Moonlighting Policy: Handling Outside Employment [+ Free Template]

A moonlighting policy (also known as an outside employment policy) safeguards employers from potential conflicts of interest without needlessly limiting employees’ rights and options for working additional jobs. Our guide covers the details of crafting your policy—including do’s and don’ts—and the legal aspects of an outside employment policy.

Download our free customizable moonlighting policy template to help you get started.

Did You Know?

The expression “moonlighting” stems from those who go to their second job in the afternoon or evening after completing their day job. Although legal within the US, many employers have policies around this activity to ensure that ground rules are clear and understood and do not negatively impact the employee’s relationship with their job or the business-at-large.

Details To Include in Your Moonlighting Policy

Many people maintain second jobs to help bring in a little extra cash. This is typically not a concern to employers; however, in some cases, it can impact an employee’s shift availability, work productivity, and professional behavior. It may also cause other issues.

It is best to announce or highlight your moonlighting policy during the hiring process, specifically during the new employee onboarding process. Additionally, include this policy within your employee handbook and have your employees sign and acknowledge that they have received, read, and understood the handbook and all policies within.

Graphical representation of what to include in a Moonlighting Policy.

Here is a list of attributes to include within your outside employment policy:

Define what “outside employment” means to the company: First define what secondary, outside, or moonlighting employment means to your company. The remainder of the policy will unfold from this definition.
Add a general hindrance clause: This main statement should frame the policy overall and should speak to the reality that employees may not engage in any outside employment or business that could hinder or impair their performance while on the job.
Ask for notices of outside employment: Much of the time, employers who allow outside employment will request that employees notify them when a second job is secured. This allows the company to perform due diligence through its methods of observation and not solely based on the employee’s word.
Address impacted employees: Although the policy should fairly impact all employees if there is a case of a specific job class or type that the policy impacts, call them out by name within the policy (for example, customer service agents may be heavily impacted, while your IT technicians may not).
Mention any encumbrances and conflicts of interest: Obviously, your company does not want your employees moonlighting at a competitor’s business. Outline what this means to your organization and offer examples (particularly if there are one or two specific competitors that are forbidden).
Clarify your stand on secondary work on company premises: In some cases, outside employment refers to selling items (such as homemade goods or direct sales products) at the workplace—in lunchrooms, the parking lot, or other work areas. Whether this activity is prohibited or permitted, specifically mention this in your policy.
Specify the use of company resources: In almost all cases, companies do not want employees utilizing company resources for their outside employment work. Mention this explicitly in the policy.
Define public representation: Generally, if you have employees working second jobs, it is unideal to allow someone who works for you to be a public face for another company. In advertising, marketing, branding, and so on, it is wise to outline the do’s and don’ts in this area.
Mention the right of refusal: Although an across-the-board denial of employees’ outside employment is impractical (as you truly cannot prevent employees from doing anything when “off the clock”), employers can prohibit employees from working, as noted, for competitors and certain vendors, suppliers, customers, and so on.
Declare consequences for violating the policy: Your company needs to define what the consequences are if there is a violation of this policy. If there is a possibility of employment termination, then it should be referenced within the policy.

Outside Employment Policy Best Practices

Any outside employment policy should focus on the matter of non-interference with the business. This includes the ability and willingness of employees—regardless of outside activities—to make their scheduled work shifts, perform duties related to their job, and maintain professional behaviors consistently.

The following are good practices to consider when you are developing your moonlighting policy:

Do's	Don’ts
Focus on what defines a successful employment relationship with the company, like showing up to work on time, not missing scheduled shifts, performing as expected, acting professional, and so on.	Attempt to define what the employee can and cannot do while away from the workplace. Your policy should not infringe on an employee’s rights.
Use inclusive language that offers benefits to every employee from top management to hourly employees.	Make the policy so restrictive that it doesn’t allow for any outside work at all. Some employees may sell their homemade goods or work for direct sales companies in their free time.
Provide work schedule options within your policy—perhaps offer flexibility or consistency so that employees can manage work shifts along with outside employment opportunities.	Create a policy that negatively impacts lower-income earners (who are the ones who most often hold more than one job).

Legal Aspects of Moonlighting Policies

Although you will develop your own rules when it comes to outside employment, you need to be aware of laws that might impact your policy. For instance, at-will employment applies in all states (except for Montana), meaning that an employee can leave their job or be terminated at any time without cause.

That said, many states have laws that 1) prohibit employers from forcing employees to sign contracts that restrict their outside employment; and 2) protect employees from being fired for taking outside employment.

This is enforceable in California, Colorado, and North Dakota; they mandate that employers may not take any employment action against employees for their participation in legal activities during non-work time (contingent upon the fact that employees are performing normally at the workplace).

When Moonlighting May Result in Termination

The three most common reasons are when the outside employment-related work:

Constitutes a conflict of interest
Occurs during the workday and/or on company property
Impacts the employee’s efficiency in performing their primary work duties or results in unprofessional behavior

Employers have the right to terminate employment if any of these occur.

What Information an Employer Can Request

Employers have the right to inquire if the employee has outside work relationships. This right is provided in the National Labor Relations Act rules and regulations, which state that an employer may ask an employee whether they have any outside work relationships that could affect their job performance.

Generally, the following details are safe (legal) to ask for and can help you become knowledgeable about your employee’s outside employment endeavors:

Name and active DBAs of the employer
Employer’s address
General description of the outside employment relationship (is the employee working consistently, seasonally, as needed, occasionally, and so on)
Type of outside employment-related work performed
Licenses or certifications that are required or preferred (this is to ensure that the primary employer is not paying for licenses or certifications that the employee is financially benefiting from elsewhere)

Bottom Line

A well-written moonlighting policy, signed as part of the new employee forms, will prevent confusion and uncertainty and provide both the employee and the employer a reference material whenever there are questions or concerns. It also allows the employee to earn extra income for their family, start a side business, or monetize a hobby while the employer gets a concrete set of ground rules and the ability to enforce them if needed.