The financial impact of COVID-19 has been significant and, in many cases, has had flow-on impacts on job security generally. With finances being an ever-present concern for most as they consider buying their first home, an investment property or the ultimate of financial independence, it is no surprise that millennial employees have a side hustle. As such there has been a corresponding need for employers to equip themselves in protecting their business interests in this regard.
Side hustles and potential conflicts of interest
Conflicts of interest issues can arise where an employee’s side hustle effects their employer in some capacity, amounting to a benefit being received. Moreover, undertaking a second job can prejudice the primary employer by way of confidentiality concerns, work productivity and use of company property. Indirect conflicts with your business may still have adverse implications and as such, employers are encouraged to consider the following:
1. Discuss side hustles from the outset and protect against them in an employee’s contract
Whether employees operate a side hustle or engage in secondary employment it should be discussed at the outset of the employment relationship. It is important that where an employee seeks to operates a side hustle, be it selling T-shirts or working weeknights as a consultant for another company, they should be directed from the outset that written consent must be obtained prior to engaging in such conduct. Employers are well placed to protect their business interests where they include their expectations as to employees working multiple jobs or running a side hustle, in the respective employee’s employment contract. In cases where there might be a real or perceived conflict, employers should review their contractual arrangements to ensure such specification is included and that it is emphasised to employees at the outset to avoid any reason for doubt later as to their obligations to their employer.
In Callum Weatherall v Elevate Education Pty Ltd t/a Elevate Education, the court looked supported the employer in the present case after an employee had set up their side hustle in direct competition with their employer. In this case, the employee established an educational-focused business centering on one-on-one coaching which directly competed with his employer. Moreover, the employee adopted a substantively similar website and released comparable advertisements for his service. As such the court did not look favorably towards this employee in respect to their conduct.
2. Implement internal policies
The duty of fidelity requires that an employee must not use information obtained during his or her employment to the detriment of the employer. This is particularly important where you as an employer operate in professional services industries, technology, and creative industries where freelancing opportunities are in abundance and it is not uncommon for an employee to have a side hustle. As such the development of an internal policy around side hustles and secondary employment is useful in highlighting the importance of an employee obtaining consent before venturing out into the world of side hustles. This policy should prohibit undertaking a side hustle (or secondary employment) unless the employer consents and such engagement is not likely to impact the profitability of the employer.
In addition to a comprehensive policy, it is prudent that your employment contract be structured in a way to protect your interests. It is suggested that a warranty be included that the employee will work only for the benefit of the employer (i.e. not using their time at work for the benefit of their own business). And further, that a clause restraining employees during and post-employment from using company property, and taking clients be included along with a clause prohibiting the use of confidential information and the protection of intellectual property.
Lastly, it is important to note that often employees are bound by a code of conduct, confidentiality agreements, and are expected to work in the best interests of their employer and such mechanism can assist you in protecting your interests where an employee engages in a side hustle without consent or the like.
What can you do?
It is important that during the very initial stages of onboarding that employers make known to new employees the relevant policies which set out their respective duties, like a Code of Conduct and other such documents.
Equally as important, is asking employees about any side hustles or conflicting interest from the outset and ensuring their understanding of what they may constitute. This helps prevent problems down the track and further can limit misunderstandings. Training is a proactive way to ensure that employees are informed about their responsibilities to your business and as such adverse circumstances in which employees claim to unaware that their conduct or running of side hustle is at odds with your business.
Businesses can best protect themselves by appointing an independent probity advisor, or human resources manager to oversee such processes during the onboarding of employees.
Further, it is prudent of businesses to set up a system of which employees can report real or perceived conflicts. Training around these systems early on is invaluable and can act as a useful framework by which potential issues that may occur can be eliminated before they eventuate.
If you need assistance in drafting an employment contract that will protect your business from the encroaching work of side hustles, contact us. Our client engagement team can get set up an appointment for you with our employment lawyers.
  FWC 6143