Side Hustles, Moonlighting, and Conflicts of Interest in Ontario Employment Law

Written on behalf of Peter McSherry

For many Ontario employees, a second source of income has become part of working life. An employee might freelance in the evenings, operate an online business, teach on weekends, drive for a delivery platform, provide consulting services, or work another part-time job.

Having a side hustle does not automatically mean an employee has done anything improper. However, outside employment can become an employment law issue when it overlaps with duties to a primary employer. Employment agreements, workplace policies, confidentiality obligations, and the nature of the outside business can all become relevant.

Are Ontario Employees Allowed to Have a Second Job?

There is no general rule under Ontario employment law preventing every employee from working a second job simply because they already have full-time employment. In many circumstances, activities outside working hours may have little connection to the primary employer.

For example, an accountant who works occasional weekend shifts at a restaurant may raise very different considerations from an accountant who provides bookkeeping services to their employer’s clients.

The employment relationship itself can also impose obligations. Canadian employment law recognizes a general duty of good faith and fidelity during employment, including obligations relating to honesty and conflicts of interest. Senior or particularly trusted employees may also have additional fiduciary obligations.

When Can a Side Hustle Become a Conflict of Interest?

The central issue is often not whether the employee earns money elsewhere, but whether the outside activity conflicts with the employer’s interests.

Potential concerns may arise where an employee’s outside work:

• Directly competes with the employer;
• Targets the employer’s customers or prospective customers;
• Involves confidential or proprietary information;
• Diverts business opportunities away from the employer;
• Uses company equipment, software, email accounts, or other resources;
• Occurs during hours when the employee is supposed to be working; or
• Interferes with the employee’s ability to perform their regular job.

The employee’s position, access to confidential information, level of authority, and relationship between the two businesses can all affect the analysis.

Working for a Competitor Can Raise Greater Concerns

Taking a second job in the same industry does not necessarily produce the same result in every situation. However, direct competition can increase the risk of a conflict. An employee working for competing companies might have access to pricing information, customer lists, marketing plans, sales strategies, technical information, or other confidential material. Even where information is not deliberately shared, concerns may arise about divided loyalties or whether the two roles can remain separate.

Ontario employment standards guidance recognizes serious conflicts of interest, including active participation in a competitor’s business or disclosure of confidential information, as conduct that may become relevant when assessing termination issues.

Check Employment Contracts and Workplace Policies

Employees considering outside work may want to review their employment contracts, employee handbooks, codes of conduct, confidentiality agreements, and conflict-of-interest policies.

A workplace policy may require disclosure of a potential conflict or approval before certain outside work begins. It may also prohibit employees from using employer property for personal businesses, approaching company customers, or performing outside work during scheduled hours.

The wording matters. A policy requiring disclosure of genuine conflicts can operate differently from a broad provision that appears to prohibit virtually every form of secondary employment.

Confidentiality Obligations Still Apply

Confidentiality can be particularly important where a side hustle operates in the same or a related industry. Confidential information may include customer information, pricing arrangements, financial data, product development information, business plans, internal processes, unpublished research, passwords, software, or strategic information.

Employees launching a competing venture should distinguish between their own general skills and experience and information belonging to their employer. Ontario’s prohibition on many post-employment non-compete agreements does not eliminate confidentiality obligations or make every use of employer information permissible.

Working on a Side Business During the Regular Workday

Remote and hybrid work may make the boundary between employment and personal activities less visible, but they do not eliminate it. Problems may arise where an employee performs substantial work for another employer or business during hours for which they are being paid by their primary employer. This may be particularly significant where the employee records hours worked, has specific availability requirements, misses deadlines, or becomes unavailable to colleagues.

Using employer-owned laptops, phones, email addresses, subscriptions, intellectual property, or other resources for an outside venture may create additional concerns.

What About “No Moonlighting” Rules?

Some employers regulate outside work through exclusivity clauses or policies prohibiting secondary employment. These restrictions should not automatically be confused with Ontario’s statutory prohibition on many non-compete agreements.

Under the Employment Standards Act, 2000, employers generally cannot enter into agreements prohibiting employees from competing with the employer after employment ends. The prohibition applies to non-compete agreements entered into on or after October 25, 2021, subject to limited exceptions.

A rule governing conduct during employment is different. Employers may have legitimate interests in preventing conflicts, misuse of confidential information, direct competition, or outside activities that interfere with an employee’s work. Whether a particular clause or policy can be relied upon will depend on its wording and the circumstances.

Can Moonlighting Lead to Termination?

An employer discovering undisclosed outside work may investigate, discipline, or terminate an employee. Whether the conduct supports termination for cause is a separate question from whether the employer simply objects to the activity.

Cause is generally assessed contextually. Relevant factors may include the seriousness of the conduct, the employee’s position, whether a clear workplace rule existed, whether the employee was dishonest when questioned, whether confidential information was involved, and whether the conduct damaged the employment relationship.

Different standards can also apply under the common law and Ontario’s employment standards legislation. Ontario guidance notes that statutory termination and severance entitlements may involve the stringent standard of “wilful misconduct, disobedience or wilful neglect of duty.”

Disclosure Can Help Address Potential Conflicts

Some workplaces require employees to disclose outside employment, particularly where another role could overlap with the employer’s business.

Disclosure may allow a potential conflict to be addressed before it becomes a larger dispute. An employer might determine that unrelated weekend employment raises no concern while imposing boundaries around work for particular competitors or customers.

Employees should nevertheless understand what information they are required to provide under their employment documents and workplace policies.

Side Hustles Are Common, but Boundaries Still Matter

Moonlighting can range from a completely unrelated weekend job to operating a business that directly competes with an employer. Ontario employment law does not treat those situations as interchangeable.

Competition, confidentiality, client relationships, employer resources, working time, contractual requirements, and the employee’s role can all affect whether outside work creates employment consequences.

Reviewing workplace policies and employment agreements before beginning outside work can help employees identify potential conflicts and understand the boundaries that apply to their employment relationship.

Peter A. McSherry: Guelph Employment Lawyer Advising Employees on Side Hustles and Workplace Conflicts

If your employer in Guelph or elsewhere in the GTA has questioned your outside employment, accused you of a conflict of interest, asked you to stop a side business, or terminated your employment because of alleged moonlighting, contact Peter A. McSherry Employment Lawyer. Our team helps employees understand their employment contracts, workplace policies, termination rights, severance entitlements, and wrongful dismissal claims. To schedule a confidential consultation, please contact us online or call 519-821-5465.