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. Employees working second jobs doesn’t typically concern employers, but in some cases, it can impact the employee’s shift availability, work productivity, and professional behavior. That’s why it’s important to have a well-drafted policy to regulate how to approach it.
Our guide covers the details of crafting your outside employment policy—including do’s and don’ts—and the legal aspects it entails. To help you get started, download our free customizable moonlighting policy template.
Details to Include in Your Moonlighting Policy
Your moonlighting policy should at least include the definition of outside employment, what to do before considering secondary employment, and the consequences of not complying with the policy.
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.
Here are some stipulations to include in your outside employment policy:
First, define what secondary, outside, or moonlighting employment means to your company. The remainder of the policy will unfold from this definition. Your policy may have wording like:
The Company recognizes that some employees may choose to maintain employment outside of the workplace. Although company employees may engage in outside employment, any obligations—vocational or otherwise—should not impede the employee’s job, performance, and behavior in the workplace.
A main statement moonlighting clause 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. For example:
Any outside employment is secondary to the employee’s relationship with the Company. Outside activities, vocational or otherwise, may not interfere with the proper performance of the company employment. Employees should report to work on time, be refreshed, and be ready to start their workday.
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. It can state something like:
Since employees may not engage in any outside employment or business that could hinder or impair their performance or behavior while performing duties for or on behalf of the Company, the company requires that before engaging in any outside employment activities, the employee contacts human resources.
Your company will likely not want 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 not allowed. For instance:
Outside employment may not compete, in any way, with the Company employment or company objectives—nor may conflict with or compromise the company’s interests, including any weakening of confidentiality, be a result of an employee’s outside employment obligations.
In almost all cases, companies do not want employees utilizing company resources for their outside employment work. Mention this explicitly in the policy, such as:
No employee shall conduct work or accept any form of compensation from anyone for outside employment-related work during their workday or while on company property. This prohibition also extends to the use of company property for any purpose that does not relate to the business of [Company Name].
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. This may be worded like:
The Company has the right to refuse or deny any request for outside employment that directly or indirectly interferes with the daily operations of the Company. This can include work of the same or similar nature or companies that operate within the same scope of business.
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. You may state this as simply as:
If outside work activities cause or contribute to job-related issues for the Company, the employee may be asked to discontinue the outside employment relationship or face other disciplinary action.
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. Use language like:
No employee of the Company may engage in outside employment where their likeness is used for public representation, except where permitted. This may be limited to current employees who have client-facing or public-facing roles.
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. For example:
No employee shall conduct work or accept any form of compensation from anyone for outside employment-related work during their workday or while on company property.
Although the policy should fairly impact all employees, if there is a case of a specific job class or type that the policy impacts, then call them out by name within the policy (for example, customer service agents may be heavily impacted, while your IT technicians may not).
Outside Employment Policy Creation 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 some of the best practices to implement when developing a moonlighting policy:
| Do | Don't |
|---|---|
| Focus on what defines a successful employment relationship with the company, such as showing up to work on time, not missing scheduled shifts, performing as expected, and acting professionally. | 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.
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. For example, state laws in California, Colorado, and North Dakota, prohibit employers from taking 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 most common reasons moonlighting may result in termination 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
- Results in unprofessional behavior
Employers have the right to terminate employment if any of these occur. Learn the legally compliant way of approaching this in our guide on how to terminate an employee.
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 (and 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)
Moonlighting Frequently Asked Questions (FAQs)
No, moonlighting is legal in the US. However, company policy may restrict an employee’s ability to get outside work if it interferes with their job performance, creates a conflict of interest, occurs during the workday or work premises, or results in unprofessional behavior.
Yes, if your company has a no moonlighting policy, or if the second job creates a conflict of interest or performance issues, then you may be able to terminate the employee. Always check with your legal counsel, however, before making any decision.
A no moonlighting policy might state: “Employees may not engage in outside employment that conflicts with company interests, impacts job performance, or uses company resources without prior written approval.” However, we don’t recommend small businesses enact or enforce moonlighting policies, as these often serve to demotivate your workforce. It can also make it difficult to find the right talent for your business since so many workers today are forced to work multiple jobs just to make ends meet.
Moonlighting refers to holding a second job or a side gig outside of your primary employment. It can range from freelance work to part-time or seasonal work.
A moonlight clause in an employment agreement or company handbook restricts or regulates outside employment. It typically prevents conflicts of interest or any work that could negatively impact the primary job.
Allowing employees to moonlight means permitting them to take on outside work as long as it doesn’t interfere with their main job or violate company policies. Employers may set guidelines to ensure there are no conflicts.
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.
