Draft for discussion only

12.10.2022

Moonlighting: Legal and Ethical Aspects

Working a second job outside of typical business hours constitutes moonlighting. A 9-to-5 job may be
an employee's major source of income, but he or she may also work nights for additional cash.
Employer policies surrounding moonlighting may apply to employees of private businesses. Some
employers may not want their employees to work for other companies, while others may not care. In
July, Kotak Institutional Equities polled 400 IT&ITES sector experts and discovered that 65 percent
were aware of individuals pursuing part-time employment or moonlighting while working from
home. 
One of the first examples of moonlighting in India was discovered when HRS tracked the provident
fund accounts of a Bengaluru resident with seven jobs. When the IT director of a huge Mumbai-based
company rejected repeated invitations to go to work, his co-workers discovered that the official email
was being used to transmit massive files to a competitor. A forensic investigation showed that he got a
new job at the IT company without leaving.

Twelve of the developers employed by a multinational company with a Bengaluru office were found
to be moonlighting. However, instead of being fired, they were encouraged to become contractual
employees. They were required to work 40 hours a week on new computers with more stringent
standards. However, they were granted autonomy in their jobs.

Ethical or not?

The concepts of ethics and morality are related. While some perceive moonlighting as unethical,
many view it as an increasing trend and a need in the modern workforce. With the help of modern
technology, assistive devices and software, and expanding Internet access, job productivity has
increased, lowering the time required to complete ordinary tasks. This enables competent and hard-
working individuals to pursue alternative options. It should not be a problem if an IT expert teaches
yoga in the morning or tutors in the evening to earn extra money, or if he or she assists a friend in
developing business-required software. This act of aiding a friend is moral from the aspect of
friendship but may be unethical from the perspective of the employer. The majority of the worry
focuses on employees who are confined to a single company and have identical responsibilities. This
raises questions about the integrity of their job requirements. It is a misdemeanour to abandon one's
principal job responsibilities in favour of another task, but it is a crime to commit a breach of trust,
fraud, misuse of confidential materials, or data theft. Similarly, when firms suddenly lay off hundreds
of employees, do ethics and morality matter? Is it morally permissible to hire and fire based on
fluctuating business cycles? Therefore, analysing morality and ethics from a narrow vantage point is
difficult and dangerous.

Legality

Moonlighting is not fully outlawed in India. Adult manufacturing workers are forbidden by Section
60 of the Factories Act of 1948 from simultaneously holding two jobs. According to section 2(s) of
the Industrial Disputes Act 1947 or section 2(0) of the Industrial Relations Code 2020, a "worker" is
any individual employed in a corporation to labour for such remuneration, whether the terms of
employment are implicit or explicit.

When a service certificate is issued to an employee pursuant to the Industrial Employment Standing
Order Act of 1946 (which also applies to the IT and ITES sectors), it indicates that the employee was
fully employed from the date of joining jobs until the agreed date of employment and not for eight
hours per day. Section 65 of the Bombay Shops and Establishment Act says that neither the worker
nor the employer can work while the worker is on yearly leave. Regarding legality, it is derived from
or conforms to the employee-employer agreement. In India, dual employment is prohibited by the
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Factories Act. The same holds true for numerous corporations and government agencies. However, if
the contract contains no restrictions on multiple employment, it is the employee's responsibility to
accept a manageable second job in accordance with the terms of the contract and without breaching
any conditions.

Statutory status under the laws governing employment

Regarding prohibitions on the practise of "moonlighting," the following labour law legislation bans
multiple employment through specific provisions:

 The Factory Act of 1948 (the "FC Act")

According to Section 60 of the Fair Labour Standards Act, an adult worker cannot be required or
permitted to work in a factory on the same day that he works in another industry.

 The Delhi Shops and Establishments Act (India), 1954 (the "Delhi S&E Act").

Section 9 of the Delhi S&E Act stipulates that no person may work for an establishment or two (two)
or more establishments or an establishment and a factory beyond the period during which he may be
lawfully employed under the terms of the Delhi S&E Act.

 The Industrial Employment (Standing Orders) Act of 1946 (the "Standing Orders Act") and the
Industrial Employment (Standing Orders) Central Rules of 1946 ("Central Rules")

Clause 8 of Schedule I-B of the Central Rules contains a provision regarding "exclusive service",
which states that a worker shall never work against the interest of the industrial establishment where
he is employed and shall not accept additional employment that could be detrimental to the
employer's interest.

 The 2020 Industrial Relations Code (yet to be implemented)

To give effect to the Industrial Relations Code, 2020 once it has been notified, the Ministry of Labour
and Employment published a draught of Model Standing Orders for the Service Sector, 2020 ("Draft
Rules") containing a provision related to "exclusive service" prohibiting workers from accepting
additional employment that could be detrimental to the employer's interests. But the above
requirements leave room for an exception that lets an employee get permission from their employer
before taking on extra work.

Work Contractual Obligations Can Be Enforced

Despite the fact that the aforementioned labour law statutes contain specific provisions restricting
double employment, these laws may not apply to a specific establishment or industry, and certain
employees employed by an establishment, such as those with managerial or supervisory
responsibilities, may be excluded. Therefore, in many situations, employees are primarily governed
by the provisions of the employment contract they sign with their employers. These clauses are vital
to the resolution of a dispute between an employer and an employee.

Common Moonlighting Policies and Non-compete clause

However, the aforementioned laws do not apply to professionals or individuals in managerial or

administrative roles. In the IT industry, there is no rule forbidding dual employment or excessively
broad side activities. But putting these kinds of limits in employment contracts could be a breach of
trust when people work in similar positions.
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Employers may view moonlighting as unethical if a worker's contract contains non-compete and
single-employer clauses. It is not cheating, however, for employment contracts to include or exclude
such limits. Before taking on a side job or starting a business, employees should look at their
employment contract and make sure they follow any moonlighting rules. The Factories Act prohibits
simultaneously employing workers. Certain states do not apply this rule to IT companies. Before
taking on side jobs or starting a business, employees should check with their main employer to make
sure they are following any moonlighting policies.

Although moonlighting is legal, many employers place restrictions on it. Numerous businesses
incorporate moonlighting provisions into employee contracts to protect themselves against the risks
associated with moonlighting. By inserting these clauses, companies have the legal rationale to
regulate employees' side jobs. These rules hold workers accountable and make sure that their
secondary jobs don't get in the way of their main jobs. On-compete provisions are the most common
form of moonlighting policy. This sort of agreement prohibits an employee from working for a
competitor of the company during and after employment. This clause protects companies by
prohibiting employee disclosure of sensitive information to competitors. Non-compete provisions
benefit businesses by prohibiting employees from leaving for a position with a competitor, thus
allowing employers to derive greater value from excellent employee training.

Other company limitations that prohibit moonlighting include no second jobs, no independent
employment, and advance notice. Each of these policies provides a corporation with some degree of
control over the conduct of its employees. A corporation may enforce a no-secondary-employment or
no-self-employment policy in order to maintain employee loyalty. When an employee has a second
job, their performance may deteriorate at both jobs. Employers ensure that they receive the highest
quality of work from their workers by regulating secondary employment and self-employment.
However, some employers require in employment contracts that employees notify them before
accepting additional work. This gives the firm control over an employee's moonlighting behaviour
and allows them to decline the employee's moonlighting request if they anticipate complications.

Frequently, businesses impose intellectual property restrictions. Variable in scope, intellectual

property clauses often assign ownership of concepts to either the employer or the employee. Even if
an individual has a second job, these regulations ensure that the organisation keeps ownership of the
intellectual property he or she creates. Even though some employment contracts ban moonlighting,
some employers encourage their workers to take on extra work as long as it doesn't get in the way of
their main job.

What Self-Protection Options Do Employers Have?

Many businesses may not perceive "moonlighting" as a significant danger, yet it is crucial for
employers to ensure that such practises do not violate corporate policy, hinder employee productivity,
violate confidentiality responsibilities, or raise conflict-of-interest concerns. Due to the rise in
popularity of "moonlighting," businesses may need to reconsider their current employment
agreements with employees and revise their corporate rules. To prevent employees from participating
in such behaviour, the covenants governing exclusive service, non-compete, non-solicitation, and
confidentiality duties must be re-examined and revised with the utmost care.

The primary problem with moonlighting is that it is difficult for employers to determine which
employees are partaking in it. To monitor employee actions and identify any suspicions of
"moonlighting," businesses may consider implementing tight cybersecurity policies and processes.
The severity of a worker's breach of the cybersecurity system will determine whether he or she is
issued a warning or terminated. Also, companies can look at the information in the provident fund
accounts of the relevant employees to see if they are getting money from another company.Employers
who accept the concept of "moonlighting" may permit the practise on an institutional level by
forbidding employees from engaging in direct competition, exposing secret information to
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unauthorised individuals, and using company laptops or equipment while performing a second job.
Employers can make it a rule that employees need to get written permission from management before
working on any extra job, task, or project while they are employed.

Opinion of the Court Concerning Dual Employment and Restrictive Covenants

The Supreme Court of India and a number of high courts have examined the issues of duplicate
employment and restrictive covenants in employment contracts at length. Several significant Supreme
Court and High Court decisions are discussed in the following section.

 In Niranjan Shanker Golikari vs. Century Spinning & Manufacturing Company Limited, the
Supreme Court looked at exclusive service clauses in employment contracts and decided that
"negative covenants operative during the period of the employment contract during which the
employee is bound to serve his employer exclusively are generally not seen as restraints of
trade, and therefore do not fall under Section 27 of the Contract Act."
 In V.D. Deshpande v. Arvind Mills, the Bombay High Court ruled that an individual who
undertakes to serve for a week, a day, or even an hour cannot work for anybody else during
that period. It is difficult to establish that a contract of this type is invalid. "
 In Gulbar v. Presiding Officer, the Punjab and Haryana High Court upheld the firing of a
driver who worked for two different companies. They did this by looking at the pay stubs that
the defendant corporation brought as proof.
 In Wipro Limited v. Beckman Coulter International S.A., the Delhi High Court said that
"negative covenants coupled with positive covenants during the subsistence of a contract,
whether of employment, partnership, commerce, agency, or the like, would not normally be
seen as restraints of trade, business, or profession unless they are unconscionable or wholly
one-sided."

An investigation of legal statements

Employers have the authority, as acknowledged by Indian courts, to protect their economic interests
by imposing restrictive covenants such as non-compete, non-solicitation, and exclusive service during
employment time. During and following employment, employers can enforce confidentiality and trade
secret duties. Additionally, as demonstrated by legal precedents, the courts have adopted a balanced
stance and acknowledged the perspective of employers imposing stringent restrictions and enforcing
negative covenants in employment contracts to exert overall control and supervision over an
employee during employment. According to the rules set by the Indian courts, moonlighting is a
conflict of interest and a clear violation of contracts that say you can't work for anyone else or
compete with your current employer.

Way forward

To protect the interests of both companies and employees, moonlighting concerns must be addressed
with urgency. Employers may do so by incorporating suitable contractual provisions into the terms of
employment, hiring freelancers whose work is performed on a "pay as you go" basis, adopting such
policies where an employee may be allowed to work for another company on the condition that the
primary employer be informed about the secondary employment, being vigilant about the protection
of their rights by tracking and motoring their employees' performance levels, investing in bet-the-
company programmes, and so forth. In addition, companies must address concerns that compel
workers to take up a second job by offering comparable compensation, desired working
circumstances, and employment contracts that are favourable to workers. At the government level, it
is necessary to have clear legislative standards for dealing with grey areas' ambiguity. Such alterations
could make moonlighting appear to be one of the most advantageous alterations to the employment
market in the near future.