Dual Employment or Moonlighting refers to the incident where an employee is actively working in two separate establishments while holding full time employment. This act creates a line of risk associated with the actions of such employee. While the dual employment and moonlighting in India do not constitute a violation of the law as there are no regulations governing such a concept, the instance of moonlighting is largely governed by the contract, policies, standing order and other legal documents governing the terms and conditions of employment between the employer and employee.[SS1] This article aims to shed light on the concept of dual employment and moonlighting and shall also provide an insight into the mechanism implemented by various organisations to limit the instances of moonlighting. It will provide the basic principles which an employer may implement to ensure protection of its interest while mitigating potential risk associated with such activities.
Dual Employment in India: Is it Legal or Not?
The labour regime in India does not contain provisions governing the concept of dual employment and moonlighting by employees in India. These concepts are largely governed by the contract of employment, internal policies and other relevant internal practices within the establishment.
What does Indian labour law say concerning dual employment?
The interpretation of the dual employment in India is subject to the labour legislations which may include the following:
- The obligation of the industry;
- The obligation enshrined under the Shops and Establishments Act;
- Terms under the standing order; and
- The terms and conditions of the contract of employment.
- The obligation of the employee to adhere to the terms of contract and dedicate the prescribed working hours fully to the role is governed by the doctrine of good faith. However, the law does not prohibit the second employment of the employee unless the following conditions are met: The legal regime specifically prohibits such dual employment;
- Presence of an exclusivity clause in the employment contract;
- The second employment creates a conflict of interest; or
- Violation of standing orders.
Are there any restrictions on dual employment in State Shops and Establishments Acts?
While not applicable to all the states, in the past certain states have prohibited the dual employment whereby the employment in two or more establishment was prohibited under the law on the grounds of working hours and health. To this effect the following must be taken into consideration with respect to the Shops and Establishment Act:
- Calculation of the working hour limits;
- Determination of the overtime limit; and
- Weekly rest day and how does the second employment impact the rest provisions.
Therefore, dual employment in India must be carefully analysed with respect to the applicable labour laws to determine whether same is compliant with the Shops and Establishment Act.
What is the application of certified standing orders?
Standing orders are the terms and condition which govern the working conditions applicable on the employee. These may include terms such as working hours and leaves etc. The standing order is binding on the employees, and any failure of compliance shall be ground for misconduct.
- Once the standing order has been enforced in the establishment, it has the following effect:Supersede the inconsistent contractual terms;
- These are mandatory terms which are enforced between employer and employee;
- Violation of the standing order shall be ground for disciplinary action.
Once a statutory recognition has been granted to the standing order, it is deemed to have obtained statutory force. This view has been deemed consistent with the various judgements passed by the hon’ble Supreme Court on numerous occasions wherein it has been stated that a certified standing order has statutory force. Any violation of the standing order can be enforced by the court of law.
Is Moonlighting the Same as Dual Employment Under Indian Law?
Dual employment and moonlighting while not having a specific statutory definition, the terms are mostly considered different based on the grounds of which such action arises.
What is the legal difference between Moonlighting and dual employment?
Moonlighting is usually defined as undertaking additional work beyond the basic working hours of the establishment that the employee is primarily engaged as an employee. Whereas dual employment is focused on employment with two separate establishments. The key facts which adjudicatory authorities and courts may take into consideration while determining the type of activity are as follows:
- Whether such secondary relations create an employer-employee relationships;
- Whether the second activities of the employee are deemed as a contractual employment or an independent consultant;
- Whether the employment led to the violation of the work-hour threshold;
Whether the specific role creates a conflict of interest.Therefore, for an employee to deemed to have indulged in dual employment as per the industrial and labour jurisprudence, the following conditions must be satisfied:
- Must have contract of employment or equivalent with two or more establishments;Draws salary from two establishments;
- Derive employment benefits from both the establishments.
On the other hand, moonlighting is determined by the factors which involves:
- Employee besides their main contract of employment has also entered into freelance assignments;
- Employee is also working on a gig-based work;
- Acting as a Consultant or advisory;
- Non-working hours are dedicated to professions such as teaching, speaking or creative activities.
However, the violation does not specifically target the nature of activity but the adherence to statutory and contractual requirements.
In the absence of a statutory restrictions preventing the employee from entering into employment with another establishment while presently working in another establishment, the analysis of any violation is determined by the following documents:
- Contract of employment;
- Standing orders;
- Internal company policies.
In case the second employment creates conflict of interest, failure of disclosure or competitive prejudice, then it can be counted as a misconduct and be challenged before the hon’ble court, regardless of whether it was done during or after working hours.
Is there anywhere in Indian law the definition of moonlighting?
- No, the term moonlighting has not been described under the Indian legal regime. The interpretation is generally governed by the doctrine and principle established by the precedents passed by the relevant authority. These principles include the following:Duty of fidelity;
- Doctrine of good faith;
- Restrictions on non-competition and non-solicitation in the course of employment; and
- Conflict of interest.
- The determination of moonlighting with respect to the standing orders are as follows:Working hours obligations;
- Employment should not be in similar organisation;
- Actions should not be against the interest of the employer.
When deciding on the legality of Moonlighting in India, courts may take into consideration the following:
- Whether the employee was mandated to make prior disclosure;
- Whether the internal policy and practices mandated that consent of employers was mandatory;
- Whether performance of the employee was affected due to such second employment;
- Whether such second employment exposes the confidential information of the first establishment;
- Whether there is any competition impact.
When does freelance or gig work become dual employment?
- Freelance, gig working or any other type of work shall only qualify as dual employment if such engagement creates an employer-employee relation between the parties. The nature of the engagement between the two parties are equally taken into consideration while determining whether something quantifies as dual employment. The freelancing is not likely to cause dual employment based on the following factors:It is arising out of the independent contract work;
- It is not deemed as full time employment; and
- It does not create statutory breach or concerns.
Nevertheless, the freelance or gig activity may create hinderance and concerns with the first employment if any of the following activities take place:
- Its forms an employee and employer relation with another party;
- It mandates conflicting attendance, work hours and other requirements;
- It is with an organisation which is in direct competition with first employment;
- it is the infringement of contract of employment, policies or certified standing orders.
In the event that any of the following actions occur due to the second employment, the employer has the authority to seek disciplinary action to the extent of termination of employment subject to due process.
To summarise, a gig or freelance work creates the instance of second engagement if it has the characteristics of employment such as mandatory attendance, working hours, employment benefits and other such factors.
To that extent, an employer may restrict independent consulting if such employer in its internal documents has established a restriction of “any other employment”. However, the same can be questioned by the courts on the ground of reasonableness.
Can an Employer Legally Terminate an Employee for Moonlighting?
Yes, an employer has the authority to terminate employment due to dual employment or moonlighting if such prohibition of dual employment has been prescribed under the internal documents of the employer’s organisation.
When does moonlighting amount to misconduct?
Moonlighting can be considered as misconduct in the following circumstances:
- It breaches contract of employment, internal policies or certified standing orders;
- It impacts the employer’s privacy or confidentiality;
- It is a misrepresentation or fraud.
Is a domestic investigation compulsory?
Yes, the domestic investigation is compulsory prior to termination of any employment. In the case of workmen who are under the industrial law:
- A domestic investigation must be conducted before the termination of employment.
- Charges must be framed and the employee must be informed of the charges.
- Employee must be granted equal opportunity to be heard.
- Evidence of both the employer and employee must be recorded.
The failure to conduct domestic or internal investigation at the termination of employment makes such termination subject to invalidity based on analysis by the Labour Courts.
For managerial employees who do not fall under the Industrial Dispute Act, action for failure to conduct domestic investigation may lead to following:
- The process of termination can be made based on contractual obligations;
- Nevertheless, the same can be questioned on the ground of wrongful termination.
Are Exclusivity Clauses Enforceable in India?
The exclusivity clauses are contractual obligation and are subject to reasonableness otherwise such clause will be violative of Section 27 of Indian Contract Act 1872.
Is there a validity of exclusivity clauses?
The Indian courts deem that the exclusivity clause in the contract of employment is valid to the extent that the employee is still engaged with the organisation. However, after the termination of the employment, the same is not enforceable unless specifically provided under the law.An employee can be prohibited to take actions which fall under dual employment or moonlighting under the following scenarios:
- Conflict of interest by employing under the rival or competing employer;
- Affects the client engagement.
Is it possible to limit work after hours by employers?
Outside work by the employee may be restricted by the employers in cases where such secondary employment:
- It affects performance or standard of work due to fatigue caused by such secondary employment;
- It may create security breach with respect to the confidential information;
- It is against exclusivity clause provided under the contract of employment.
- However, the enforceability of such clauses shall be subject to judicial interpretation which will be determined based on the following:Content of the concerned clauses of the contract of employment;
- Legitimate harm to the interest of the employer;
- Proportionality between the rights of the parties.
What does a court mean by reasonableness?
Courts determine the scope of dual employment and moonlighting based on reasonableness whereby it examines the following:
- Nature and the specific role of employment;
- Access to trade secrets and confidential information;
- Competition impact in the industry due to such dual employment;
All disputes which may arise due to the conflict of interest are subject to the doctrine of reasonableness.
Does the Industrial Relations Code, 2020 Change the Position?
The Industrial Relations Code, 2020 while aimed to consolidate the development in the labour law into a single code, the code does not specifically address the moonlighting or dual employment concerns. Thus, despite the code coming into force, the concepts of moonlighting and dual employment shall be governed employer’s documents and the standing order.
Will certified standing orders prevail?
Yes, the standing order shall retain its statutory enforcement that is applicable to it.Employers must therefore ensure the following:
- Standing orders must provide for secondary employment;
- Disciplinary proceeding with respect to dual employment must be codified;
- Review the standing orders on a regular basis.
What compliance steps are required?
Employers to ensure that its stance is covered under its documents, it should:
- Review its internal documents and the standing order;
- Review the obligations provided under the state specific labour law;
- Update employment contracts;
- Conduct periodic compliance audits.
Can Government Employees Engage in Dual Employment?
Government officers are prohibited from engaging in activity of dual employment or moonlight unless such officer has undertaken prior approval from the competent authority.
What do service rules provide?
Under Central Civil Services (Conduct) Rules, the rules provide specific obligations applicable on the government officer:
- Obligation to seek prior approval before undertaking secondary employment;
- Second employment must not impact the obligation under its government position;
- Violation of any of the obligations may attracts disciplinary proceedings.
How Should Employers Draft Policies on Moonlighting?
Employers are advised to draft policies governing the dual employment and moonlighting to ensure that it able to establish its stance on the aforementioned by implementation of a clear, proportionate, and legally enforceable policies.
What clauses are essential?
Employment agreements may implement the following clauses to prevent potential instance of dual employment or moonlighting:
- Exclusivity clause;
- Disclosure requirement of present or future employments;
- Confidentiality and IP protection;
- Prevention of conflict of interest clause;
- Performance quality/ standard clause.
Should companies allow conditional engagement?
A disclosure-based regime may include:
- Prior written approval;
- Declaration of non-competition;
- Certification of no conflict;
- Affirmation of no use of company resources.
This mitigates risk while respecting employee autonomy.
What compliance risks arise?
Key risks arising out of dual employment or moonlighting are as follows:
- Breach of confidentiality with respect to IP, data or trade secret;
- Work standard or fatigue related concerns;
- Conflict of interest; and
- Reputational risk.
What Risks Do Employees Face?
Employees if it is prohibited from dual employment or moonlighting as per the internal practices of the employer, it may be subject to the following:
- Disciplinary action or termination of employment;
- Recovery of damages for any confidentiality or security breach;
- Potential dispute before the competent authority.
Can criminal liability arise?
In certain cases, an employee may be subject to criminal proceedings if it is involved with any of the following activities arising out of moonlighting or dual employment:
- Fraud;
- Misappropriation of the funds;
- Theft of IP, confidential information or other trade secrets of the first employer;
In the aforementioned circumstances, a criminal complaint may be preferred before the competent authority.
How Have Indian Courts Interpreted Dual Employment Disputes?
The Courts while determining the cases pertaining to the dual employment undertake to careful peruse the facts to determine the following:
- Employer’s right to protect their business operations including information and finance;
- Employee’s right to livelihood;
- Whether the restriction imposed by the employer are reasonable;
- Whether the employer has incurred actual harm which could have been substantiated by evidence.
The court’s approach to determine the guilt of the party is subject to the facts, circumstance and evidence which has been produced before it.
Key principles which may also be considered by the court while determining the guilt of the parties are as follows:
- Whether the parties are acting in good faith;
- Proportionality of the right of the employer and employee;
- Whether the employer has undertaken procedural fairness at the time of termination of employment;
- Judicial interpretation of the laws due to lack of specific prohibition under the law.
Frequently Asked Questions (FAQs)
Is it illegal to have two jobs in India?
No, it is not illegal to have employment with two establishments. However, the same is subject to the terms of employment and company’s internal documents.
Can I freelance while working full-time?
Yes, the employee can work as a freelancer unless it is prohibited by contract of employment, standing orders, or internal policy of the company.
Can I be terminated without inquiry?
No, the employer is obligated to provide the employee with the internal inquiry at the time of termination of employment.
Does moonlighting violate labour laws?
No, there is no legal provision which deems moonlighting as violation of labour law unless it violates contractual obligations or amount to misconduct.
Conclusion
Dual Employment and Moonlighting in India is not subject to legal framework but operate by the contract of employment, standing order and internal policies. Employee must assess the contractual obligation prior to undertaking a further employment in other establishments.
The debate and concerns which are surrounding the Moonlighting in India is largely subjected to the employment contract and the obligations thereunder. While there is no general or absolute restriction under the law, the organisation must incorporate relevant obligations in its key documentation to meet the organisational purpose.
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