Can an Employer Prohibit Moonlighting?

It’s common for employees to have more than one job or have a gig on the side. It’s also common for employers to dislike “moonlighting” by employees because of possible conflicts of interest or problems arising from conflicting work schedules or demands on the employee. But what can employers actually do about moonlighting?

Employers can’t prohibit outside employment entirely, but they can put reasonable restrictions on it. See Bus & P C §16600; Lab C §96(k); Lab C §2863 (“an employee who has any business to transact on his own account, similar to that entrusted to him by his employer, shall always give the preference to the business of the employer”).

Employers may prohibit employees from establishing a competing business during employment or engaging in work that creates a conflict of interest. Such an interest is apparent, for example, when a salesperson for a router manufacturer acts as a sales representative for another router manufacturer who’s in direct competition with the first employer.

But even under this example, Lab C §98.6 appears to require that there be a written employment contract that recites the prohibited conduct. It should also state that such conduct is an activity that’s in direct conflict with the essential operations of the employer and that for the employee to engage in such conduct would result in a material and substantial disruption of the employer’s operation. See Lab C §98.6(c)(2)(A).

This writing can be in the employee handbook. For example:

Employees may engage in outside employment to the degree that it does not conflict with the interests of the Company. No employee is permitted to accept employment, whether for pay or otherwise, if the additional outside employment leads to a conflict or potential conflict of interest for the employee, if the nature of the outside employment will reflect negatively on the Company, or if the outside employment conflicts with the duties of the employee.

As long as the employee doesn’t violate an employer’s outside work policy, the employer can’t take any adverse employment action against an employee who engages in lawful conduct during nonworking hours away from the employer’s premises. Lab C §§96(k), 98.6.

Sample employee policy language like this can be found in CEB’s Drafting Employment Documents for California Employers. For an alternative outside employment policy language, check out CEB’s Advising California Employers and Employees  §13.87. Both of these titles are part of CEB’s OnLAW Employment Law Library.

Other CEBblog™ posts you may find useful:

© The Regents of the University of California, 2018. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

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