Can A Conflict Of Interest Stop Your Side Business?

The lure of making extra income with your own part-time side hustle may sound appealing, but could your side business pose a conflict of interest with your employer, and if so, what are the consequences?

If those are questions on your mind right now, read on. 

Below, I’ll outline everything you need to know about how your side project may conflict with your 9-5, what actions your employers could take against you if it does, and how you can prevent it from happening. 

What is a Conflict of Interest? 

In the world of work, a conflict of interest can be defined as any action or decision you make that directly conflicts with your employer’s ability to succeed and make money. 

When it comes to side hustles, there’s a very real possibility that your employer could deem your side gig to be in conflict with their objectives, especially with the following types of conflicts of interest.

1. You Directly Target the Same Customers as Your Employer 

If you launch a second business in the same industry as your day job,  you need to be very careful that you don’t go after the same client base. 

Even if you’re offering a different service or product, your employer will still consider this to be a sign that you’re in direct competition with them, and is almost certainly prohibited as part of any conflict of interest policy they have.

At best, this could lead to disciplinary action, such as a suspension. At worst, it could lead to your termination, especially if you signed a non-compete agreement.

2. Your Work With Your Company’s Competitors 

If your side hustle involves collaborating with or providing services to businesses that directly compete with your employer, you’re treading on delicate ground. 

This situation can create a clear conflict, as your actions may be seen as undermining your company’s competitive edge and financial interests.

Again, this is still true even if your side business operates in a distinct niche or offers unrelated products or services, as what you do still benefits your company’s competitors.

3. You Use Confidential Information or Intellectual Property

Another major conflict that will land you in hot water with the boss is using specialist knowledge, information, or intellectual property owned by the company you work for. 

This could mean using the company’s name, logo, and reputation to establish yourself in the field or relying on data or industry secrets that your employer spent time and money to acquire.

Here, you need to be especially mindful if you’ve signed a Non-Disclosure Agreement (NDA) with your company in which you explicitly agreed not to divulge company information to outside partners. 

4. You Use Company Resources to Grow Your Side Business 

Information and intellectual property aren’t the only company resources you should avoid using when starting your new venture. 

As tempting as it might be to use the office printer to run off a batch of flyers or create a spreadsheet on your company laptop, it’s important to remember that your bosses will have paid for this equipment to benefit their own business, not yours. 

Get found out, and you’re essentially giving your employers a good reason to cite misuse of company property as a reason to hand you your termination papers. 

I’m not just talking about physical equipment here, either. 

If you spend your office hours working on your business while you’re employees are paying you to work on theirs, that’s an obvious conflict of interest. 

5. Running Your Side Hustle Negatively Affects Performance in Your Day Job 

While I’ll always be the first to encourage you to chase your entrepreneurial dreams, I do so with a strong word of caution that this should never come at the expense of your ability to perform at your best from 9-5. 

If you’re coming in late or you’re too tired to deliver the kind of quality and productivity you’re being paid for, that’s another major red flag. 

Your employer has hired you for a specific role, and when your side hustle begins to hinder your performance in that role, it’s a conflict of interest.

Remember, your day job is your source of stable income, and neglecting it can not only damage your professional reputation but also jeopardize your financial security. If your goal is to eventually turn your side hustle into a full-time business, losing that financial security could seriously hinder those plans.

Can My Employer Cite a Conflict of Interest to Stop My Side Business?

In a general sense, your employer can’t stop you from having a side hustle, but they can certainly stop you from having a full-time day job by firing you if your hustle creates a conflict of interest. 

Many state labor laws allow employers to terminate their employees’ contracts if they work a second job that significantly interferes with their 9-5 responsibilities and duty of company loyalty.

For example, if you work in accounting Monday through Friday and then spend three hours selling your hand-made jewelry at craft fairs on the weekends, your bosses probably won’t have a problem with it. 

However, if you’re too tired to perform your duties properly because you were up all night making pendants for an upcoming event, or you decide to ditch the jewelry game and start moonlighting with your own accounting blog that draws on insider knowledge gained from your current job, that’s going to cause a problem. 

Your employer will be able to cite this conflict of interest as  “just cause for termination,” meaning they can fire you without being required to give you severance pay or other benefits.

The exception to all this is if you signed a non-compete agreement as part of your employment contract. In those circumstances, your employer could challenge you in court for breach of that agreement, potentially putting your business goals on hold until the agreement expires.

Laws That Protect Side Hustlers 

Although many states allow businesses to establish policies and employment contracts forbidding employees from moonlighting, there are two places where this isn’t the case. 

Washington state and Washington D.C. both have laws that ban companies from instituting policies that stop their staff from having more than one job, while California has a similar law that stops employers from taking action against workers who engage in lawful conduct outside of their usual work hours and away from the company premises. 

How Can I Avoid a Conflict of Interest Between My Side Business and My Full-Time Job?

1. Read Your Employment Contract Carefully

Start by thoroughly reviewing your employment contract. Pay close attention to any clauses related to conflicts of interest, moonlighting, or additional employment to ensure you’re meeting your employers’ expectations.

2. Consider Non-Compete Clauses and Non-Disclosure Agreements

If you’ve signed non-compete clauses or Non-Disclosure Agreements (NDAs) with your current employer, assess how these agreements might impact your side business. These legal documents often outline specific restrictions regarding the type of work you can undertake outside of your primary job. 

3. Choose an Unrelated Industry or Niche

Consider a side business in an entirely different industry or niche than your full-time job. This ensures that you’re not directly competing with your employer and is less likely to cause a conflict unless your business affects your 9-5 performance.

4. Conduct Side Business Activities on Your Own Time

Keep your side gig to the side, using evenings and weekends rather than hours that your employer is paying you for, and you’re less likely to be accused of running your business on company time.

5. Monitor the Impact on Your Job Performance

If you notice a decline in your productivity, missed deadlines, or any other indicators that your side business is impeding your ability to excel at your full-time job, it’s time to reconsider your priorities.

6. Maintain Open Communication

If you have concerns or questions about potential conflicts of interest, it’s best to discuss them with your employer or HR department to avoid getting in trouble.

Can a Conflict of Interest Stop Your Side Business? Key Takeaways 

I’ve thrown a lot of information at you about possible conflicts of interest between your side gig and your main job. So, before I go, allow me to quickly recap the key lessons I hope you’ve learned. 

• Employers can’t usually stop your side business, but they can stop your employment – If your business competes with your employer, affects your job performance, or uses company resources, your employer could well choose to terminate your contract.

   

• Employers could pursue legal action in some circumstances – A breach of a non-compete contract or confidentiality agreement could land you in legal trouble, potentially derailing your side job.

   

•  Be proactive about avoiding a conflict of interest – Run your side business on your own time, using your own resources and your own client list to avoid violating your employment contract.

For more tips on balancing your passion project with your 9-5, see 11 Steps to Starting a Side Hustle While Working a Full-Time Job.