When can an employer limit or prevent workers from moonlighting?
Many employees see the value in having a side gig: Supplemental income, skill development, networking in their industry and — for some — the ability to do it all from the comfort of home.
Some employers, however, are less than pleased to find employees’ attentions are divided. But organizations should handle moonlighting with caution, judging by a recent case.
In Carter v. 1657593 Ontario Inc., a restaurant manager got into hot water after buying a stake in a new bar. The restaurant owners were concerned the manager would use his connections to get bulk inventory deals for the bar or potentially steal customers away from the restaurant. They terminated the employee — a decision later found to be wrongful dismissal. They were ordered to pay the manager 20 months’ salary.
“Generally, (our) courts hesitate to restrict employees unduly from gaining employment elsewhere,” said Katherine Ford, an employment lawyer at Sherrard Kuzz in Toronto. “Particularly in a world where it seems more and more jobs may be part-time, more contract-based... it’s often a reality that employees might have employment with another employer.”
While the courts may tend to err on the side of flexibility, the same can’t always be said of employers.
“In terms of employer concerns, I think they’re often around the idea that the employee may start working for a competitor, where they may be using confidential information or may be somehow diverting potential customers or consumers or clients to that other business,” said Ford.
“The other area where I think we see concerns sometimes cropping up is an employer’s concern that an employee may be moonlighting at their own job — they may have set up their own company or they may be running a side business, and using the employer’s time or resources.”
Generally speaking, the golden rule for moonlighting is that it shouldn’t create a conflict and it shouldn’t interfere with the main job, said Pierre Battah, a New-Brunswick-based management consultant at Battah Associates.
“Even if it’s unrelated to our business, if you’re showing up for work less able to contribute than you would be if you weren’t doing your second job, well then, I think there is a general sense that that is the employer’s business,” he said.
In an employment relationship, there are implied duties of loyalty, confidentiality, avoiding conflict of interest, said Stuart Rudner, founding partner of Rudner MacDonald in Toronto.
“But otherwise, generally speaking, you can’t ban someone from taking a job outside of their working hours or moonlighting. There’s nothing inherently wrong with that,” he said.
But things can get a bit more complex when it comes to upper-level employees in management or senior leadership, said Rudner.
“When we work with our clients (and) we’re dealing with managers or upper-level employees, we’ll typically put a clause in the contract which says something like ‘They’re not allowed to take on outside employment without the approval of the organization.’ And we usually add in wording to the effect that ‘The approval won’t be withheld unreasonably,’” he said.
But, at the same time, many organizations want or expect senior leadership to sit on boards or volunteer with charity initiatives, said Rudner.
Discipline and terminations
If an employer’s concerns are realized, it may be possible to impose discipline — but just-cause terminations are pretty rare, said Arleen Huggins, partner at Koskie Minsky in Toronto.
“There’s going to be very few circumstances where an employee is terminated for just cause for moonlighting,” she said.
In the case of a termination, the onus would be on the employer to prove the employee’s after-hours activities were inconsistent with their employment responsibilities, said Huggins.
Perhaps the most clearcut reasoning for a termination would be around impaired job performance, said Battah.
“(That is), when your job performance is suffering and we are able to draw some kind of direct relationship between that and your outside activity. So, to paint a simple picture, you’re falling asleep on the job because you’ve got an evening job somewhere else,” he said.
Terminations for conflict of interest are trickier, said Battah.
“As an employer, (you should) have a policy that is clear about the fact the onus is on the employee to advise us, and to keep us advised, as opposed to ‘If I don’t ask, you won’t tell me.’”
Whatever the reasoning, the employer would need solid evidence its business is suffering detrimental impacts, said Ford.
“In those cases, the employer needs to have pretty clear evidence... (of) the detrimental impact on the employer’s business and the employee’s ability to perform.”
Transparency and disclosure
It’s wise for employers to have clear policies around what is and is not allowed when it comes to moonlighting but, at the same time, employees should be transparent and upfront in disclosing their after-hours jobs, said Battah.
“It’s all about transparency. I think it’s appropriate for employers, in policy, to simply ask for employees to state if they’re involved in any outside activities that could impact either their ability to do their job or that would be some source of conflict,” he said.
“If those conversations are done transparently and openly at the beginning of an employment relationship, I think it gets everything going on the right foot. And then revisit it once in a while. I certainly know of many employers who will kind of recirculate that information either every year or two years.”
The reality is it’s not uncommon for people to have to supplement their jobs, said Battah.
“Given that the nature of employment relationships are all over the map, and full-time, regular employment is no longer the norm, necessarily… we are well-advised — especially at a time when we have some challenges in some sectors in finding people and hanging on to them — I think that would encourage me as an employer to be a little bit more flexible,” he said.
“Gone are the days where the employer (could) say, ‘All of your focus needs to be with us.’”