Millions of full-time employees are creating new businesses as second sources of income with the goal of transforming the new businesses into primary sources of income. This begs a simple question: what is the legal framework governing side hustles?
From a practical perspective, an employer expects its employees to do their jobs. In formal terms, this means employees owe an implied duty of fidelity to their employers. This simple concept has two core principles. First, the side hustle should not negatively affect the employee’s job performance. Being too tired to work, showing up late, and failing to finish tasks will not be excused. Second, it means the employee’s side hustle should not impact the employer’s business. Unfortunately, too many employees fail to—or choose not to—understand the following acts are unacceptable: (a) directly competing for the employer’s customers in the employer’s market; (b) disparaging their employer for any reason; and (c) using time at work to work on the side hustle.
Although their powers are somewhat limited, employers can still deny employees the opportunity to engage in a side hustle under a variety of circumstances:
- Employment contracts for senior employees often require these employees to devote all of their time, attention, and abilities to their employer’s business.
- Employment contracts may require employees to first seek permission from the employer before performing other work. Of note, an employer’s denial of a request could be a breach of contract.
- Employers may take actions to protect their confidential information and business reputation that would be negatively impacted by an employee engaging in certain activities.
Employers must also remember permission to engage in a side hustle can be withdrawn when circumstances change.
Employers should not treat all employees who disregard directions to limit their work activities in the same way. High ranking employees competing against their employers are substantially different than lower-level employees working second jobs to take care of their families. Talking with employees to better understand why they are pursuing a side hustle should resolve most, if not all, concerns employers may have. Savvy employers could ultimately engage an employee to develop a new line of business or improve their operations through this process.
Side hustles are a fact of life. How employers and employees handle these situations should not push employees to double their efforts because their employers are unreasonable and unsympathetic.
David Seidman is the principal and founder of Seidman Law Group, LLC. He serves as outside general counsel for companies, which requires him to consider a diverse range of corporate, dispute resolution and avoidance, contract drafting and negotiation, real estate, and other issues.
He can be reached at david@seidmanlawgroup.com or 312-399-7390.
This blog post is not legal advice. Please consult an experienced attorney to assist with your legal issues.
