Moonlighting in California: What Employers Should Know About Employees Working a Second Job

“Moonlighting” is a term that refers to an employee holding a second job or performing freelance or consulting work outside of normal work hours for their primary employment. With the rise in remote work, moonlighting has become an increasingly common practice leaving many California employers asking themselves what parameters can be imposed, if any. 

Moonlighting is Generally Protected Activity

California is generally an at-will employment state, meaning that both employees and employers can terminate employment at any time for any reason, without prior notice. However, an employer’s ability to terminate or discipline an employee based on the employee’s activities outside of work remains subject to statutory and contractual limitations.

California Labor Code section 96(k) authorizes the Labor Commissioner to pursue certain claims for lost wages resulting from an employee’s demotion, suspension, or discharge for “lawful conduct occurring during nonworking hours away from the employer’s premises.” Labor Code section 98.6 provides related protections against certain adverse actions involving conduct protected by section 96(k).

Additionally, under California Business & Professions Code section 16600, contracts that restrain someone from working in a lawful profession, trade, or business are generally considered void and unlawful. 

When Can an Employer Restrict Moonlighting?

While employers cannot impose blanket prohibitions on outside employment during an employee’s off-duty hours, employers may reasonably restrict an employee’s second job if it directly affects the employer’s legitimate business interests. An employee’s second job raises legitimate concerns when it:

• Creates an actual conflict of interest;
• Interferes with attendance, scheduling, or job performance;
• Involves misuse of confidential information or trade secrets;
• Uses the employer’s equipment, systems, or working time; or
• Otherwise materially interferes with the employee’s obligations to the employer.

For example, an employee begins working late-night shifts for another company and repeatedly fails to complete assigned projects in a timely manner. The employer does not have to excuse the employee’s performance issues or avoid taking disciplinary measures simply because the employee’s second job itself is lawful.

Likewise, an employee who operates a side business generally cannot use their employer’s confidential information, customer information, or trade secrets for the benefit of that business.

What Should Employers Do?

California employees are not legally required to inform employers of their moonlighting activities, unless there is a valid employment contract in place requiring disclosure. 

Employers should focus on creating policies within their employee handbooks or employment agreements that specify the circumstances in which an employee’s outside employment directly creates legitimate workplace concerns and the business interests that the policy is designed to protect. 

Before disciplining or terminating an employee over outside employment, employers should determine precisely what policy was violated and what legitimate business interest is affected.

If you or your company have questions about moonlighting or outside employment policies, feel free to contact us.