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An Outside Employment Policy is a written workplace policy that establishes the rules governing whether and how employees may hold secondary jobs, freelance engagements, board positions, or self-employment activities while employed by an organization. It defines what counts as outside employment, requires employees to disclose and seek approval before accepting secondary work, identifies categories of outside activity the organization will not permit β such as working for direct competitors or using company data for personal clients β and states the consequences for non-compliance. Unlike a contractual non-compete clause, this policy operates as an internal HR framework that sets process and expectations rather than creating a standalone legal obligation.
Without a written outside employment policy, you have no consistent basis for evaluating or responding to employee moonlighting β and the gaps are costly. An employee who uses your proprietary data or client relationships while freelancing on the side can divert revenue and expose confidential information before you are even aware of the conflict. Performance problems tied to fatigue or divided attention become difficult to address when there is no documented expectation that outside work must not impair the primary role. In regulated industries such as financial services, the absence of a formal disclosure process can itself constitute a compliance failure. A clear, well-communicated policy closes these gaps by establishing a documented approval workflow, explicit prohibited activities, and a graduated disciplinary framework β giving HR and managers the tools to act consistently and defensibly when outside employment becomes a problem.
| If your situation is⦠| Use this template |
|---|---|
| General workforce covering all employee levels | Outside Employment Policy |
| Executive and senior leadership roles with equity stakes | Executive Conflict of Interest Policy |
| Employees in regulated industries such as finance or healthcare | Conflict of Interest Policy |
| Remote and hybrid workforces with higher moonlighting frequency | Remote Work Policy |
| Independent contractors engaged alongside permanent staff | Independent Contractor Agreement |
| Organizations requiring a standalone disclosure form for approval requests | Outside Employment Disclosure Form |
| Companies addressing intellectual property created during outside work | Intellectual Property Policy |
Why it matters: Unpaid advisory roles, board seats, and equity positions in competing startups carry the same conflict-of-interest risk as paid jobs. A policy that ignores them leaves a visible gap.
Fix: Expand the definition of outside employment to include unpaid roles, advisory positions, and any financial interest β such as equity or profit-sharing β in an outside entity.
Why it matters: A side job that was harmless at hire can become a direct conflict after a market shift, a client relationship deepens, or a competitor is acquired. Static disclosure creates a false sense of security.
Fix: Require employees to re-disclose any material change to existing outside work and to disclose new engagements at any point during employment, not just at onboarding.
Why it matters: If approvals are inconsistently granted β approved for one employee, denied for another in a similar role β the company is exposed to claims of discriminatory or arbitrary enforcement.
Fix: Require HR to document the specific factors considered for each approval or denial and retain that record for the duration of employment plus two years.
Why it matters: Listing only termination as the consequence for non-compliance leaves managers with no proportionate response for minor or first-time violations, leading to either under-enforcement or disproportionate outcomes.
Fix: Include a three-step scale: written warning and mandatory disclosure for a first undisclosed engagement, revocation of any active approval for a second violation, and termination for repeated or egregious breaches.
Why it matters: Employees who receive approval for outside work may assume their IP and confidentiality obligations do not apply to work performed for a secondary employer β especially if those topics are only addressed in the employment contract.
Fix: Add an explicit clause stating that all existing confidentiality and IP obligations remain in full force during any approved outside employment, regardless of when or where the work is performed.
Why it matters: An undated, unreviewed policy quickly falls out of step with changes in employment law, remote-work norms, and company structure β and signals to employees and auditors that it is not actively maintained.
Fix: Set an annual review date in the policy document itself, assign ownership to a named HR role, and calendar the review in your HR task management system at the time of publication.
Replace all [COMPANY NAME] placeholders with your registered legal entity name and add the policy's effective date at the top of the document.
π‘ Use the registered entity name, not a trade name, so the policy is consistent with employment contracts and your employee handbook.
Confirm whether the policy applies to all employees, including part-time, fixed-term, and remote workers. Add any carve-outs β for example, board members governed by a separate conflict-of-interest policy.
π‘ Broader scope reduces enforcement inconsistencies. If you carve out a group, document the reason to avoid discrimination claims.
Review the default list of prohibited activities and add or remove items specific to your industry β for example, patient solicitation bans in healthcare or client-poaching restrictions in professional services.
π‘ Keep the list specific and exhaustive β courts give less deference to catch-all phrases like 'any conflicting activity.'
Fill in the notice period employees must give before starting outside work (10 business days is standard) and identify who reviews requests β direct manager, HR, or a designated committee.
π‘ A two-level review (manager plus HR) catches conflicts the direct manager may miss due to their own relationship with the employee.
Specify the attendance and output standards that must be maintained regardless of outside commitments, and state that approval can be revoked if performance falls.
π‘ Tie this clause directly to your existing performance management framework so the standard is already documented and familiar.
Cross-reference your standard employment contract's confidentiality and IP assignment clauses so the policy reinforces rather than contradicts existing obligations.
π‘ If your employment contracts vary by role, note the cross-reference generically β 'as set out in your employment agreement' β rather than quoting specific clause numbers.
Enter the annual review date, name the HR role responsible for updates, and specify how employees will be notified of changes.
π‘ Calendar the review in your HR task management system immediately after publishing β policies without a scheduled review date are rarely updated.
Insert the finalized policy into your employee handbook, send it to all current employees for acknowledgment, and include it in onboarding materials for new hires.
π‘ A digital acknowledgment with a timestamp is far easier to retrieve during a dispute than a paper signature file.
An outside employment policy is a written workplace rule that governs whether and how employees may hold secondary jobs, freelance engagements, or self-employment activities while employed. It typically defines what counts as outside employment, requires employees to disclose and seek approval before accepting outside work, lists prohibited activities such as working for competitors, and states the consequences for non-compliance. Organizations use it to protect confidential information, prevent conflicts of interest, and ensure employee performance is not compromised.
In most jurisdictions, there is no legal requirement to maintain a written outside employment policy. However, several US states β including California and New York β have laws limiting an employer's ability to restrict lawful off-duty conduct, which makes a clearly scoped, written policy important for demonstrating that restrictions are business-justified rather than arbitrary. Regulated industries such as financial services may face secondary employment disclosure requirements from regulators like FINRA or the FCA. A written policy provides the documented framework to manage these obligations consistently.
Employers can restrict outside employment that creates a conflict of interest, uses confidential information, or impairs job performance β but blanket prohibitions on all secondary work are difficult to enforce and, in some jurisdictions, unlawful. California's Labor Code, for example, limits employer control over lawful off-duty activities. The most defensible approach is a disclosure and approval model that permits outside work unless it meets specific defined criteria for denial, rather than a flat prohibition.
An outside employment policy focuses specifically on secondary jobs and freelance work β setting disclosure requirements, approval criteria, and performance expectations around an employee's work for another employer. A conflict of interest policy is broader, covering any personal, financial, or relational interest β including investments, gifts, family relationships, and board memberships β that could improperly influence an employee's business decisions. Many organizations maintain both, with the outside employment policy cross-referencing the conflict of interest policy for the broader framework.
Best practice is a written disclosure form submitted to the employee's direct manager and HR at least 10 business days before the outside work begins. The form should capture the name of the secondary employer, the nature of the work, estimated weekly hours, whether any company resources will be used, and whether any customers or colleagues of the primary employer are involved. Keeping the completed form on file creates a documented record that protects both the employee and the employer.
Failure to disclose outside employment as required by the policy is a disciplinary matter. Depending on the severity β whether the undisclosed work involved a competitor, a company client, or the use of confidential information β consequences typically range from a written warning to termination. In cases where the outside work caused measurable harm, such as diverting a client or misappropriating trade secrets, the employer may also have grounds for civil claims beyond the disciplinary action.
In at-will employment jurisdictions, an employer can generally terminate an employee for outside work that violates a clearly communicated policy, particularly if the work involves a competitor, uses confidential information, or demonstrably impairs performance. In jurisdictions with stronger employee protections β Canada, the UK, and most EU countries β termination for outside employment requires a documented connection to a legitimate business interest. A well-drafted, consistently enforced policy is the foundation for any defensible termination decision on these grounds.
Yes. Including the policy in the employee handbook ensures that all employees receive it at onboarding, it is referenced consistently alongside other conduct policies, and the company can demonstrate that employees were on notice of the rules. Supplement handbook inclusion with a signed or digitally acknowledged receipt so there is a dated record that each employee reviewed the policy.
An annual review aligned to your fiscal or calendar year is standard. Trigger an off-cycle review whenever the organization expands into new markets or industries, employment law changes in a jurisdiction where you operate, or a conflict-of-interest incident reveals a gap in the current policy. A policy that has not been reviewed in more than two years is unlikely to reflect current business operations or legal standards.
A conflict of interest policy covers a wider range of personal and financial interests β gifts, investments, family relationships, and board memberships β that could bias an employee's decisions. An outside employment policy focuses specifically on secondary jobs and freelance work. Most organizations need both, with the outside employment policy serving as a detailed subset of the broader conflict of interest framework.
A non-compete agreement is a contractual restriction β typically in an employment contract β that prohibits an employee from working for competitors during or after employment. An outside employment policy is an internal HR policy that governs disclosure, approval, and performance conditions for any secondary work during employment. The policy manages the process; the non-compete creates the legal obligation.
A code of conduct sets broad behavioral expectations β integrity, respect, and professional standards β across all aspects of employment. An outside employment policy provides the specific rules and procedures for one particular scenario: secondary work. The code of conduct typically references the outside employment policy rather than replacing it.
A remote work policy governs where and how employees perform their primary job duties β equipment, availability, security, and home-office expectations. An outside employment policy governs work an employee performs for a different employer or client. The two policies intersect for remote employees who are more likely to moonlight, and organizations with distributed teams should ensure both are current and cross-referenced.
FINRA Rule 3270 requires registered representatives to notify their firm before engaging in outside business activities β making a formal disclosure and approval workflow a regulatory compliance requirement, not just an HR best practice.
Engineers and developers who freelance on the side risk inadvertently incorporating company code or proprietary algorithms into client work, making the IP cross-reference clause particularly critical.
Clinical staff working for multiple healthcare providers face patient confidentiality obligations under HIPAA at each employer, and secondary employment with a competing practice raises both conflict-of-interest and patient-solicitation concerns.
Consultants, accountants, and lawyers who moonlight for clients of their primary employer create direct fee diversion and confidentiality risks β the prohibited activities clause must explicitly cover work for any current or prospective client of the firm.
| Path | Best for | Cost | Time |
|---|---|---|---|
| Use the template | SMBs and startups building an HR policy framework for the first time | Free | 1β2 hours to customize and publish |
| Template + professional review | Companies in regulated industries or jurisdictions with strong off-duty conduct protections | $300β$800 for an HR consultant or employment lawyer review | 2β5 business days |
| Custom drafted | Enterprises operating across multiple jurisdictions or subject to sector-specific secondary employment regulations | $1,500β$4,000 for a jurisdiction-by-jurisdiction employment law review | 2β4 weeks |
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