Can Your Employer Restrict You During Employment? (Section 27 During vs After)

Can your employer stop you from taking a second job, consulting for another company, or even talking to a competitor while you are still on their payroll? In India, the answer flips depending on exact timing. A restraint that operates during employment (an exclusive-service clause, a no-moonlighting rule, garden leave) is generally valid and enforceable. A restraint that tries to operate after employment ends is void under Section 27 of the Indian Contract Act, 1872. The one thing most people get wrong is treating "restraint of trade" as a single question with a single answer; Indian courts have drawn a hard line between the two, which is why employees panic over clauses that are actually fine, and employers over-rely on clauses that die the moment someone resigns. (Adira, which publishes this guide, makes contract review and CLM software; we wrote this to be useful on its own, whether or not you ever use it.)

This page covers the "during" half of that line: exclusive-service clauses, moonlighting bans, garden leave, and how confidentiality sits alongside them. If you landed here from a search about a clause that kicks in after you leave, see non-compete clauses in India instead.

Plain meaning

An "exclusive service" or "restraint during employment" clause requires you to work only for your current employer while you are employed there. In practice it does three things:

• Stops you from taking a second job, full-time or part-time, without written consent
• Stops you from freelancing, consulting, or moonlighting for anyone else, especially a competitor
• Sometimes extends into a notice period or garden leave, where you are still formally employed (and usually still paid) but not required to come to work

None of this touches what happens after you leave. "The Employee shall devote full working time exclusively to the Company during the term of employment" is a during-employment restraint. "The Employee shall not join a competitor for 12 months after termination" is a post-employment restraint, void regardless of how reasonable 12 months sounds. The word to hunt for is not "restraint" or "compete"; it is when the restraint operates.

Who it protects and what triggers it

The employer is the party this clause protects. It exists because an employer paying a full-time salary has a legitimate interest in a full-time employee, not someone splitting attention, and possibly confidential know-how, between two competing jobs. It is triggered from day one and, unless drafted carelessly, stops applying the moment employment ends.

The employee is the restrained party. Usually the restraint is uncontroversial: you cannot reasonably expect to work full-time for Company A while secretly also working full-time for Company B. It gets contested when an employer stretches a "during employment" clause to also bite after resignation (which does not survive Section 27), and when moonlighting, especially unpaid side projects, gets treated as a breach even though it does not compete with or harm the employer.

What to look for

Three checks before you worry about a clause like this:

1. Does the restraint end when employment ends, or does the drafting leave that ambiguous? Ctrl+F for "termination," "cessation," or a specific number of months after you leave. None of those present usually means a pure during-employment restraint, likely enforced as written.
2. Is the scope "any other employment" or specifically "competing employment"? A blanket ban on any second job, paid or unpaid, related or unrelated, is broader than what courts have upheld; a scope tied to competing or conflicting work is on firmer ground.
3. Is garden leave paid? If placed on garden leave (relieved of duties, still formally employed for a notice period), check whether salary continues. Unpaid, open-ended garden leave starts to look like a disguised post-termination restraint by another name.

The Indian position: Section 27, and the "during vs after" split

Section 27 of the Indian Contract Act, 1872 reads:

"Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void."

You can read the full section on India Code or on Indian Kanoon. Read literally, this looks like it should void any restraint on anyone's ability to work, at any time. Indian courts, starting with the Supreme Court, have not read it that way for restraints operating while the employment relationship is still alive.

The reasoning: Section 27 targets restraints that stop a person from earning a livelihood as a free agent. While employed, you are not a free agent competing in the open market for your own time; you have already contracted to give your working time and exclusivity to one employer for a salary. A clause holding you to that bargain during the contract is not "restraining trade" in the sense the section targets; it is the employer enforcing what you already agreed to do.

The moment the employment relationship ends, that reasoning stops applying. You are back to being a free agent, and a clause trying to restrain your work from that point forward runs straight into Section 27 and is void "to that extent." That is the entire "during vs after" divergence, and it is the single most important distinction in Indian employment contract law.

The case law: Niranjan Shankar Golikari and the during-employment rule

Niranjan Shankar Golikari v The Century Spinning and Manufacturing Co. Ltd. (Supreme Court of India, judgment dated 17 January 1967, AIR 1967 SC 1098). Golikari joined Century Spinning as a Shift Supervisor under a five-year contract that required him to devote his time exclusively to the company, keep its manufacturing processes confidential, and not work for any rival business during the contract term. After roughly nine months of training in tyre cord yarn manufacturing, a specialised and relatively rare skill at the time, he resigned and joined Rajasthan Rayon, a direct competitor, for higher pay. Century Spinning sued for an injunction. The Supreme Court upheld it, holding that a negative covenant operating during the period of a contract of employment, when the employee is bound to serve the employer exclusively, is generally not a restraint of trade at all, and does not fall within Section 27. The Court drew the express distinction that "the considerations against restrictive covenants are different in cases where the restriction is to apply during the period after the termination of the contract, than those where it is to operate during the period of the contract." Because Golikari's restraint operated only for the remainder of his five-year term, not after it, the injunction stood.

This case is the origin point of the "during vs after" rule that every later Indian judgment on restrictive covenants relies on. It also matters for a practical reason: Golikari's own argument, that a restraint on his ability to work for anyone was unreasonable, failed because the restraint was time-bound to his existing contract, not open-ended, and matched a real interest (protecting a specialised, recently trained process) the employer could point to.

Superintendence Company of India (P) Ltd v Krishan Murgai (Supreme Court, 1980, AIR 1980 SC 1717) is the contrast case, worth reading alongside Golikari rather than instead of it. Krishan Murgai's contract restrained him from competing for two years, but that restraint was drafted to survive termination. The Supreme Court confirmed the Golikari logic (in-employment negative covenants generally fall outside Section 27) but held that once the clause reached past the end of employment, it became void. Together the two cases give you the full picture: the exact same "do not compete" language can be enforceable or void depending entirely on which side of the termination date it operates.

Red flags table

Normal	Red flag	Why it matters
"During the term of employment, the Employee shall devote full working time to the Company"	Same clause continues "and for [X] months after termination"	Crossing the termination line turns a valid Golikari-style restraint into a void Section 27 restraint
Exclusivity limited to competing or conflicting work	Blanket ban on "any other employment or business activity, paid or unpaid"	Overbroad scope goes beyond the legitimate interest that justifies the restraint
Moonlighting bar tied to conflict of interest or use of company time	Bar applies even to unrelated freelance work done outside work hours	A total ban on any outside earning is harder to justify and increasingly contested in Indian IT
Garden leave for a defined notice period, salary continued in full	Garden leave that is unpaid, or has no fixed end date	Unpaid, open-ended garden leave resembles a disguised post-termination restraint
Confidentiality in a separate clause that expressly survives termination	Confidentiality and exclusivity mixed into one clause, unclear what survives	Confidentiality protects information and validly survives; exclusivity does not, and blurring them confuses everyone
Restraint proportionate to a real interest (a specialised process, recent training)	Restraint applies uniformly regardless of role or access to sensitive information	Golikari's restraint held partly because a specific trade secret was at stake; a copy-pasted clause is weaker
Notice period and garden leave clearly cross-referenced	Notice period, garden leave, and non-compete bundled as one undifferentiated block	Bundling hides which obligation is enforceable (during-employment) and which is not (post-termination)

Bad clause, better clause

Bad: "The Employee agrees to devote full time and attention exclusively to the Company at all times, including during and after the term of this Agreement, and shall not engage, directly or indirectly, in any other business, employment, or occupation, whether or not competing with the Company, without prior written consent, for so long as the Company deems necessary."

What is wrong with it: "during and after the term" extends the exclusivity restraint past termination, exactly the void territory Section 27 covers, even though the "during" part alone would have been fine under Golikari. "Whether or not competing with the Company" makes the restraint disproportionate to any real business interest. "For so long as the Company deems necessary" defines no period at all, a red flag even for an in-employment clause.

Better: "During the term of employment, the Employee shall devote full working time and attention to the Company and shall not, without the Company's prior written consent, undertake any other employment or business activity that competes with, or creates a conflict of interest with, the Company's business. This clause ceases to apply on the date the employment relationship ends, for any reason. The Employee's confidentiality obligations under Clause X, covering the Company's trade secrets and proprietary processes, shall separately survive termination for 24 months, independent of this clause."

What changed and why: the exclusivity restraint is expressly scoped to "during the term," with the ending point stated in plain words. The scope narrows to competing or conflicting activity, matching what Golikari actually upheld, rather than a total ban on any outside activity. Confidentiality, which validly survives termination, gets its own clause with its own defined duration, so nobody has to guess which obligation applies.

How it interacts with related clauses

A during-employment restraint clause rarely appears alone. Three related clauses are worth checking alongside it:

• Non-compete (post-termination): The clause this page is contrasted against; once employment ends, a different rule applies entirely. See Non-Compete Clauses in India.
• Non-solicitation: A narrower restriction on approaching specific clients or co-workers, which can also be drafted to operate during or after employment, with the same split applying. See Non-Solicitation Clauses in India.
• Confidentiality/NDA: Protects information, not your ability to work, so it validly survives termination on its own footing. See Confidentiality Clauses Explained.

The pattern: exclusivity and non-compete language are strong during employment and weak to void after it; confidentiality runs the opposite way, largely irrelevant to whether you can take a second job, but fully enforceable after you leave.

The moonlighting debate

Moonlighting, taking a second job or freelance work while formally employed elsewhere, became a live issue in Indian IT after Wipro, Infosys, and TCS, among others, publicly acted against employees found working for competitors or clients on the side, around 2022. No dedicated Indian statute bans moonlighting outright for private-sector, white-collar employees. Section 60 of the Factories Act, 1948 prohibits an adult worker from being employed in more than one factory on the same day, but that targets factory floor workers, not IT, professional, or supervisory roles.

In practice, whether moonlighting is a problem comes down almost entirely to your contract and company policy, not a standalone law. An exclusivity clause worded to cover "any other employment or business activity" makes moonlighting without consent a breach, grounds for discipline up to termination. A narrower clause, limited to competing work or use of company time and resources, leaves an unrelated side project done on your own time in much greyer territory. The clause's scope, not a general moonlighting law, decides most real disputes.

US and global contrast

In the United States, most states permit an employer to require full-time, exclusive service during employment, which is not far from India's underlying logic. The bigger US divergence is what happens after employment ends: most US states apply a "reasonableness" test to post-termination non-competes rather than voiding them outright, the opposite of India's blanket Section 27 approach (see our non-compete page for that comparison in detail).

Where the two systems differ even during employment is "at-will" flexibility. US at-will employment lets an employer terminate for taking a second job, subject to state and contract limits, without the formal notice-period and garden-leave structures common in Indian contracts. Indian employment relationships are more contract-driven, with notice periods and garden leave doing much of the work "at-will" does in the US, which is why whether garden leave is paid matters more in an Indian contract review than in a typical US employment agreement.

FAQ

Can my employer stop me from taking a second job while I am still employed? Generally yes, if your contract has an exclusive-service clause. Under the Golikari rule, a restraint operating only during your employment is not treated as restraint of trade under Section 27, so courts will usually enforce it, especially if the second job competes with your employer.

Is moonlighting illegal in India? No specific law bans moonlighting for most private-sector employees. Section 60 of the Factories Act, 1948 bars dual factory employment on the same day but does not cover IT or professional roles. Whether moonlighting is allowed depends on your contract's exclusivity clause and your company's policy, not a general statute.

My employer put me on garden leave during my notice period. Is that enforceable? Usually yes, as long as you are still formally employed and, ideally, still paid. Garden leave operates during the employment relationship, the same logic that makes exclusivity clauses enforceable under Golikari. If it is unpaid or has no defined end date, that starts to resemble an unpaid restraint rather than a genuine notice-period arrangement.

Does my confidentiality obligation end when my exclusivity clause ends? No. Confidentiality protects information and typically survives termination on its own defined terms, often years. Your exclusivity restraint, by contrast, generally stops applying the day employment ends. A contract that mixes the two into one clause makes it harder to tell which is which, itself a red flag.

If my contract restrains me during employment but also mentions "after termination," which part is enforceable? The during-employment part is very likely enforceable under Golikari. The post-termination part is void under Section 27, the same logic that struck down the extended restraint in Superintendence Co v Krishan Murgai. Courts generally strike the post-termination reach specifically, not the entire clause.

Can I mark up a clause like this myself before sending it to a lawyer? Yes. You can drop the contract into Weave, Adira's free browser-based contract tool, and flag exclusivity, garden leave, and confidentiality language for a first pass before it goes to a lawyer.

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This guide explains how Section 27 and the Golikari line of cases generally treat restraints that operate during employment, as distinct from restraints that try to operate after it. It does not tell you whether your specific clause, in your specific contract, will be enforced if it is contested; that depends on the exact wording, your role, and the facts of your situation. For that, talk to an employment lawyer before you sign, or before you assume a clause does or does not bind you.