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What You Need to Know About Employee Moonlighting

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As an employer, you may wonder if you can (or should) attempt to prohibit your workers from moonlighting at second jobs or prevent them from launching their own businesses based on the experience they’ve gained with your company. In many cases, the answer is yes – but moonlighting among your workers should be handled carefully to minimize the risk of legal problems – and losing good employees.

Why Employees Take Second (or Third) Jobs

There are two major reasons why employees seek additional work to supplement their main jobs: a need for additional income and pursuit of personal ambition. Determining whether a moonlighting employee is motivated by the first reason or the second may have a significant impact on how you handle the situation.

If your moonlighting employee is a low-level or part-time worker, he or she may need the income from a second job to make ends meet. Similarly, even well-paid employees may need supplemental income if they have heavy family responsibilities or large financial obligations. In such cases, the main considerations are whether the employee is performing adequately in his or her main job and whether the second job represents a conflict of interest.

On the other hand, if your employee is pursuing a personal ambition, the first consideration is whether that ambition poses a threat to your company’s bottom line. For instance, if you discover your employee is laying the groundwork for his or her own company – and soliciting your company’s customers – there’s obviously a problem. And while dismissal is likely warranted in such a scenario, it’s still wise to gather the facts before taking definitive action.

Performance Problems with Moonlighting Employees

Moonlighting employees’ performance may falter or they may take too much time off. In both cases, employers are on safer ground if they address deficiencies in their workers’ performance rather than their second jobs. Dismissal may or may not be warranted – depending on the severity of performance deficiency and workplace policies already in place.

If your company does not have a clear workplace policy in effect, tread lightly before taking disciplinary action or dismissing the underperforming employee. This is especially advisable if the employee is a member of a protected class. Otherwise, your company may find itself on the wrong side of a claim of retaliation or wrongful termination. Even if you ultimately prevail, you’ll be forced to expend money and resources in court that could be better spent in running your company, generating new products or services or cultivating new customers or clients.

Moonlighting and the Family Medical Leave Act (FMLA)

Under the Family Medical Leave Act (FMLA), eligible employees are entitled to take up to 12 weeks of unpaid leave within a 12 month period to care for a new baby or a seriously ill or injured family member. That allotted leave is doubled for workers who are caring for a seriously ill or injured member of the military.

Many employers prohibit workers who are on leave through the FMLA from moonlighting. This is generally permissible if your company has an established policy in place before the situation arises, and if the policy is evenly applied. However, without such a policy, imposing a prohibition against a moonlighting employee while he or she is on leave through the FMLA could leave your company open to adverse legal action.

Conflict of Interest

The earlier example of an employee siphoning off your company’s clients or customers represents a classic conflict of interest. Likewise, an employee who improperly appropriates your company’s products or intellectual property is also engaged in a conflict of interest. In such clear cut cases, dismissal is almost certainly called for. However, employers should gather all the facts before dismissing an employee and especially before taking him or her to court.

If dismissal is called for, you may also seek to limit potential ongoing damage at the hands of your departing employee by restricting him or her from similar employment (or self employment) in the future. If the departing worker has signed a noncompete agreement, you’re more likely to prevail than if there is no such agreement in place. However, even with a noncompete agreement in place, there may be limits on the types of restrictions that are allowed. Such agreements are also almost universally time limited. In other words, you cannot prohibit a departing employee from working in a similar business in direct competition with your company forever – even if you would like to.

The Proactive Approach

Depending on the laws in your area, you may be on shaky legal ground if you attempt to issue a blanket ban against moonlighting among your company’s employees. You also run the risk of putting off potential and present employees – especially if your company’s wages are lower than average for your area. A better approach is to craft a policy that addresses detrimental effects on employee performance and conflict of interest resulting from moonlighting.

For instance, your company’s moonlighting policy can and should prohibit second jobs with employers that are in direct competition with yours. Prohibitions against using company materials or intellectual property on a second job are certainly reasonable. Requiring employees to seek permission before taking a second job is also advisable. Finally, there should be an understanding that actions taken toward employees regarding moonlighting will be based solely on legitimate company interests – and that such actions will be applied evenly.

Disclaimer: This article represents a general discussion about issues related to moonlighting. It does not represent legal advice. Please consult with an attorney specializing in labor relations with specific questions concerning your company and its moonlighting employees.

Audrey Henderson

Posted In: Management

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