Introduction
Moonlighting is booming — and with it comes real exposure for employers. For HR, legal and people leaders, unmanaged side gigs can mean IP leaks, client conflicts, misclassification risk and awkward disputes that chew up time and money. This brief guide helps you strike the right balance between employee flexibility and protecting your business assets.
What you’ll get: practical, enforceable templates and policy language—covering scope and disclosure thresholds, **IP protection** and NDAs, simple approval and automated renewal workflows, tax/classification checkpoints, plus progressive enforcement steps—so managers can make consistent decisions and you can automate approvals and audit trails. These recommendations map back to your employee handbook and workplace policies and lead into the detailed sections below with ready-to-use Formtify templates and implementation tips.
Define scope: permitted side work, disclosure thresholds and examples of conflicts of interest
Define the boundary. Start by stating what types of side work are permitted (examples: freelance design for non-competing clients, tutoring, passive investments) and what is prohibited (direct competitor work, soliciting company clients while moonlighting, using company systems).
Disclosure thresholds
- Time-based: side work that uses more than X hours per week (commonly 5–10 hours) should be disclosed.
- Revenue or scope: paid engagements that materially overlap with your role or produce income above a set dollar threshold must be reported.
- Client overlap: any work for a vendor, customer, or competitor requires disclosure regardless of hours.
Examples of conflicts of interest
- An engineer doing paid work building a competing product.
- A salesperson using company leads to close side‑gig deals.
- An employee hiring a vendor they personally own to provide services to the company without disclosure.
Capture these rules in your employee handbook and align them with other company policies and office policies so managers and employees can find a single source of truth for workplace rules.
Protect IP and confidentiality: NDAs, IP assignment clauses and when outside work requires an addendum
Protecting intellectual property should be non‑negotiable. Your workplace policies must include clear IP assignment language so inventions, code, designs, and trade secrets created in the course of employment belong to the company.
Key clauses to include
- NDA/confidentiality obligations: prohibit sharing of confidential information with outside employers or clients. Provide an NDA for new hires and, when needed, supplemental NDAs for particular projects. (Template: Formtify NDA.)
- IP assignment: require employees to assign inventions and to cooperate with patent or copyright filings.
- Use of company resources: prohibit the use of company devices, licenses, proprietary data, or facilities for side work.
When an addendum is needed
- If an employee’s outside work uses company IP or materially overlaps with company projects, require a written addendum that defines permitted scope and any royalty/ownership arrangements.
- For remote work or contractor arrangements that touch IP, add explicit clauses about deliverables and ownership.
Make these provisions part of core HR policies so they appear alongside the employee handbook and other workplace policies examples for consistent enforcement.
Approval and exception workflows: manager sign‑offs, periodic disclosures and automated renewals
Design a simple approval pathway. A clear workflow reduces friction: employee submits disclosure → direct manager reviews → HR/legal approves or requests conditions → sign‑off recorded in personnel file.
Practical elements
- One‑page disclosure form: capture hours, client, services provided, overlap with company work, and requested duration.
- Manager sign‑off: frontline managers should evaluate operational risk and escalate legal concerns.
- Periodic disclosure: require annual or quarterly reconfirmation of approved engagements; automated emails reduce manual follow‑up.
Automated renewals and exceptions
- Use time‑boxed approvals (e.g., 6–12 months) that auto‑expire unless renewed.
- For exceptions, require a written business justification and higher‑level approval (HR + legal or head of business unit).
- Keep an auditable record for compliance and future dispute resolution—integrate with the employee file in HRIS where possible.
These approval workflows belong in your workplace policies and should be mirrored in your company policies portal so managers and employees can follow consistent HR policies and workplace rules.
Tax, classification and contractor conversion considerations when side‑gigs overlap with core business
Misclassification risk is real. If an employee’s side‑gig functions like an independent contractor engagement with your company (built products, long‑term client work, consistent schedule), there’s a risk of reclassification, extra payroll taxes, and benefits obligations.
What to watch for
- Control and dependency: if the company controls hours, tools, or deliverables, the relationship may be employee‑like.
- Exclusivity and continuity: repeated or exclusive work for the same client (including your company) suggests employment.
- Financial indicators: regular, ongoing payments versus project‑based one‑offs raise flags for tax authorities.
Mitigations and procedures
- Use written independent contractor agreements when engaging outside workers and revisit terms if scope changes. (Template: Formtify contractor agreement.)
- Consider conversion criteria and a documented pathway if the side‑gig becomes core to business operations.
- Coordinate with payroll and legal before approving side work that could create employer tax exposure; update company policies to reflect any tax reporting duties.
Documenting classification logic in your employee handbook and office policies helps HR make consistent decisions and reduces legal exposure.
Enforcement and remediation: progressive discipline templates, disclosure audits and termination triggers
Enforce consistently and transparently. Define a graduated response for violations that scales with severity—from remedial counseling to termination for serious breaches like IP theft.
Progressive discipline model
- Informal counseling: first breach or minor non‑disclosure; document conversation and required corrective actions.
- Written warning: repeat or material breach with documented expectations and a timeline.
- Final written warning or suspension: for continued non‑compliance or serious policy violations.
- Termination: severe misconduct such as deliberate IP misappropriation, fraud, or working for a direct competitor after refusing to stop.
Audits and triggers
- Perform periodic disclosure audits by sampling personnel files and checking for undisclosed external affiliations.
- Set clear termination triggers in the policy (e.g., unauthorized transfer of confidential data, persistent failure to disclose client overlap).
- Include a documented investigation process, evidence standards, and an appeal path to ensure fairness and legal defensibility.
These enforcement provisions should be part of your workplace policies and incorporated into your employee conduct policies and HR policies to ensure consistency across the organisation.
Recommended Formtify templates to govern moonlighting: NDAs, non‑competes (where lawful), contractor and employment templates
Use standard templates and adapt them. Start with robust, jurisdictionally reviewed templates and adjust policy language in the employee handbook or workplace policies portal.
Suggested templates
- NDA / Confidentiality Agreement: use for hires and when supplemental confidentiality protection is needed. (Formtify NDA: https://formtify.app/set/non-disclosure-agreementemployee-b9s6h.)
- Independent Contractor Agreement: for outside workers or consultants; include IP assignment and clear deliverables. (Formtify contractor: https://formtify.app/set/independent-contractor-agreement-5jhqd.)
- Employment Agreement: include IP assignment, moonlighting rules, and conflict of interest clauses at hire. (Formtify employment: https://formtify.app/set/employment-agreement-mdok9.)
- Non‑compete / Restrictive covenants: only where lawful and narrowly tailored. Use sparingly and with legal review to avoid enforceability issues.
How to tie templates to your policies
- Cross‑reference templates in the employee handbook and workplace policies template index so employees can find the forms for approvals and disclosures.
- Keep a library of workplace policies examples (harassment policy, remote work policy, leave and absence policy, health and safety policy) that link back to the appropriate legal templates.
- Review templates annually to reflect changes in local law (e.g., non‑compete restrictions) and business needs.
Using these Formtify templates together with clear workplace policies and practical approval workflows will make managing moonlighting, protecting IP, and enforcing company policies more straightforward and defensible.
Summary
Moonlighting and side‑gig risks are manageable when you pair clear, practical policy language with simple approval workflows: define permitted work, protect IP with NDAs and assignment clauses, add time‑boxed approvals and renewal checks, and document classification and enforcement steps. Using document automation to deploy these templates creates consistent decision trails, faster manager approvals, and audit‑ready records that reduce HR and legal friction while protecting company assets and employee flexibility within your workplace policies. Ready to implement? Explore ready‑to‑use templates and automated workflows at https://formtify.app.
FAQs
What are workplace policies?
Workplace policies are written rules and guidelines that set expectations for behavior, safety, and business processes across your organisation. They cover everything from code of conduct and IP protection to leave, remote work, and disclosure rules for side‑gigs.
Why are workplace policies important?
Policies help manage legal and operational risk, create consistent manager decisions, and protect company assets like confidential data and IP. Clear policies also improve transparency for employees, reduce disputes, and make enforcement fairer and more defensible.
How do you write a workplace policy?
Start by defining scope and examples, set disclosure thresholds and approval workflows, and include enforcement and audit provisions. Draft with HR and legal input, use plain language, and tie the policy to related templates and procedures for approvals and recordkeeping.
What should be included in an employee handbook?
An employee handbook should include core topics such as code of conduct, IP and confidentiality rules, moonlighting and conflict‑of‑interest policies, leave and absence rules, and disciplinary procedures. Cross‑reference legal templates and approval workflows so employees know how to request exceptions and where to find forms.
Are workplace policies legally required?
Some policies are legally required in certain jurisdictions (for example, health and safety, anti‑discrimination, and statutory leave notices), while others are best practice to manage risk. Regular legal review ensures required disclosures are met and that voluntary policies remain enforceable and up to date.
