Author: Yash Arjariya is an undergraduate law student at Hidayatullah National Law University.
In this piece, the author analyses the legality of dual employment or moonlighting in the Indian paradigm. Since India does not have an employment law but employer-employee relations are governed by contracts of service between parties, the article deciphers the issue from the orientation of analysing the legal standing of non-compete clauses inserted in such contracts that ban dual employment. The author concludes by suggesting critical policy dynamics to sketch a sustainable employment landscape in India.
Introduction:
The conventional employment paradigm has connoted a single employer for an employee. The concept of dual employment or popularly referred to as ‘Moonlighting’ in the Information Technology Industry (‘IT’) has disrupted this norm of traditional employment. Working a second job—often without informing your primary employer—is referred to as moonlighting. In essence, moonlighting is when a full-time employee takes on a side job for financial benefit, such as freelancing or a similar endeavour.
However, this concept of moonlighting has not been welcomed by the IT giants like Wipro, Infosys, and Tata Consultancy Services etc. About 300 Wipro workers were let off for doing a second job after hours; similarly, Infosys employees also suffered the same fate. Another IT giant TCS has made it clear that it will not tolerate moonlighting by its employees.
In this backdrop, the author analyses the legality of dual employment or moonlighting in the Indian paradigm. Since India does not have an employment law but employer-employee relations are governed by contracts of service between parties, it is imperative to analyse the legal standing of non-compete clauses inserted in such contracts that ban dual employment. The author then compares dual employment to the country’s current legal framework. The author concludes by suggesting critical policy dynamics to sketch a sustainable employment landscape in India.
Evaluating the legality of “non-compete clauses” banning Dual Employment:
A non-compete clause in an employee’s employment contract forbids them from establishing a new enterprise or accepting an employment proposal from a rival. At some point, it prevents the employee from working against their employer, or from disclosing confidential information while still at work or thereafter.
It is essential to recollect that § 27 of the Indian Contract Act of 1872 forbids non-compete clauses. However, the law has marked a departure from this statutory codification with respect to employment contracts in the sense that they are not illegal per se. The law has upheld the insertion of a non-compete clause in an employment contract, but with protections against unfairness or arbitrary action. In Niranjan Shankar Golikari v. The Century Spinning & Mfg. Co., the Supreme Court upheld the non-compete provision of an employment contract prohibiting an employee from working for their employer’s competitor while still under contract of service. The court also determined that a negative covenant could only be sustained if it was impartial, reasonable, and fair. This jurisprudence with respect to non-compete clauses is in sync with the recommendation of the Law Commission of India which also recommended revising §27 to include suitable constraints and rethinking the existing position of outright banning such contracts in its thirteenth report.
After duly acknowledging the legal standpoint of such non-compete clauses in employment contracts, it needs to be looked at whether such clauses may disallow or plainly ban dual employment. In this respect, the Madras High Court in Government of Tamil Nadu v. Tamil Nadu Race Course General Employees Union has held that dual employment must be governed by the employment contract. In essence, the court has ruled that dual employment is allowed as long as employment does not include any prohibitions or if the employer agrees. Thus, in order to prohibit an employee from moonlighting, it is required to evaluate the employment contract.
Hence, after perusing the above authorities, it can conclusively be said that non-compete clauses in contract of employment banning dual employment or moonlighting are valid. Also, the court has held that any right of dual employment is subject to such contract of employment.
Weighing the current legal status of “moonlighting” in the current legislative scheme:
Dual employment is forbidden under § 6O of the Factories Act. However, the extent of this limitation is limited to just manufacturing employees and excludes people in other industries. Therefore, there is nothing to prevent an employee from moonlighting, provided the service contract does not forbid dual employment due to a non-compete provision. However, § 8 of Schedule I-B of the Industrial Employment (Standing Orders) Central Rules, 1946, prevents employees from engaging in multiple employment in a way that hurts the interest of business. As a result, if the employment contract deems dual employment to be detrimental to the company’s interests, it will be protected by the said orders and dual employment will be prohibited.
According to the author, the current system is neither open to nor conducive to the concept of dual employment. For example, when it comes to delivering provident fund contributions to employees who work for many companies in compliance with the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the “EPF Act”), an employer may encounter practical challenges. Given that each member of the EPF Organization is given a universal account number that is connected to an exclusive identity code number given to an employer registered under the EPF Act, it might be organizationally challenging for multiple employers to make EPF contributions in favour of the same individual employed simultaneously in more than one place at the same time. A similar problem would emerge with respect to payments made to employees under the 1948 Employees’ State Insurance Act. Due to the fact that a “moonlighter” would profit from receiving gratuities from two employers that would exceed the limit permitted by the Act, the effects of moonlighting under Social Security laws like the EPF & MP Act of 1952 and the Payment of Gratuity Act of 1972 are particularly in conflict with the current legislative scheme.
Therefore, even while the existing statutory framework is not in opposition to the idea of moonlighting, it is also not sympathetic to the practical consequences it has.
The developing Indian jurisprudence on ‘moonlighting’:
The Supreme Court noted that “the general rule in respect of the relationship of master and servant is that a subsisting contract of service with one master is a bar to service with other masters unless the contract otherwise provides or the master consents” in Manager, Pyarchand Kesarimal Ponwal Bidi Factory vs. Omkar Laxman Thange and Ors.
As a result, the Supreme Court unavoidably established that, until shown differently, dual employment is prohibited. Despite noting the Supreme Court’s ruling, the Madras High Court reached the opposite conclusion in its ruling in Government of Tamil Nadu vs. Tamil Nadu Race Course General Employees Union. According to their conclusion, having two employers is not always prohibited “if the contract expressly allows for it or the master approves.” As a result, the HC sets down the general rule that dual work is allowed until it can be shown to be unlawful, which is in direct opposition to the SC’s ruling.
The Punjab & Haryana High Court’s ruling in Gulbahar v. The Presiding Officer, whereby the court upheld the respondent’s decision to terminate a driver who was paid by the respondent because he had obtained a job with another business, is perhaps the first legal ruling on dual employment. The Court determined that this was a breach of his employment agreement, which called for him to collaborate and work only with the respondent.
Despite without noting the Supreme Court’s ruling, the High Court reached a similar conclusion. The judgement was always based on the exclusivity agreement between the employer and the employee. Therefore, it can be safely inferred that, despite the fact that it is still developing, jurisprudence has tended to support the general presumption that dual employment is generally permitted unless specifically prohibited by an agreement to that effect.
The futuristic call: India’s call on the 4-day work week concept:
India is currently considering a 4-day work week model seriously. In such a case, a person’s holding multiple jobs could turn into a new normal or widespread practise. As a result, it is crucial to think about providing a suitable framework and controlling the idea of many employments.
Conclusion: The dynamic of suggestive policy
Data breaches and client data confidentiality are the main issues with dual employment from the viewpoint of an employer. In Niranjan Shankar Golikari v. The Century Spinning & Mfg. Co., the SC decided that a “negative covenant” is a legitimate clause in an employment contract where it falls within the parameters of a reasonable limitation on multiple employment. Additionally, Indian law is moving towards allowing multiple employment as the norm, and an employment contract may only impose reasonable restrictions on this practise.
The author contends that in order to create a strong legislative framework for dual employment, the spectrum of actions that are forbidden must be specified. This would prevent employers from imposing workers with arbitrary and unfair contract requirements. Conflict of interest issues might arise from employees working for rival companies due to dual employment. As a result, criteria must be established to assess whether factors—such as an employee’s seniority or their ability to access crucial inputs—cause conflicts of interest. The Delhi High Court’s decision in Wipro Limited v. Beckman Coulter International, which stated that non-solicitation provisions that require employees to keep client information confidential and refrain from soliciting business, is also cited by the author. Therefore, by including non-solicitation provisions in the terms of an employment contract, it is possible to address the danger of client solicitation by workers who are doing two jobs at once. The authors suggestive stance concurs with recent step taken by Swiggy. It recently developed a policy[1] enabling workers to moonlight in a capacity that does not present a conflict of interest and has no negative effects on productivity. This may herald a new era in employment. Thus, inclusion of conflict-of-interest provision in the employment contract by companies is the way to future.
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