Agencies
Ramesh Vaidyanathan
The author is managing partner, Advaya Legal
Suyash Sarvankar
The writer is associate, Advaya Legal
Working at more than one job - 'moonlighting' - has been especially enabled by India's enormous demand for digital skills, shortage of skilled workers willing to work for plummeting real wages in an inflationary economy, and remote jobs enabling engagements far from one's place of residence. Take any recent quarterly earnings of IT companies. They will show how record-high attrition rates are creating pressures on margins. IT employers are finding it hard to attract and retain talent, and the smallest difference of a perk can make employees leave.
Moonlighting is purportedly responsible for this high attrition. Hence, some industry leaders have condemned it and suggested that it be cracked down upon. Others find nothing wrong with it, but suggest that employees should disclose their other undertakings.
Any 'crackdown' on moonlighting should first involve defining it. The term 'moonlighting' - something conducted in the dark - itself implies deception and possible illegality. However, all employees are likely to engage in some undertakings apart from their full-time employment. A CEO might be on the board of a sister concern, or be receiving speaking fees for industry events. A manager may cook and sell meals during festivities. Someone may volunteer at a local animal shelter or resident welfare association. If an employee chooses to sew, paint or write when 'not at work', no prudent employer would berate him or her as a 'cheat', even if these pursuits generate a supplementary income.
It becomes evident that no prudent employer can - or should - prohibit all side ventures. At this point, an astute HR manager may well draw distinctions:
These 'tolerable' side pursuits are conducted in one's spare time. Thus, the employee remains available for work during work hours.
The employee does not use company resources, know-how or equipment.
The pursuits do not conflict with the employer's business and client relationships.
It is not hard to imagine pursuits where these three conditions are easily met. A software developer could lend her expertise to a free and open-source project in her spare time. Nothing in the statutes applicable to an average IT employer prohibits its employees from moonlighting, especially not when the three conditions are met. Without statutes, legal action cannot involve state machinery, labour courts and commissioners. So, an employer must incorporate protections in the employment agreement or company policy and create private obligations.
In employer-employee contracts or policies, the norm is that the employer has an advantage. Employees have to accept contracts and policies as they are, or not be employed. Recognising this disparity in the employer-employee's bargaining power, the courts usually adopt an interpretation favourable to employees.
An agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind is to that extent void, unless it falls within the narrow statutory exception. The idea is that an individual is entitled to pursue lawful trade or calling as and when she wills it. The law guards against interference with trade, even if it means interfering with the freedom of contract.
Accordingly, courts have consistently taken the view that during term of employment:
Negative covenants are enforceable to the limited extent that they are reasonable.
The purpose of the covenant is to protect legitimate business interests. The restraint cannot be greater than necessary to protect the interest concerned.
A contractual obligation that the employee would not engage himself in a conflicting business or perform substantially similar duties for another employer is generally enforceable, unless the contract is excessively harsh.
Thus, restrictions should be fashioned as a tool for securing discharge of key employee responsibilities. A blanket prohibition on moonlighting will not work. Assuming there is a binding agreement, enforcement remains a challenge. Even the most airtight contracts require a court order to be meaningful. It would be several years for final determination of the dispute, including appeals.
The probability of an adverse order several years down the line creates very little pressure for an employee to cease moonlighting. This assumes the employer is able to discover moonlighting, determine that it conflicts with employment agreement or company policy, and is intent on litigation. In most such cases, the cost and effort involved in legal action would be disproportionate to the potential benefit.
Given the status quo, IT employers would benefit from smelling the coffee. Employers should incorporate sufficient and tailored protections in the employment agreements requiring employees be available during work hours, use corporate resources for corporate purpose, and promptly disclose side ventures to determine any conflicts of interest. A policy of trust, conversations and transparency can boost employee satisfaction and tackle attrition rates.
Moonlighting is purportedly responsible for this high attrition. Hence, some industry leaders have condemned it and suggested that it be cracked down upon. Others find nothing wrong with it, but suggest that employees should disclose their other undertakings.
Any 'crackdown' on moonlighting should first involve defining it. The term 'moonlighting' - something conducted in the dark - itself implies deception and possible illegality. However, all employees are likely to engage in some undertakings apart from their full-time employment. A CEO might be on the board of a sister concern, or be receiving speaking fees for industry events. A manager may cook and sell meals during festivities. Someone may volunteer at a local animal shelter or resident welfare association. If an employee chooses to sew, paint or write when 'not at work', no prudent employer would berate him or her as a 'cheat', even if these pursuits generate a supplementary income.
It becomes evident that no prudent employer can - or should - prohibit all side ventures. At this point, an astute HR manager may well draw distinctions:
These 'tolerable' side pursuits are conducted in one's spare time. Thus, the employee remains available for work during work hours.
The employee does not use company resources, know-how or equipment.
The pursuits do not conflict with the employer's business and client relationships.
It is not hard to imagine pursuits where these three conditions are easily met. A software developer could lend her expertise to a free and open-source project in her spare time. Nothing in the statutes applicable to an average IT employer prohibits its employees from moonlighting, especially not when the three conditions are met. Without statutes, legal action cannot involve state machinery, labour courts and commissioners. So, an employer must incorporate protections in the employment agreement or company policy and create private obligations.
In employer-employee contracts or policies, the norm is that the employer has an advantage. Employees have to accept contracts and policies as they are, or not be employed. Recognising this disparity in the employer-employee's bargaining power, the courts usually adopt an interpretation favourable to employees.
An agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind is to that extent void, unless it falls within the narrow statutory exception. The idea is that an individual is entitled to pursue lawful trade or calling as and when she wills it. The law guards against interference with trade, even if it means interfering with the freedom of contract.
Accordingly, courts have consistently taken the view that during term of employment:
Negative covenants are enforceable to the limited extent that they are reasonable.
The purpose of the covenant is to protect legitimate business interests. The restraint cannot be greater than necessary to protect the interest concerned.
A contractual obligation that the employee would not engage himself in a conflicting business or perform substantially similar duties for another employer is generally enforceable, unless the contract is excessively harsh.
Thus, restrictions should be fashioned as a tool for securing discharge of key employee responsibilities. A blanket prohibition on moonlighting will not work. Assuming there is a binding agreement, enforcement remains a challenge. Even the most airtight contracts require a court order to be meaningful. It would be several years for final determination of the dispute, including appeals.
The probability of an adverse order several years down the line creates very little pressure for an employee to cease moonlighting. This assumes the employer is able to discover moonlighting, determine that it conflicts with employment agreement or company policy, and is intent on litigation. In most such cases, the cost and effort involved in legal action would be disproportionate to the potential benefit.
Given the status quo, IT employers would benefit from smelling the coffee. Employers should incorporate sufficient and tailored protections in the employment agreements requiring employees be available during work hours, use corporate resources for corporate purpose, and promptly disclose side ventures to determine any conflicts of interest. A policy of trust, conversations and transparency can boost employee satisfaction and tackle attrition rates.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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