So You Want To Start A Side Hustle? Read This First!

150 150 Johanna Hyman

By Johanna Hyman
johanna@jayaramlaw.com

As a working mom I am keenly aware of the infamous “side hustle.” I have friends and colleagues with full time jobs that have another job on the side: everything from selling beauty products, sneakers, diet products, and clothes.

While I applaud our clients that find time in their busy days to earn some extra dinero on the side, I want to make sure they’re not lining their pockets with unsavory funds that could result in breach of fiduciary duty litigation.

Every employee (no matter how low level or how high level) are “agents” of their employers. And as agents, employees have a fiduciary duty to act loyally for the employer’s benefit in all matters connected with the agency relationship. Restatement (Third) of Agency §8.01. In the employment context, the duty of loyalty means that the employee will not compete with their employer, solicit the employer’s customers, clients or employees prior to them leaving the company, or use work time to further the employee’s own interests. This list is, of course, not exhaustive.

One such situation that we often see resulting in litigation is when an employee breaches his/her fiduciary duty to his employer by secretly taking steps to set up a competing business, or seeking employment with a competitor, while the employee is still employed. There is clearly a conflict between preparing to compete, or preparing to work for a competitor, and the duty not to act in any matter that is adverse to the employer’s interest. Nevertheless, the majority of courts have concluded that although an employee is permitted to make preparations to compete with his or her employer while still employed, that employee – while still employed – cannot actively solicit an employer’s custo

mers or employees to leave the company. Nor can the employee prepare to compete with his employer, or prepare to work for a competitor, during the time he or she is supposed to be working for his or her current employer.

How does this implicate those of you with side-gigs? Well, you should be sure that your secondary job does not compete with your employer. In other words, if you work in PR you cannot also set up a company on the side to provide freelance PR services. Or if you work in the fitness industry you should not be soliciting your current employer’s customers, clients or employees to buy their dietary supplements from you on the side when they could buy them from your employer. Also never work on your side hustle while “on the clock” at your primary job.

If you want to make your side-hustle your main-hustle, Jayaram Law can set you up for success and help to avoid litigation.

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