Can a Full-Time Employee Legally Own an Agency? Seeking HR Advice on Disclosure and Policies

Dear All,

Can a full-time/confirmed employee work in an organization and at the same time have some type of agency in his/her name? This employee could be just a signing authority for this particular agency.

I am interested to know two things: a) Is it permitted? The appointment letter mentions clearly that the employee should not engage in any other employment activity. In a way, the employee is actually not working there but might be the owner or signing authority. b) Should the employee inform the management about owning the agency?

I really need inputs from all the HR Seniors. Please suggest and guide!!

Request to kindly pour in all your inputs ASAP.

Hi Shalini,

I accept that in most appointment letters, this clause exists where employees are not allowed to take on any other employment or engage in any other activities, blah blah blah...

First, we need to understand the role of an employee in an organization. Companies hire employees for their skills and competence, not to bind them as labor. An employee has the right to pursue any business or profession as long as it does not conflict with their employer's business interests.

We should be reasonable when dealing with people. If an employee becomes a signatory authority in a business belonging to their brother or relative, or becomes a shareholder for income tax purposes, that should not pose a problem for you.

There are many such examples, but employees often do not share this information with their employers as it is not the employer's concern. You should appreciate their disclosure of such information to you.

Regards,
Sawant

Mr. Sawant,

Thanks a lot for being kind enough to answer my query! Well, the employee hasn't yet disclosed anything to the employer. In fact, the other colleagues have reported it. So at the first juncture, we have to gather information as to what exactly it is. If it is just for tax savings, that would be a real "okay" thing for us.

My organization is really quite caring as far as employees are concerned. I just had a doubt as to where a line has to be drawn since we are too lenient in our dealings and at the same time it should not be that people develop a taken-for-granted approach. That's the reason I want all my HR friends and seniors to guide me.

Best Wishes,

Hi Shalini,

First, ask those other colleagues not to bother about someone else's life. Second, an employee can have another business (most of them do too) as long as it does not raise any conflicts of interest with your organization. For example, he cannot have a business similar to your organization or work (in any capacity) for your competitors. Whether the employee has this other business for tax benefits or not is not your concern.

Dear Deepthi,

Thank you for your kind words! I would like to stress again that it was not known for what purpose this particular employee was engaged at the second place or agency herein.

It is essential to determine whether the interests of the organization are conflicting or not.

Anyways, thank you again.

Yes, I agree with Deepthi. It's not the organization's concern what the employee does or what business he is involved in. Just forget about this and ignore it.

Hi,

Well, I have a different opinion altogether. If the person is the owner of a firm, his liability as the owner conflicts with the job that you are offering. If the person has not disclosed this information to you, he might be making a big blunder during the interview session with your company. It is not easy to grant a person ownership or signing authority of any firm. The appointment itself will have a lot of legal complications as he is a competent person from another firm.

Suresh

Hi,

I would suggest that you not ignore the situation, as that employee may be transferring data from your organization for personal benefit. First, try to determine the capacity in which he is engaged with the business and take appropriate action. If his business is related to the organization's business, then it becomes a matter of concern.

Dear all,

Can a full-time/confirmed employee work in an organization and at the same time have some type of agency in his/her name? This employee could be just a signing authority for this particular agency.

I am interested to know two things: a) Is it permitted? The appointment letter mentions clearly that the employee should not engage in any other employment activity. In a way, the employee is actually not working there but might be the owner or signing authority. b) Should the employee inform the management about owning the agency?

I really need inputs from all the HR seniors. Please suggest and guide!!

Request to kindly pour in all your inputs ASAP.

Generally, an employer expects his employee to be fully involved in the job. If the employee is either employed or involved in any private business, his concentration would be distracted. Hence, the employee should not be gainfully employed elsewhere.

Since it is mentioned in the appointment letter - which is supposed to be a contract between the employer and the employee - the details about the agency business should be informed to the employer. Otherwise, the employer has every right to take action if he so wishes.

G. Sankaranarayanan [Login to view]

Hi Ravi,

Thank you for responding, my dear friend! I have noticed that you tend to oppose everything that HR does. Please do not interpret it in any other way. I have no issues with it; it's your choice, and you may have had many such experiences!

I also want to express my sincere gratitude to Mr. Suresh, Mr. Pranay, and Mr. Sankaranarayan. I completely agree that understanding the other perspective is crucial. When working with a firm or organization, your primary duty is to fulfill your job responsibilities. There is no harm if an employee mentions their involvement with another agency, as long as it does not conflict with the company's interests. It is essential for the individual to realize this from the outset.

I am truly grateful for the guidance from the HR circle! I will definitely provide updates on the progress of this particular case, whatever may unfold.

Best wishes to all,

Hi Shalini,

When in the appointment letter, if it is clearly mentioned that the employee should not engage in any other employment activities, associating with a second employment is illegal and should not be permitted. Even if it is just to the extent of signing cheques or letters, it will be considered a second employment. If the employee engages in a second job, they must obtain written permission from the management to do so. Normally, the employer will not entertain such double job activity, especially if the nature of the business of the second employment is the same as the employer's business.

My suggestion to you as an HR person is to immediately issue a letter to that employee pointing out that they have breached the terms and conditions of the appointment letter and request an explanation. Once you receive the written explanation from the employee, forward it to your management with your remarks for their further directive on this matter.

Regards,

Vijay Gaonkar, Goa

Hi Shalini,

It is important for the employee to keep the employer/HR informed about their other business. The employer needs to understand the nature of involvement and ascertain that there is no conflict of interest. The employer can give consent with a condition that it does not impact work commitments. Thus, there is transparency in the relationship, and you have a happier employee.

Regards,

Robbert

Heartfelt thanks to Mr. Robbert, Mr. Vijay, and Mr. Piyush for taking out time and posting their views! I support your views that either management or the Human Resources department should be kept informed about any other activity!

Hi Shalu,

No law will support this conclusion, and it is ill-thought to expect an employee to disclose their business to the company unless it violates a conflict of interest. I recommend reading an article on fundamental rights expressed in the constitution of India.

It is immature and egoistic thinking to believe that an employee loses their privileges once they take employment with an employer. This mindset belongs to the medieval age and does not align with 21st-century HR practices.

Regards,
Sawant

Mr. Sawant,

Perhaps you are getting my statements absolutely "wrong"! I second that an employee is free to choose activities, but it should not interfere or clash with the company's interests! My initial query did clarify that we weren't aware of what exactly it was.

The clause in the appointment clearly states that outside employment is not permissible. If, in any case, an employee has secondary employment for whatever reasons, then I think the company should be made aware of it. Secondly, when you sign the so-called "Confidentiality agreement and appointment letter," you ought to adhere to the matters mentioned in it.

A company can run into huge losses if an employee is simultaneously conducting the same activities. Perhaps he or she can offer services (might not be entirely) but along the same lines to the client, that too at half the price, or an employee can disclose client details to another company or use it for personal gain. I really do not see why a company should not express concerns about it. We are all mature professionals with self-responsibility.

Today it might be a case of secondary employment, but tomorrow an employee could hide many other things too. How long will it take to happen? My answer would be very soon.

Nowhere have I mentioned that privileges are revoked once an employee takes employment at another company, unless it interferes with the interests of the organization; we are not concerned!

I do not agree that it is uncivilized or medieval-age thinking—all we are concerned with is that his/her activities should not conflict with the organization's. We are all free to have our opinions and views.

Thanks for your response. When we are professionals, I don't seem to understand why ego and immaturity should come into play! It's pure business, and we need to be vigilant about it, that's all.

As per my word, I'm posting the development of this case. This particular employee was undertaking a similar profile of business activity as our company's. We didn't actually have to do anything as one of our clients got this news from the market, and he, in turn, did inform us. The employee was in a partnership business acting more as a signing authority, but his name was involved too.

He has given it in writing undertaking responsibility for not getting involved in any future activity that might affect the company's business.

I sincerely express my thanks to all those who contributed to this thread. Best wishes to all.

Hello Shalu,

I believe we both agree on the principle of each other's point of view on conflict of interest. Beyond conflict of interest, nothing is tenable or practical. We, as HR professionals, cannot spy on each employee's activities beyond the workplace. Principally, we are hiring employees for their skills and competence, not the employee himself to surrender his agenda of life.

I accept your conclusion to the extent that the employer has the right to confirm an employee's loyalty, integrity, and fidelity to the organization. Nothing beyond this point is the employer's business to look into employees' personal affairs.

I appreciate your points as good for debate.

Regards,

Sawant

Mr. Sawant,

I completely accept your viewpoint.

We are just hiring an employee's services! I believe we all can decide by ourselves which of the activities fall under this purview and which don't. In case it baffles us, then discussing it or seeking guidance (within the organization or from competent individuals outside) should help an individual. We are dealing with living beings where flexibility and understanding are a must and foremost in our HR world.

Thanks for sharing your views. Unless and until we discuss it, it would not have been possible for us to consider both sides of the coin.