Introduction
In August 2022, Wipro’s chairman Rishad Premji announced that the company had dismissed around three hundred employees for working for competitor companies while on Wipro’s payroll, describing the practice as a “complete violation of integrity.” The announcement ignited a national debate about moonlighting, a term borrowed from American English to describe the practice of holding secondary employment or freelance engagements alongside a primary job. Infosys, TCS, and other large IT employers quickly clarified their positions on the practice, ranging from outright prohibition to conditional tolerance. Employee communities and commentators argued that the pandemic-era normalisation of remote work, combined with flat salary growth relative to inflation and the growth of freelancing platforms, had made secondary work an economic necessity for many knowledge workers.
The legal dimensions of the moonlighting controversy in India are complex and under-examined. The question of whether an employer may prohibit employees from engaging in secondary work, and whether such prohibition is enforceable, engages a cluster of provisions across multiple statutes, overlaid by the general principles of contract law. The answer varies significantly depending on whether the secondary work conflicts with the primary employer’s business, whether the primary employer is in a sector regulated by specific dual employment restrictions, and whether the prohibition is framed as a contractual term or as a standing order.
Legal Framework
The Factories Act 1948 contains an explicit prohibition on dual employment in its application to factories. Section 60 of the Factories Act provides that no adult worker shall be required or allowed to work in any factory on any day on which they have already been working in another factory, with limited exceptions for specified circumstances. This provision applies specifically to workers in registered factories engaged in manufacturing with power-operated machinery, and its rationale is the prevention of excessive working hours that would be harmful to the worker’s health, rather than the protection of the employer’s competitive interests.
The Industrial Employment (Standing Orders) Act 1946 requires certified standing orders governing conditions of employment in industrial establishments. Model standing orders under the Act typically include a provision prohibiting employees from taking up outside employment without the permission of the employer. However, the scope of this prohibition and its application beyond the factory and establishment sectors covered by the 1946 Act is limited. The new standing orders framework under the Industrial Relations Code 2020 raises the coverage threshold to establishments with three hundred or more workers, which will, when notified, exclude many IT sector employers from mandatory standing order certification.
The employment contract in the IT sector is the primary mechanism through which moonlighting is addressed. Standard contracts in the sector typically include a clause requiring exclusive devotion of the employee’s professional time and energy to the employer’s business, prohibiting engagement in any other employment, business, or activity (whether paid or unpaid) without the prior written consent of the employer, and in some contracts, prohibiting investment or ownership interest in competitor companies. These exclusivity clauses are contractual terms rather than standing orders, and their enforceability is governed by general contract law principles.
The key legal question is whether a contractual exclusivity clause that prohibits an employee from engaging in non-competing secondary work (say, an IT employee who also teaches coding online or works as a freelance graphic designer) is enforceable under the Indian Contract Act 1872. The argument for enforceability rests on the general principle that freely negotiated contract terms bind the parties. The argument against draws on Section 27 of the Indian Contract Act, which voids agreements restraining persons from exercising a lawful profession. If an exclusivity clause is so broadly drawn as to prevent an employee from engaging in any lawful profession outside their primary employment, it may operate as an impermissible restraint of trade.
The courts have not definitively resolved whether a during-employment exclusivity clause that prohibits non-competing secondary work constitutes a restraint of trade within the meaning of Section 27. The prevailing view, consistent with Niranjan Shankar Golikari’s distinction between during-employment and post-employment restraints, is that during-employment exclusivity is a reasonable incident of the employment relationship and is not a restraint of trade in the Section 27 sense. However, this view is not beyond challenge, particularly where the clause is so broad as to prevent the employee from using their skills in any context outside their primary employer.
The Code on Wages 2019 and the other labour codes are largely silent on the question of multiple employment. The Code on Wages defines “employer” and “employee” in terms that are consistent with a single primary employment relationship but do not prohibit multiple employment per se. The EPFO contribution framework contemplates the situation where a worker may have contributions from multiple employers, which implicitly recognises that multiple employment relationships may coexist.
Judicial Developments
Indian courts have addressed the dual employment prohibition in several contexts, most significantly in industrial disputes involving employees who were dismissed for engaging in outside employment. The Labour Courts and High Courts have generally upheld dismissal for undisclosed outside employment where the employment contract or standing orders required disclosure and the outside employment conflicted with the employer’s business interests. Dismissal for non-conflicting secondary work without disclosure has been treated with more scepticism by some courts, particularly where the secondary work did not impair the employee’s performance of their primary duties.
The Supreme Court has not directly addressed the moonlighting question in the knowledge economy context. Its general jurisprudence on the employment relationship, however, suggests a contextual approach: the nature of the employment, the degree of fiduciary obligation involved, the degree to which the secondary activity conflicts with the primary employer’s interests, and the impact on the primary employment would all be relevant in assessing the validity of a dismissal for moonlighting.
The Delhi High Court in several service law matters has held that government employees who engage in private practice or secondary employment without permission are in breach of their service conditions and may be dismissed, but has distinguished the consequences of deliberate concealment (where dismissal is appropriate) from technical violation of disclosure obligations (where a lesser penalty may suffice). The reasoning in these service law cases is not directly applicable to private sector employment, but the distinction between deliberate deception and technical non-compliance has relevance in the private sector context.
The introduction of the DPDP Act 2023 adds a new dimension to the moonlighting debate. Employers who seek to monitor whether their employees are engaged in secondary work through surveillance of device usage, email monitoring, or LinkedIn profile tracking must comply with the DPDP Act’s obligations, including the requirement to notify employees of the data being processed and the purpose of processing. Covert surveillance of employees to detect moonlighting, without disclosure, may fall foul of the DPDP Act’s consent and transparency requirements.
Contemporary Issues and Analysis
The moonlighting controversy in India’s IT sector reflects a structural tension that is not unique to India. Knowledge workers who possess marketable skills can deploy those skills in multiple contexts. The growth of digital freelancing platforms, including Upwork, Toptal, and domestic equivalents, has dramatically lowered the transaction costs of arranging secondary engagements. The pandemic’s shift to remote work removed the physical visibility that had previously served as an informal monitoring mechanism, making undisclosed secondary work significantly easier.
Employer concerns about moonlighting fall into several distinct categories. The first is conflict of interest: where the secondary work is for a direct competitor, there is a genuine risk that the employee shares proprietary information, client intelligence, or work product between employers. This concern is both legitimate and legally actionable through confidentiality agreements, fiduciary duty principles, and, during the employment period, injunctive relief.
The second concern is divided attention: even where the secondary work does not involve a competitor, the employer may be concerned that the employee’s time, energy, and focus are not exclusively devoted to the primary employment. This concern is legitimate to the extent that the employee’s primary performance obligations are not being met, but is less compelling as a basis for absolute prohibition of secondary work that has no measurable impact on primary performance.
The third concern is productivity and fatigue: overworked employees who hold multiple jobs may be less effective and more accident-prone. This concern has more force in physically demanding occupations and is less directly relevant to many knowledge economy roles where the employee’s output is measured by results rather than hours.
Comparative and International Perspective
Germany’s legal framework on secondary employment (Nebentätigkeit) offers a nuanced model that India might consider. Under German employment law, employees are generally free to take secondary employment unless it conflicts with the primary employer’s interests. An employer may require prior approval for secondary employment that involves direct competition, use of employer resources, or work during rest periods mandated by working time legislation. A blanket prohibition on all secondary work, without regard to whether it conflicts with the employer’s interests, would be considered an impermissible interference with the employee’s general right of personality (Allgemeines Persönlichkeitsrecht) under German law.
France similarly permits secondary employment subject to the duty of loyalty (obligation de loyauté) owed to the primary employer. The duty of loyalty prohibits secondary activities that directly compete with the employer or that involve the use of confidential information but does not prohibit non-competing secondary work generally.
The United States does not have a uniform federal framework on moonlighting. Employment contracts in the US may include exclusivity provisions, and state law governs their enforceability. California, consistent with its approach to non-competes, views broadly-drawn exclusivity clauses with considerable scepticism and has statutory protections for employee activities conducted outside working hours on the employee’s own time and equipment.
The UK does not prohibit moonlighting in general. The Working Time Regulations 1998 (implementing the EU Working Time Directive) impose a maximum average working week of forty-eight hours (across all employment relationships combined), which effectively constrains the extent of secondary employment for UK workers, not by prohibiting it outright but by limiting the aggregate working hours that may be performed.
Practical and Policy Implications
The moonlighting controversy reveals a mismatch between the legal framework’s design (which largely assumed a single employment relationship) and the economic reality of a growing segment of the workforce. Knowledge workers in the technology sector increasingly operate in a portfolio model, combining primary employment with freelance work, advisory roles, or early-stage entrepreneurship. The legal framework’s failure to clearly accommodate this model creates uncertainty for workers about the legality of their secondary engagements and for employers about the enforceability of their contractual restrictions.
From a labour policy perspective, secondary work serves important functions. It enables workers to supplement incomes that may be insufficient to meet living costs in expensive cities. It provides a pathway for entrepreneurship and skills diversification. It contributes to the gig economy ecosystem that provides services to consumers. Blanket prohibition of secondary work, if enforceable, would impose social costs that the legal framework should take into account.
Suggestions and Reforms
The Ministry of Labour and Employment should issue a policy position paper clearly distinguishing between conflicting secondary employment (working for a direct competitor) and non-conflicting secondary work (freelance activities unrelated to the primary employer’s business). Contractual exclusivity clauses that prohibit non-conflicting secondary work conducted outside working hours on the employee’s own resources should be treated as unenforceable restraints, while conflict-based restrictions should be acknowledged as legitimate.
The Industrial Relations Code’s standing orders framework should include a model provision on secondary employment that requires disclosure of secondary engagements potentially conflicting with the employer’s interests, but does not permit blanket prohibition of non-conflicting activities. This would provide a standardised approach for covered establishments.
The DPDP Act rules should specify that employer monitoring of employee secondary work through device surveillance or digital tracking requires explicit informed consent, and that covert monitoring for the purpose of detecting moonlighting constitutes a violation of the Act’s transparency requirements.
Conclusion
The moonlighting controversy is ultimately about the boundaries of the employment relationship in a knowledge economy where skills are portable and the costs of secondary work are low. The legal framework, designed for an era of single, full-time, place-based employment, does not provide clear answers. The distinction between conflicting and non-conflicting secondary work is legally sound, practically workable, and consistent with comparative experience in Germany and France. India’s labour policy should articulate this distinction clearly, protecting employers’ legitimate interests in preventing conflicting secondary work while respecting workers’ autonomy to deploy their skills in non-competing secondary activities. A legal framework that achieves this balance would serve the interests of both the knowledge economy’s employers and its workers better than the current ambiguity.
