Handbook / Side business

Moonlighting policies: checking your job's rules before a side business

Many businesses begin as evening and weekend projects while the founder keeps a job. That is often the sensible way to start, but it comes with a question people skip: what does my employer allow? Moonlighting rules, conflict-of-interest policies and invention agreements can affect what you build and who owns it. This guide explains what to look for and how to handle the conversation. It is general information, not legal advice; if the stakes are high, talk to an employment lawyer where you live.

Where the rules live

Look in all of these, since the relevant clause is often not where you expect:

• employment agreement or offer letter
• employee handbook, often a section on outside employment or conflicts of interest
• code of conduct
• confidentiality or non-disclosure agreement
• invention assignment or intellectual property agreement
• non-compete or non-solicitation clauses

Keep copies of the versions you signed.

What the clauses usually cover

Outside work. Some employers allow it freely, some require disclosure, some require approval, and some prohibit certain kinds, usually competing work.

Conflicts of interest. Work for competitors, customers or suppliers of your employer, or work that could influence your decisions in your job.

Company time and resources. Using work hours, laptops, software licences, accounts or office space for your own business is commonly prohibited, and can also give your employer a claim to what you create.

Confidential information. Customer lists, pricing, plans and know-how belong to the employer. Using them in a side business is a serious problem regardless of other rules.

Inventions and intellectual property. Agreements may assign to the employer inventions or works you create during employment. How far that reaches depends on the wording and the law.

Non-solicitation. Restrictions on approaching your employer's clients or staff.

Where the law sets limits

Employers cannot always claim everything. California Labor Code section 2870 is a well-known example. It says an employment agreement requiring an employee to assign inventions does not apply to an invention developed entirely on the employee's own time without using the employer's equipment, supplies, facilities or trade secret information, except inventions that relate to the employer's business or actual or demonstrably anticipated research or development, or that result from work performed for the employer. A provision that tries to go further is unenforceable in California.

Other states have their own rules, and some have none. Non-compete enforceability also varies widely. Check the law where you work.

Public sector employees

Government employees often face specific rules. For federal executive branch employees, 5 CFR 2635.802 says employees may not engage in outside employment or activities that conflict with their official duties, for example where an activity is prohibited by statute or agency regulation or would require recusal from matters central to the job. It also cautions that an activity not prohibited by that section may still violate other ethics standards. Agencies can add supplemental rules, including prior approval requirements. State and local governments have their own codes.

Assess your side business

Write a short description of your planned business, then answer honestly:

1. Does it compete with my employer, or serve its clients or suppliers?
2. Will I use anything from my job: equipment, software, contacts or information?
3. Does it overlap with my employer's products, research or plans?
4. Will it affect my hours, availability or performance?

The more "yes" answers, the more carefully you need to proceed. Choosing a niche clearly distinct from your employer's business avoids many problems.

Disclosure and approval

If your policy requires disclosure or approval, follow it, in writing. A good request:

• describes the business briefly and plainly
• explains that it does not compete or involve the employer's clients
• confirms you will work on it only outside work hours, with your own equipment
• asks for written confirmation

If the policy is silent, you still have a choice. Being open can build trust and avoid surprises; keeping it private avoids an awkward conversation but can backfire if it is discovered and seen as a conflict.

Keep it clean

Whatever the rules, protect yourself with clear separation:

• your own devices and accounts for the business
• no work time, including calls and email
• no employer information, contacts or materials
• separate records showing when and with what you created your work

The guide on running a side business while employed covers the practical and tax side.

When to get advice

Talk to an employment lawyer if your side business is close to your employer's field, if you have signed broad invention or non-compete agreements, or if you plan to build something valuable such as software or a product.

Read every agreement you signed, assess the overlap honestly, follow any disclosure process in writing, and keep the side business separate in time, tools and information.