How can employers manage employees side hustles?

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How can employers manage employees side hustles?

July 31, 2022         Raphaella Revis

Side hustles, or secondary employment, aren’t new. However they have become far more common over the last few years and especially during the COVID pandemic. To an employee, this can provide additional income, a creative and entrepreneurial outlet, and maybe establish a new future for them if their side hustle blows up.

For an employer, a number of issues can arise including financial loss to the business (where the employee’s focus is divided), losing a great employee, and the creation of a competitor. One way to approach the issue is with consent protocols for employee to follow, and taking steps to avoid conflicts of interest. 

Consent

It is reasonable for employers to require consent by employees before taking on side hustles. This can be formalised into work policies and/or employment contracts. This was reinforced in the 2020 case Donelan where an employee’s unfair dismissal claim was dismissed because her employer had a policy that required consent for secondary employment (amongst other reasons).


Consent via Policies

An employer can and often should have a policy that addresses requirements around side hustles or secondary employment, especially if they are in industries where intellectual property is common (i.e. technology software or educational materials). Key areas to address may be:

  1. Consent to be requested from the employer/relevant staff without which the side hustle is not permitted.
  2. Disclosure of any conflicts of interest surrounding other business ventures. The side hustle should not bring a commercial or financial detriment to the employer, including instances of direction competition.
  3. Various requirements and restrictions, eg that work cannot be done on thee side hustle during hours of primary employment, and that no use of company material is permitted to be used in its service.

A policy can be amended based on circumstances or new information, but the employee must always be aware of such changes. 

Consent via Employment Agreements 

Employment contracts can be drafted with with appropriate safeguards and terms. Key issues could be those that address:

  1. Confidentiality – an employee cannot utilise any sensitive / specified information in their own business.
  2. Non-compete – an employee cannot poach clients, or operate or be involved in any external employment in the same market or category as the primary employer.
  3. Intellectual property, which is especially important if the business has unique software or any other unique form of IP.
  4. Warranty clauses, which in this context can mean a guarantee that an employee will use working time for the primary employment only.


If an employer has particularly confidential information or intellectual property (such as software), then they can also use a commercial confidentiality and intellectual property agreement as a further means to address the issue with the employee.  

What’s Next?

It is important for you as an employer to effectively manage the way an employee may engage in a side project. You may also need to balance out an employees wishes to have their own creative and entrepreneurial outlets and don’t need to assume they are necessarily in conflict.

Need help revisiting employment agreements or workplace policies? Feel free to reach out to us anytime to discuss this (or any other commercial legal) issue.

About Raphaella Revis

Raphaella RevisRaphaella is a legal intern at OpenLegal and is currently a second year student studying Bachelor of Law and Science in Information Technology at UTS. Her interests are legal tech, contracts and IP.