Can Employers Restrict Employees’ Second Jobs? What Employers Can and Cannot Do

As side jobs and gig work become increasingly common, employers may be wondering how much control they have over employees' outside activities. Federal and state laws limit broad restrictions on secondary employment, but employers can still establish policies to protect confidential information, prevent conflicts of interest, and maintain workplace performance. The Workplace Advisors outline what employers can and cannot restrict, along with practical steps for developing clear, legally compliant policies.

In brief: Employers can restrict employees' second jobs only when the rule is specific and tied to a legitimate business reason, such as working for a direct competitor, using confidential information, or doing outside work on company time. Blanket bans on outside employment are risky under the National Labor Relations Act and are limited or prohibited by several states, according to The Workplace Advisors.

Key takeaways:

• Broad "no outside employment" rules are presumptively unlawful for most nonsupervisory employees under the NLRA, union or not.
• Narrow rules are allowed: conflicts of interest, confidential information, attendance and performance, and use of company resources.
• Some states protect lawful off-duty work or bar moonlighting bans for lower-wage employees.
• Noncompete agreements are the wrong tool for limiting side jobs as many states restrict them.
• The strongest approach is a set of specific, consistently enforced policies with signed acknowledgments.

Second jobs, side businesses (or “hustles”), gig jobs, personal investments, and ownership opportunities are becoming more common. Employees may seek additional income to cover routine expenses, manage a temporary financial setback, save for retirement or a child’s education, monetize a hobby, pursue a long-term goal while maintaining steady income, or simply seek to earn money through an after-hours activity.

Some employers openly support outside ventures, while others become concerned when they learn that an employee has another source of income and want it stopped. As an employer, here’s what you need to know when managing employees with side jobs.

What you cannot do. The federal National Labor Relations Act (NLRA) treats broad, nonspecific outside work restrictions by employers as presumptively unlawful for most employees, including nonunion employees. (The NLRA does not apply to managers or supervisors.) It does allow an employer to create restrictions that are specific and narrowly tied to a legitimate business reason. For this reason, why and how you write a policy matters as much as what it says. For example, some states prohibit bans on moonlighting for employees earning below an income level while others prohibit blanket bans altogether.

What you can do. Employers can (and should) set clear rules for outside employment and activities both on and off the clock. Communicate and enforce the following expectations consistently across all positions as allowed by federal and state law:

• Define conflicts of interest as a specific list rather than an open-ended standard, for example working for a direct competitor, or for a client, vendor, or supplier the employee deals with on the company’s behalf, when the work requires using or disclosing the company’s confidential, proprietary, or client information, or if it uses company time, equipment, or materials. Outside work that does not fall within those categories is not a conflict.
• Define proprietary and confidential information and clearly prohibit employees from disclosing it during employment and, when applicable, afterward. This may include nonpublic financial data, client and prospect names, marketing strategies, trade secrets, formulas, processes, and client information learned on the job.
• Set clear attendance and performance standards so employees know when they must be present and available, what work they must perform, and the expected level of performance. It is generally acceptable to prohibit outside work while employees are on the clock, as well as selling non-company products or services or promoting another job while being paid or attending events as a company representative.
• Clarify permitted and prohibited uses of company equipment and resources. Specifically bar the use of company technology, supplies, and materials for nonbusiness purposes. Keep in mind that if employees may use company computers, phones, or internet access for personal matters, you may also need to permit comparable use for outside interests, including a second job.
• Encourage, but do not require, employees to disclose new outside ventures so potential conflicts can be addressed early.

What about noncompete agreements? Companies often use non-compete agreements and other restrictive covenants, such as non-disclosure and non-solicitation agreements, overly broadly to limit employees’ outside activities. These are not the right tools to use to restrict gig work. While the much-publicized 2024 Federal Trade Commission rule banning non-competes was never implemented, many states and jurisdictions severely restrict or even ban them. These restrictive covenants should be reserved for unique positions and circumstances and should be reviewed regularly by legal counsel.

Situations that may apply to your company.

• In some industries, employees commonly hold similar second jobs, especially when wages are low or full-time work is unavailable. Cleaners, landscapers, restaurant workers, security guards, home health aides, caregivers, and personal care or fitness providers may work for multiple companies because they need the income and can coordinate their schedules. Even so, it may be possible for you to require them to work their full shifts, remain focused while on the clock, and avoid using company resources for outside work.
• Independent contractors, by definition, may provide the same services to other companies. You may still hold them to confidentiality and non-solicitation obligations, but legal counsel should review your agreements to confirm that those protections are enforceable.
• Volunteering usually is not restricted by an outside-employment policy because it is unpaid and usually unrelated to the business. It can still cross the line in situations like these:
  • The employee “volunteers” for your company by performing work for which they or others are normally paid. That is considered compensable work, not volunteering, and likely should result in overtime for non-exempt employees.
  • The employee uses company logos, products, or other materials in a way that suggests they are representing the company.
  • The employee serves on the board or as an officer of an organization that is, or becomes, a client, vendor, or competitor, creating a conflict of interest or an obligation to both sides.

Actions you should take now.

• Know the laws: The actions you can take and policies you set are dictated by federal and state law, and they vary considerably by state. Local laws and regulations are constantly changing and not knowing them will undermine your ability to establish and enforce rules that protect your operations.
• Policies: Draft or update the policies needed to protect company operations, set expectations, and support consistent accountability. Instead of relying solely on an Outside Employment policy, ensure your other policies (e.g., Attendance and Punctuality, Conflicts of Interest, Confidentiality, and Use of Company Resources) set clear expectations about what employees may and may not do on and off the clock without restricting their legally protected rights.
• Communication and accountability: Publish this and all relevant policies and obtain signed acknowledgments from all employees. If you learn about an employee’s outside venture, remind the employee of the applicable rules. Apply those rules consistently: if one employee sells cookies to coworkers, another should be allowed to market a similar business to the same group in the same manner.
• Agreements and restrictive covenants: Identify positions that are essential to the business or have access to proprietary information critical to the company’s success. Consult legal counsel to determine whether non-compete, non-disclosure, or non-solicitation agreements are appropriate and to draft them.

Second jobs and side businesses are here to stay. Protect your company now, before employees spend work time or company resources on outside activities or solicit clients for unrelated products and services.