Moonlighting and Dual Employment: Misconduct or a Legitimate Economic Right?

Introduction

The hybrid working arrangements and economic variability, post-pandemic, has raised the culture of moonlighting. Employees take additional tasks and roles as a source of supplement earning, providing financial security and skill development. However, employers, on the other hand, employers take it as a threat to loyalty, productivity, and confidentiality.

Indian jurisprudence on labour, however, stays silent on the legal provisions surrounding moonlighting, which are yet governed by still regulated by employment contracts, judicial interpretations, and standing orders. This raises a serious question: Is moonlighting essentially a misconduct, or does it fall within an employee’s legitimate right to livelihood?

 

Understanding Moonlighting and Dual Employment

Though often used interchangeably, Moonlighting and dual employment, are two different concepts.

• Moonlighting refers to the acts of employees taking multiple paid works outside the working hours of primary employment usually as freelancing.

• Dual employment, whereas, refers to working for two employers at the same time, under formal contracts, with overlapping obligations sometimes.

• Indian laws do not define any of the terms. Therefore, their legal status is rationalized through contractual obligations, standing orders, and common law principles of employment.

Employer’s Perspective: Moonlighting as Misconduct

Duty of Fidelity and Good Faith

An employee, according to common law, owes a duty towards the employer, of loyalty and fidelity. This duty restricts the employees from:-

• Involving in competing businesses

• Misleading/diverting employer’s clients

• Using confidential information or trade secrets

The court in Hivac Ltd. v. Park Royal Scientific Instruments Ltd. (1946), restricted employees to work for a competing company while the time of employment, highlighting the obligation of fidelity.

Standing Orders and Service Rules

Many companies add clauses either in a form of certified standing orders or in appointment letters. Stating that:-

“Involving in any other employment without prior permission constitutes misconduct.”

Courts generally consider these clauses if found reasonable and aims at preserving legitimate business interests. However, their applicability depends on:

• Clarity of the restriction

• Secondary employment’s nature

• Whether actual prejudice is caused to the employer

Conflict of Interest and Performance Impact

Moonlighting is more likely to be referred as misconduct when it:

• Competitor is involved

• Performance in the primary role is affected

• Uses employer resources or work hours

Indian courts focus on actual or potential harm, rather than just the mere existence of secondary work.

Employee’s Perspective: Right to Livelihood and Economic Freedom

Article 19(1)(g) of the Constitution

According to arguments employees provide, moonlighting falls under Article 19(1)(g) the right to practice any profession or carry on any occupation. Reasonableness under Article 19(6), must be satisfied in case of any restriction imposed by the employer.

A mass prohibition on all kinds of secondary employment can be challenged as arbitrary and disproportionate, irrespective of conflict or impact.

Absence of Statutory Prohibition

Indian labour laws, unlike certain jurisdictions, does not force a blanket ban on moonlighting in private sectors. This provisional silence overshadows the argument that moonlighting is not illegal, except barred by legitimate contractual terms or statutory guidelines.

Statutory Restrictions: Limited and Often Misapplied

Factories Act, 1948

Double employment is prohibited under section 60 of the Factories Act but only in the context of factory workers. Employers in non-maufacturing sector particularly IT and services, rely often on this provision incorrectly, despite being a limited scope. Such dependence is is not sustainable legally, as the law does not extend beyond factory setups.

Judicial Approach: A Balancing Test

Moonlighting is not declared illegal by Indian courts. Instead, a balanced approach is applied:-

1. Nature of the employee’s duties

2. Existence and reasonableness of contractual restrictions

3. Conflict of interest

4. Use of employer’s resources

5. Impact on productivity and performance

This method depicts judicial cognizance of adopting an absolutist position in an increasingly evolving landscape.

Labour Codes, 2020: A Missed Opportunity

New categories such as gig workers and platform workers were introducedin the Labour codes, acknowledging the changing nature of work. However, moonlighting or dual employment for regular employees was left not addressed.

This failure to address, resulted in:-

• Policies driven by employers

• No uniform standards

• Increased scope for arbitrary disciplinary action

Comparative Perspective

Moonlighting is often permitted in jurisdictions like the UK and US, until it infringes contractual obligations or raises conflict of interest. Whereas, Indian laws, rel heavily on private contracts, employer-centric rather than legislative guided.

Need for Regulatory Clarity

The rapid moonlighting surge calls for a reasonableness-based regulatory framework, which:

• Guards employers from genuine conflicts of interest

• Recognizes employees’ economic realities

• Distinguishes between harmful dual employment and benign skill-based side work

Otherwise, disputes will be continued to be resolved inconsistently through litigation, in the absence of such clarity.

Conclusion

Legality of moonlighting should be assessed on the basis of conflict of interest, contractual obligations, and demonstrable prejudice to the employer, not merely on the basis of enagagment in other employment. Merely because moonlighting involves secondary income, it should not be presumed to be misconduct. In a knowledge-driven evolving society, Indian Labour laws must transform from a binary view to a well-balanced and well- structured legal framework that harbours economic freedom without undermining legitimate business interests. 

Author: Somya Kataria, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney.