts and the Loopholes Within

Even without the reprise of moonlighting, the generic employment contracts in India consist of various clauses pertaining to the rights and obligations of employees accruing during their period of employment. These clauses include the terms pertaining to leaves, bonuses, working hours, performance duties, compensation, etc. While most of these employment agreements do not contain an express provision/ clause stipulating a ban on moonlighting per se, yet, most employment agreements do have a similar clause, which prohibits “dual employment” and endeavors to establish an exclusivity over the skills of the employees. An inference to the said clause may be drawn from the example given below:

“The employee agrees that during the employment period, he/she shall devote his/her full business time to the affairs of the Company, in question, and shall perform all the duties assigned to him/her with utmost faith and efficiency, and shall endeavor, to the best of his/her abilities, to achieve the goals and adhere to the parameters set by such company. That the employee further agrees that during his employment period he/she shall not work for any other employer and shall maintain confidentiality with respect to the affairs of the Company”.

When examined in light of the flexibility granted by the WFH model, the above clause, particularly during the pandemic coupled with other factors such as wage reduction/ lay-offs, had apparently not served the purpose and thus appeared to be ineffectual and technically weak in preventing the moonlighting.  Under the garb of the WFH model, such a clause facilitated a considerable number of employees the advantage of utilizing their off-duty hours by taking up work either during the weekends or after clocking out of their shifts.

Although, this manner of working for two employers/companies simultaneously, reflected blatant illegality, it remained unhinged due to its presence behind the closed doors of Covid-19 which locked individuals in their houses for a substantial period. The reality came into the limelight after several companies like Wipro became aware that their employees were working for a competitor company, which ultimately led to the company’s decision to lay off such employees. Following the stringent decision undertaken by Wipro, companies like Infosys followed suit and sounded a strong opposition to the idea, thus, in turn taking a crystal clear stand over their tolerance towards moonlighting.

Dual Employment and Moonlighting: Overlapping Contractual Legality

As may be inferred from a mere perusal of the aforementioned provisions contained in various enactments under the spectrum of  “Labour and Employment” laws, labour legislations seek to attain an exclusivity over individuals while they are effectively employed at an establishment. Contrary to this position, Section 27 of the Indian Contract Act, 1872 stipulates that all agreements by which any one is restrained from exercising a lawful profession, trade, or business of any kind, are void to the extent of such restraint. In line with the aforesaid statutory provision, it was argued in various cases before several Indian courts that a clause in employment agreements prohibiting “dual employment” demanded exclusivity and therefore, was against the provisions of the Indian Contract Act, 1872.

However, such line of arguments have been now and again negated by various Courts, including the Hon’ble Supreme Court of India, in various cases. In the case of Niranjan Shanker Golikari vs. Century Spinning & Manufacturing Company Ltd., [1], the Hon’ble Supreme Court of India, while dealing with the issue of ‘exclusive service provisions’ vis-à-vis the Indian Contract Act, 1872 has held that,

“A negative covenant that the employee would not engage himself in trade or business or would not get himself employed by any other master for whom he would perform similar or substantially similar duties is not a restraint of trade unless the contract as aforesaid is unconscionable or excessively harsh or unreasonable or one-sided”

A similar view was taken by the Hon’ble High Court of Bombay in the case of V.D. Deshpande vs. Arvind Mills [2], while dealing with the clause pertaining to dual employment. In this case, the Hon’ble Court held that,

“An agreement to serve exclusively for a week, a day, or even for an hour necessarily prevents the person so agreeing to serve, from working during that period for anyone other than the person with whom he has so agreed. It can hardly be contended that such an agreement is void.”

Furthermore, in 2016, the Hon’ble Punjab and Haryana High Court, in the case of Gulbahar vs. Presiding Officer & Anr.[3] upheld the termination of employment of a driver on the ground of his engagement in double employment in two different institutions at the same time.

A Uniform Approach

Although controversial, the practice of “moonlighting” has an equal amount of advantages and disadvantages, with the same being sparingly recognized by employers worldwide. Such inconsistency in recognition has resulted in varying acceptability across different nations. For example, the stance taken by several companies in the United States of America supported moonlighting on the ground that similar work arrangements were already legally permitted, which could be gathered from their tax assessment regulations.

Even in India, companies like Swiggy and Tech Mahindra have allowed their employees to moonlight to the extent that their work at their former/ parent establishments is not hampered in any manner. On the other hand, a major fraction of the multinational companies including, Wipro, Tata Consultancy Services are completely against the idea of permitting moonlighting mainly because of the concerns as to data protection.  In fact, these multinational companies have termed the practice as a blatant “cheating” of employers by employees.

Thus, owing to such varied approaches to the concept and practice of “moonlighting”, there is a dire need for a uniform law based on a sound understanding of “moonlighting” to approve or disapprove of the practice by employers. The possibility of implementing such a practice could be explored only after enforcing some specific prohibitions, including the prohibition of working with a direct competitor of the employer.

It is however, needful to note that exclusivity of employment has been the norm in India, as has already been discussed in light of the various statutory provisions and considering the position under the Indian Contract Act, 1872. It is also needful to reiterate that moonlighting has been thrown into the spotlight only in recent years after the working conditions and wages of employees were severely questioned in furtherance of the increased market costs.

Owing to all aforementioned contentions, perhaps a uniform approach towards limited banning of certain aspects of moonlighting, with the permissions for the remaining conduct, may be considered to be reasonable enough to be accepted by the employers. Such an approach may include prohibition of the previously discussed occupation with a competitor along with certain other limitations which may seek to define the following:

  • The range of other activities which may be allowed;
  • The range of employees who may be permitted to work for another employer;
  • The manner in which such moonlighting has to be disclosed to maintain transparency with the establishment in question; and
  • The signing of a non-disclosure agreement which shall preclude the employee from disclosing trade secrets.

While such a skeleton of the policies may not be exhaustive, it may give an inference of how any policy that seeks to cover moonlighting may be drafted, whereby the ultimate result would include contempt on both sides.

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