Moonlighting – Legal Considerations And Contractual Regulation

The concept of ‘double employment’ or ‘dual employment’ has not been expressly defined under Indian laws.

However, the Supreme Court in the case of Manager, Pyarchand Kesarimal Ponwal Bidi Factory vs. Omkar Laxman Thange and Ors. (AIR 1970 SC 823), which dealt with the transfer of an employee from a factory to the head office, observed, “The general rule in respect of relationship of master and servant is that a subsisting contract of service with one master is a bar to service with other master unless the contract otherwise provides or the master consents.”

The Madras High Court in the case of Government of Tamil Nadu vs. Tamil Nadu Race Course General Employees Union (1993 I LLJ 977 Mad), citing the aforementioned Supreme Court judgement held, “If the contract otherwise provides, or the master consents, there may not be any prohibition to have dual employers.”

Therefore, the position under Indian law is that dual employment is permitted, subject to the employment arrangement providing for dual employment or with prior consent of the respective employers.

This position is also reflected through the model standing orders—which are essentially template service rules—prescribed under the Industrial Employment (Standing Orders) Act, 1948 (“IESO Act”)[1].

It is also important to note that there are legislations that recognise and implicitly permit dual employment.

The Factories Act, 1948, and certain state shops and establishments legislations—such as those applicable to Haryana and Delhi—impose restrictions on working hours in the context of dual employment, even though they do not explain the concept of dual employment or otherwise state that dual employment is permissible.

These legislations provide that an employer may not engage an employee to work in excess of the prescribed working hour limits across their employment with different establishments.

For example, if the daily prescribed working hours are nine, and an employee is employed by X company and Y company, X and Y companies must employ the employee such that the total hours worked by the employee on any given day for X and Y companies put together, should not exceed nine hours.

Separately, an employer may also face practical challenges, such as in making provident fund contributions under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (“EPF Act”), in respect of employees employed by more than one employer.

Under the current framework, an individual member of the Employees’ Provident Fund Organisation is allotted a Universal Account Number or UAN, which is linked to a code number allotted to an employer covered under the EPF Act, which may make it administratively difficult for more than one employer to make EPF contributions in respect of the same individual at the same time.

A similar difficulty would be encountered in respect of employees’ state insurance contributions under the Employees’ State Insurance Act, 1948.

Do note that the above restrictions and practical difficulties would be relevant only where an individual is employed by more than one person.

Consequently, these matters would not be relevant if there are two distinct relationships at play: (i) an employer-employee relationship and (ii) any different type of relationship—such as consultancy arrangement, project based/ gig-based assignment.

In such scenarios, the permissibility of the second arrangement would be entirely dependent on the contractual terms of the individual’s agreements with the engaging entities.

Contractual terms restricting dual employment and/or second engagements are enforceable under Indian law and the Supreme Court has on multiple occasions upheld non-compete clauses in employment agreements that are operative during the term of an individual’s employment agreement.