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Moonlighting And Restrictive Covenants

Raavi Birbal
26 Sep 2022 1:32 PM GMT
Moonlighting  And Restrictive  Covenants
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Moonlighting refers to the practice of taking up additional jobs, without employers' knowledge. Shops and Establishment Act of various states and Factories Act, 1948 prohibits double employment. Employment contracts too restrain working in dual employment. As a professional, freelancer, stringer, retainer one can work for multiple clients, customers , however , as a full time...

Moonlighting refers to the practice of taking up additional jobs, without employers' knowledge. Shops and Establishment Act of various states and Factories Act, 1948 prohibits double employment. Employment contracts too restrain working in dual employment. As a professional, freelancer, stringer, retainer one can work for multiple clients, customers , however , as a full time regular employee there are restrictions .

Two timing employer without his knowledge is not allowed . Moonlighting could also be considered as cheating apart from violation of employment laws. Recent action of terminating mass employees would be a deterrent for others .Employers have a right to set conditions . There cannot be a security at the expense of entrepreneur and then work for others. Objective for disallowing double duty is health , wellness , fatigue , usage of company's resources for secondary job, distraction , salary package which is supposed to commensurate various needs , etc .Businesses too need to prevent insiders from taking trade secrets, business relationships or data to competing firms. Apart from wanting employees concentration completely on company's work ,one of the most crucial challenges before organisations today is employees joining competitors and soliciting other employees, clients, vendors as well as disclosing trade secrets.

Not just according to statutory provisions, even as per certain dictums of Supreme Court negative covenant of not joining competitor to an extent is enforceable during the operative term of contract . Infact , if a contract expects an employee to work for required number of years but he exits prior to the stipulated period, he can be stopped from joining the competitor till the end of the specified period. Reasoning given by courts is that during such period, employee is expected to serve employer and if not stopped, it would be against company's interests , unless contract is too harsh. Such an estoppel, however, would not be applicable in case the employer terminates the employee. In such a case, the parties may be entitled only to monetary benefits, commensurate with the damages caused. Furthermore, while considering an injunction or granting of monetary reliefs, courts take into account the reasonableness of the clause as well as circumstances such as position of employee, options available, extent of loss, damage etc. Clauses for not joining competitor post termination period are not yet practically enforceable in India, and only compensation and damages could be claimed.

While there are statutory provisions protecting , it is always advisable to include specifications of not working for another employer in the appointment agreement . Employment restrictive covenants viz, non-compete, non-poaching and non-disclosure are imperative . According to courts dictas , a restraint on use of trade secrets during or even after cessation of employment has also in many circumstances held not to tantamount to a "restraint on trade" and, therefore, enforceable under various circumstances. Ambit of non-disclosure now includes information written/oral, relating to the business, financial affairs, employee records, trade secrets, technology, contacts, etc. Such restraints are resorted to by employers as they get distraughted at seeing employees solicit other employees, their business, contacts, and even when they fear leakage of trade secrets.

Restrictive covenants imposing an unreasonable hardship on employees are generally not enforced by courts.

Some middle path solutions to issue could be operating part time for various employers but with maintaining confidentiality ,work based contracts, retainership contracts or even have employment contracts accordingly framed .Most importantly factum of other employers should not be intentionally and malafidely concealed.

Time to legislature to re-consider various laws and lay down a streamlined provisions for such contingencies , in light of global economics.

The author is an Advocate practicing at Supreme Court and Delhi High Court .

Views are personal

Picture Courtesy: The Week

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