Baba’s Explainer – Moonlighting Debate

  • IASbaba
  • October 10, 2022
  • 0
Economics, Governance
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  • GS-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
  • GS-3: Inclusive growth and issues arising from it. 

Context: Recently, there has been a growing debate on the issue of moonlighting where certain companies have openly opposed it while others have supported it.

What is moonlighting?
  • Moonlighting refers to the practice of working a second job outside normal business hours, typically without the employer’s knowledge.
  • It is called so as the side employment is typically performed at night or on the weekends.
    • The phrase became well-known when Americans began looking for second jobs in addition to their regular 9-to-5 jobs to supplement their income.
  • Moonlighting has become a topic of debate in the IT industry as working from home became the normal norm during the Covid-19 pandemic, which is believed to have led to a rise in dual employment.
  • Moonlighting is now leading to compliance issues within companies and has also stirred a debate over whether this is the future of gig economy.
What factors has led to increase in moonlighting?
  • It is argued that in the absence of overtime pay and regulation of employment contracts, employees are engaging in moonlighting for additional income or for developing skills, or to pursue other interests outside their job.
    • Moonlighting could be considered cheating if an employee’s contract calls for non-compete and single employment, which is the situation with the majority of conventional employment contracts. However, it is not cheating if the employment contracts do not have such a clause or provide relaxations.
  • One of the reason for moonlighting is the shortage of skilled workers. “India is one of the countries with a huge perceived gap in skills, with 54% of employees strongly/gap in skills”.
  • Then there is the emergence of crowdsourcing platforms like Topcoder which provide short-term project-based services through hiring IT professionals.
  • The idea reflects a practical recognition of the changing nature of white-collar jobs. In the last century, work from home was never thought of. But in the current times, it has become a common norm. Likewise, maybe we are indeed on the cusp of change when it comes to the gig economy.
How are companies reacting to moonlighting?
  • The IT sector is divided when it comes to moonlighting. Some call it unethical while others believe it is the need of the hour.
  • Wipro has sacked 300 employees following the discovery that they were working for rival firms on the side. Wipro Chairman Rishad Premji has said “This is cheating – plain and simple.”
  • Infosys has warned staff against moonlighting, saying it could lead to termination.
  • On the other hand, Swiggy announced an “industry first” policy that allowed moonlighting for its employees. “Any project or activity that is taken up outside office hours or on the weekend, without affecting productivity, and does not have a conflict of interest, can be picked up by the employees.”
  • The argument for supporting moonlighting is that “Employment is a contract between an employer who pays employee working for them for ‘n’ number of hours a day. Now what an employee does after this ‘n’ hours is his/her freedom”
What Are Companies’ Concerns?
  • Confidentiality breaches: Moonlighting may give employees the opportunity to divulge trade secrets if they are working in a similar industry and job. Employees need to understand the importance of maintaining confidential information that could benefit a competing organization.
  • Integrity of Employees: Employees working for rival firms is considered as a “complete violation of integrity in its deepest form”.
  • Loss of productivity: If employees are working long hours, the second job may cause the employee to become distracted, unproductive, and neglect job responsibilities because of physical fatigue.
  • Cost Factor: Employees may use company resources for their second job which increases operating expenses.
  • Reluctance to come to Office: HR experts have attributed moonlighting as one of the factors that makes many reluctant to come back to office. In fact, 42% of the participants said they would consider changing their jobs or even quitting if they were not allowed to work from home.
  • Tax complexities– If moonlighting income is received as salary, both the employers will consider standard deduction to calculate the tax liability.
    • Additionally, both the employers will take into account the basic exemption limit and consider the tax slab as per the respective salaries.
    • This could lead to the TDS being deducted by each employer to be lower than the taxpayer’s aggregate tax liability.
Is moonlighting legal in India?
  • Overemployment, which is called dual employment in India, is technically permissible in the US and the UK from a tax perspective.
    • A second employment in the UK could alter a worker’s tax status, but it wouldn’t be expressly noted as such to the payroll department of the first employer and would probably go unreported in larger organisations.
    • The US tax system is simpler since it is built on the idea of self-assessment and voluntary reporting.
  • In Glaxo Laboratories (I) Limited vs Labour Court, Meerut & others, the court held that the power to regulate the behaviour of the workmen outside the duty hours by the employer amounts to the contract of service being reduced to contract of slavery.
  • Moonlighting is not defined under any statute in Indian employment laws. Moonlighting is also not necessarily dual employment, which is a formal employer-employee relationship, complete with legal obligations like minimum wage, provident fund, gratuity etc. It could also be side hustles or freelancing which can be with or without the knowledge of the primary employer.
  • Under the Factories Act, dual employment is prohibited. However, in some states, IT companies are exempt from that rule. However, a person with a similar set of jobs could give rise to concerns about a violation of confidentiality because many employers include such restrictions in their employment agreements in addition to prohibitions against holding down multiple jobs.
Does the law lay out punitive action against moonlighting?
  • Unless an employer is able to prove that an employee acted against the interest of the company, courts may not uphold severe punishment of termination of employment.
  • The courts of law in India dealing with employment are writ courts and labour courts which exercise jurisdiction based on equity or fairness. Therefore, the courts may lean in favour of the employee unless the contravention of the employee has led to serious prejudice and loss to the employer.
  • The Minister of State for Skill Development and Entrepreneurship, and Electronics and IT, said that employers should not to suppress employees who want to monetise, develop and demonstrate but also urged employees not to violate their agreements with employers.

Main Practice Question: Is moonlighting changing the work scenario in India? Critically analyse.

Note: Write answer his question in the comment section.

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