New practice: Employers plan for employees starting side businesses or second jobs as cost of living rises

For example, an employee might be thinking of starting up a side business selling products offline or on online platforms like eBay and Etsy; offering their services privately, on a freelance basis; or taking on a part-time second job in addition to their main employment.

Full-time employees have an automatic duty of loyalty to their employer that means they are not allowed to compete with that employer, and some employers write this duty into employees’ contracts of employment. If an employee breaches this duty it can lead to dismissal for misconduct. However, it would be rare for an employer to be able to ban side businesses or second jobs completely if they are non-competing.

Note also that special rules apply to workers on zero-hours contracts, which make clauses purporting to stop such workers accepting other work, or requiring them to get their employers’ consent before doing other work, unenforceable. The government has announced that this ban will at some stage also apply to workers whose guaranteed weekly income is on or below the Lower Earnings Limit.

Some employers are happy for workers to run side businesses or take second jobs. They reason that it might stop employees being so worried about money, help their mental wellbeing and relationships, or mean that they develop new skills. However, employers usually require the employee to ask permission first – with the general rule applying that permission cannot be unreasonably refused.

Otherwise, employees are not required to tell their employers about side businesses or second jobs unless their contracts of employment or the employer’s policies say they are. However, requiring employees to disclose these helps the employer make sure the employee is complying with the working time rules regulating their maximum working hours, and that there are no health and safety implications, such as an overtired employee creating risk for both themselves and their co-workers.

It is sometimes legitimate to specifically ask an employee if they have a side business or second job, such as in disciplinary proceedings brought on grounds of performance, which could be caused by tiredness, lack of concentration, etc as a result of working two jobs.

Employers who want to monitor employees – particularly those working remotely – to ensure they are not operating their side business during their main working hours, should beware breaching the employee’s right to privacy and data protection laws, and do so only in accordance with a relevant policy. The same applies if the employer wants to check the employee is not making unauthorised use of company property such as computers in their other role.

If an employee is lawfully operating a side business or has a second job, they may be disciplined if their activities could affect their employer’s reputation – for example if they are generating income by posting discriminatory or offensive content on an internet content subscription service. This will depend on a whole range of factors – for example:

• the nature of the employer’s business;
• the nature of the content the employee is posting;
• the position the employee holds – for example, are they more senior, customer-facing or dealing with other third parties;
• how publicly visible the employee’s activity is;
• how identifiable the employee is;
• how easy it is to discover the link between the employee and the employer;
• the likely attitudes to such activity from customers, suppliers and the employee’s work colleagues if they find out;
• evidence of the nature and value of any actual or likely damage;
• most importantly, what it says in the employee’s contract of employment and the employer’s social media and other relevant policies.

The danger in disciplining employees in those circumstances is that employers act on moral rather than legal grounds, which could result in a successful unfair dismissal claim against them. Specialist advice is strongly recommended before taking action.

The same considerations apply if an employer decides not to recruit a job applicant having discovered such activities during pre-offer social media research.

Finally, note that employers should take steps to ensure the employee is not using the employer’s confidential information, such as customer lists, or other intellectual property in the course of their side business or second job.

Operative date

• Now

Recommendation

• Employers should consider the approach they want to take with employees who plan to generate extra income for themselves by starting a side business or taking on a second job, and review their employees’ contracts of employment and company policies accordingly.