I suspect it’s mostly about control, or maybe some misguided idea that employees owe loyalty to their employer. People trade their work for money. It’s not like getting married, forsaking all others.

If the employer sets clear performance expectations and has some way to measure performance, then employees either meet expectations or they don’t. If they don’t the employer can take remedial action, up to letting the employee go. It doesn’t really matter if the poor performance or low productivity was caused by another job or the employee playing video games or watching TV all day.

There’s some irony in the business the OP describes hires programmers out to multiple customers. That means the owners and managers of the company are working multiple jobs.