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Moonlighting: A Boon or A Bane

A Q&A with Pooja Ramchandani and Kriti Kaushik




Pooja Ramchandani heads the labor and employment law practice at Shardul Amarchand Mangaldas & Co, a law firm in India.

Pooja has dedicated her focus to providing expert advisory solutions for matters related to employment and labor laws. She has successfully led and advised various multi-nationals and large corporations on matters relating to closures, employee stock options, integration issues emanating from mergers, business transfers, industrial disputes, strikes, employment policies, key and non-key employment contracts, confidentiality agreements, disciplinary proceedings, general compliances under the employment and labor laws, etc., over the years across various sectors.

Kriti Kaushik is a partner at Shardul Amarchand Mangaldas & Co. and provides solutions for the employment, labor, and benefits practice.

Kriti specializes in advisory relating to compensation, benefits, and executive engagement. She focuses on providing sound strategic solutions to both domestic and international clients across sectors on matters relating to the structuring of employee benefits and incentives in terms of regulatory, policies, and advisory; benefits analysis and harmonization; share-based benefits and incentives; executive engagement structures, restrictive covenants, and executive exit strategies including separation plans, pay-outs, and risk mitigation.   

What is the simplest way to understand the term moonlighting?

Ramchandani: Moonlighting is the practice of taking up more than one job at a time or having a side hustle along with the main job. It is typically done to create an extra flow of income in addition to the regular pay received from the main job. A moonlighter will generally do the second job/gig over the weekends or outside their regular working hours. Such a side gig, however, may not always lead to double employment. In some cases, the employees could take up freelance assignments, consultancy work, etc., which are not structured as employer-employee arrangements. Either way, the second job is not supposed to impact the work obligations in the primary position. Moonlighting, however, becomes an issue when the side gig is connected closely or is similar to the work performed in the primary job.

What has set the moonlighting trend in motion in India?

Ramchandani: This trend has picked up in the last two years because of organizations' remote work or work-from-home policies during the COVID pandemic. The absence of a constant vigil that comes with a physical workspace has given considerable flexibility to individuals to pursue other interests or, in some cases, to take side gigs. This is more prevalent in sectors that provide for complete remote working structures.

Another factor that may have given rise to moonlighting could be employers' excessive salary or bonus cuts during the lockdown. Individuals had to resort to alternate avenues or find side hustles to fill that income gap. The increased layoffs during the lockdown also could have contributed to the trend, as individuals needed to work more than one job for a sense of security in the otherwise unpredictable job market.

Is moonlighting ethical in our country?

Kaushik: There is no specific law on moonlighting in India, and per se, it is not unethical. Even though moonlighting may be a new terminology in the Indian market, side gigs in the form of part-time and freelancing have always been part of common work structures in India. So long as the side job does not conflict with the employee's primary job, it should not be an issue. Where the conflict is such that it leads to data privacy issues or misuse of confidential information of the employer, it will be termed as fraud or cheating on the part of the employee. Thus, the repercussions of moonlighting, in some cases, could be unethical.  

Most employment contracts in India provide exclusivity clauses and impose an embargo on the employees to associate themselves with any other firm or business for income. Further, there could be cases where moonlighting results in a breach of non-compete obligations operating during the subsistence of employment. Any side job that violates these obligations could be viewed as unethical as it would lead to a violation of the employment terms. Courts in India have also, in several cases, upheld orders of termination of employment where the employee had been found to have taken up a second job and, as a result, had been negligent in their duties towards the first employer. Thus, it will be a problem if moonlighting by employee results in a breach of obligations or the employer's code of ethics.

Is moonlighting permitted or prohibited by law in India? 

Kaushik: There is no legal definition of the term 'moonlighting' or 'double/dual employment' under Indian labor laws other than a few checks and balances provided under the law in this regard. For example, dual employment has been regulated under the Factories Act, and some of the Shops and Establishment legislations provide that the employee may be allowed to work in more than one factory/establishment so long as the employee is not required to work for more than nine hours in a day in total or not more than 48 hours in a week. The model standing orders framed under the Industrial Employment (Standing Orders) Act of 1946 require the employees to work exclusively for the establishment where they are employed and are restricted from taking up any additional employment that adversely affects the employer's interest. The draft model standing orders framed under the upcoming Industrial Relations Code, 2020, however, go a step further to provide that the employer can permit employees to "take up an additional job, assignment with conditions or without conditions" with the prior permission of the employer. 

While these restrictions do not apply to senior-level employees in most cases, the concept of moonlighting is completely unregulated when the second job falls outside the traditional employer-employee structure. Apart from this, Courts in India have recognized the idea of dual employment in cases where the terms of employment provide for it or the employers have consented to the same. At the same time, there are also cases where the Courts have upheld orders of termination of employment where the employee had been found to have taken up a second job and, as a result, had been negligent in their duties towards the first employer.

The underlying scheme of these limited regulations on dual employment has, thus, been to strike a balance between the employer's business interest not being adversely affected and ensuring the health and safety of the employees by restricting work beyond the permissible hours. That said, even in the absence of any specific prohibition under the law on dual employment, the construct of some important labor welfare laws in the country is not conducive to such situations. Even in cases where employers allow employees to take up additional jobs, there are practical challenges that both employees and employers face in ensuring legal compliance. For instance, contributions under the provident fund and employees' state insurance schemes are challenging, where the employees are linked with the accounts of more than one employer simultaneously. Withdrawal of provident fund accumulations also becomes difficult for the employees in such cases. Again, these challenges exist only where the person takes up 'employment' with more than one employer. These issues can be easily addressed when the second gig is structured as a consultancy or advisory. 

What makes the trend more prevalent in IT companies compared to the other sectors in India?

Kaushik: Most IT companies allow work-from-home or remote work structures. The lack of a talented workforce and high attrition rates due to the increased demand in the market has led to people receiving more than one job offer at a time. Since most IT companies these days do not emphasize the physical presence of employees in the office, it becomes more flexible for them to take up multiple jobs at a time. Additionally, they are the new age companies that allow their employees the flexibility to explore other side gigs and thus, in a way, promote the moonlighting culture. This, however, is likely to change with IT companies now coming up with more robust remote work and moonlighting policies to regulate this or completely prohibit any moonlighting in some cases.  

Some reputed IT companies have recently come to light after warning their employees of termination if they are caught moonlighting. Is it legal for employers to take such a stringent position and restrict workers from taking on additional work?

Kaushik: Where the second job is in the same sector as the primary job, impacts the employee's performance, or poses a threat to the confidentiality requirements of an organization, it is only natural for the employers to be against it. In cases where the employee is dealing with sensitive information like pricing or business secrets of the company, a second job in a similar profile can potentially threaten the first company's business interest. In such cases, it will be justified for employers to restrict employees from moonlighting. Thus, allowing or refusing to moonlight depends solely on the employer's discretion and the nature of the business they are engaged in.  

What factors prompt businesses to determine whether to implement a moonlighting work policy?

Ramchandani: This depends on how the company perceives moonlighting. While on one side, there are companies allowing employees to moonlight by providing flexible work hours, others view it as plain and simple cheating. One determinative factor would be the kind of workforce appointed by the company. Full-time employees are typically expected to devote their entire working time and energy to the employers' business interests. In part-time or fixed-term employment, the employee is not at the employer's disposal beyond the prescribed time. Thus, if the company majorly operates through part-time or gig workers or freelancers, a moonlighting policy would be essential to regulate the nature of work taken up as a side hustle by the employees. In such cases, the moonlighting policy will need detailed clauses on maintenance of confidentiality, conflict of interest, impact on the employee's performance, a dedicated number of work hours required, etc. Whereas, where the nature of business is such that it requires a dedicated full-time workforce, the moonlighting policy would not be preferable. In such cases, the employment contracts should instead have robust clauses on exclusivity, confidentiality, etc., and restrict moonlighting.

Moonlighting Policy: A Boon or a Bane! People have divided opinions about moonlighting. Please share your views on this.

Kaushik: Moonlighting policy is relevant or a boon where the employer allows it and can regulate the extent and scope of moonlighting by the employees. In such cases, a moonlighting policy will help employers draw boundaries for employees on what is allowed and what is not. Further, it could require employees to compulsorily declare any additional job taken up by them so that the employer can decide whether such work impacts its business. However, where the employer is against moonlighting altogether, a policy on this will be immaterial. Instead, in such cases, robust obligations on exclusivity and confidentiality in the employment contracts prohibiting moonlighting in any form will be more helpful.

One must remember that as much as a moonlighting policy enables the employee to make that extra buck, it also curtails the time for rest and recuperation. Multiple jobs at a time can result in increased levels of fatigue and other health issues over a period and impact overall efficiency. Thus, even from the employees' perspective, it is essential that moonlighting, where allowed, is adequately controlled and, where required, restricted altogether.

In a nutshell, it will have to be a bespoke approach depending on factors like the nature of the business, category of employees in the workforce, demand in the market, etc., to see how these policies are structured for each organization.

What potential legal ramifications could moonlighting have for an employer and an employee?

Ramchandani: Considering there is no penalty prescribed under law for moonlighting employees, the terms and conditions governing the employment become relevant. In our experience, employers have been able to take disciplinary actions against moonlighting employees where the employment contracts or policies contained explicit terms on exclusivity and non-compete obligations operating during the term of employment. Additionally, employers will be able to sue employees for injunction and damages where such moonlighting has resulted in the disclosure of confidential information of the employer or amounts to a breach of trust under law and contract.

Action can also be taken against moonlighting employees in case their performance is impacted due to the second job, or they become negligent in their duties towards the primary job. The implication would, therefore, largely depend on the impact of moonlighting on the employer's business.

In cases where the second gig is such that it does not conflict with the main job or is not likely to result in any loss to the employer, it won't be easy to proceed against such employees unless the Company policies expressly prohibit another engagement in any form and manner by the employees.

Concerning the employees, the implications could involve dismissal from the main job and loss of income. Given the varying stands taken by corporates on moonlighting, dismissal from employment due to moonlighting could also hamper the prospects of employees. 

What structured modifications in the scope of moonlighting in India may the workers anticipate? What shift should employees in India expect in the legal bodies' and employers' attitudes toward moonlighting?

Ramchandani: Moonlighting is an evolving concept in the Indian market and is likely to develop further with the recognition of the gig work economy under the new Labor Codes. With the increase in gig workers or freelancers, the side jobs taken by individuals are not always structured as traditional employer-employee arrangements. Individuals can be engaged as advisors or consultants by another business. A side gig of this nature may not always impact the employee's performance, and to what extent this poses a risk to the company's business would vary in each case. Thus, it is to be seen whether moonlighting will gain acceptability in core activities in the future or will be allowed only for jobs of ancillary nature. Further, moonlighting policies, while promoting flexible work cultures, would need to strike a balance between the interests of both parties. One would expect to see more streamlined approaches setting clear expectations from employees regarding performance and time commitment to the employer and adequate protection for employers in terms of confidential and proprietary information and other business interests. 

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