Making Outside Work Work For Everyone: Guidelines for Success

I’ve been doing some thinking lately on policies surrounding outside work for employees and companies.

When done right, outside work can help both the employer and employee individually and together. When done wrong, it can be a nightmare for everyone.

Below are some of my thoughts on outside work.

Potential Benefits of Outside Work

There are many potential benefits to outside work. Below are a few I’ve recently considered.

Benefits to the Employee

• Additional Capital. Employees may choose to undertake outside work to supplement their income.
• Develop Business and Technical skillsets. Employees may wish to work with a new technology or understand larger aspects of technology work as a business.
• Build Reputation. Employees may be seeking to build a broader positive reputation within the communities of their interests.
• Learn – and enjoy – Independent work. Employees may be interested to try their hand at self-directed work, or to better understand management by managing themselves.
• Work on passion projects. Employees may wish to use technology work as an outlet for passions in other industries or hobbies.

Benefits to the Employer

• Encourage passionate employees. Passionate employees may be more engaged or more willing to offer solutions to problems facing the businesses, and may gain the ability via outside work to respond better to these needs.
• Experience-based training without company investment. Experience is excellent training; an employer receives this for free when an employee undertakes outside work.
• Potential new ideas. Employees working in other industries or solving different problems than the company may potentially contribute new ideas for the business as a result of those experiences.
• Increased reputation in community and beyond. Companies that encourage their employees’ passions will be seen as a better environment to work. Additionally, when positive word of mouth is spread by employees, recruitment goals and referrals may become easier for the company to achieve.

Potential Risks of Outside Work

Outside work is not without potential downsides, particularly to the employer. It’s important to consider these and work to mitigate them.

Risks to the Employee

• Burnout. Employees need to be able to manage their time. If they push too hard, they may lose effectiveness in both outside work and work for the company, leading to a performance issue.
• Not taking full advantage of skills development. If a company offers benefits around skills development, the employee may choose not to utilize them in favor of outside work. This could leave the employee with a skills gap.

Risks to the Employer

• Legal issues spilling over from employee to employer. An employer needs to ensure that they never incur any risk or put the company in jeopardy in any way. Otherwise, outside work arrangements are untenable
• Employee mistakenly seen as representative of company. In the even that an employee’s outside work sours, it is important to ensure that the company’s reputation or relationships would remain undamaged.
• Competition. A company needs to ensure that an employee avoids work that harms the company’s interests.
• Loss of employee effectiveness. If an employee does suffer burnout and a conversation isn’t had about employment, the relationship between the company and the employee could sour.

Minimizing the Risks of Outside Work

Eliminating Employer Liability

• No outside work should be performed with company resources. This includes company technology, equipment, locations/buildings, transportation, etc.
• No work performed on behalf of company. The employee should keep their outside business relationships entirely separate from the company and ensure that the two would never be confused.
• No use of company name whatsoever. Along with the above point, the employee should never use the company name in the performance of outside work.
• Encourage employee to form a legal separation for outside work. An LLC or similar structure insulates the individual as well as the company from repercussions should outside work sour.
• Make it clear that the employee can never make any contract that would contradict or supersede their employment contact. In the case of any conflict, the agreement between the employer and employee must always come first to ensure a healthy working relationship.

Eliminating Employee/Employer Relationship Risks

• Communication is key. Proactive and transparent communication is paramount in situations such as these, and so is trust. Both parties should understand the goals and expectations of an employee’s outside work, and trust that each has the interests of the other in mind.
• Define clear boundaries for non-compete. Some suggestions include:
  • Avoid the industry: employees should not seek to perform outside work in the same specific industry as the company (e.g. IT work may be fine, but not IT work for a government client or relating to transportation).
  • Different clients w/no potential overlap. Employees should avoid outside work for clients, acquaintances of clients, or competitors of clients to avoid any conflict of interest for the company.
  • Company has good faith final say on whether something is competition. After a discussion, the employee should allow the employer to have the final say on whether outside work is in competition with the business. The Company should seek to be reasonable in these determinations.
  • Any product that could be sold to the employer for client work counts as competition. Employees should avoid developing ideas that they could have used to further the company’s work in its industry. Employees should instead be encouraged to raise these ideas internally for the company to potentially support.
• Clear boundaries for intellectual property. A company should allow the employee to own their intellectual property, with the exception of IP gained while otherwise in violation of the agreement or spirit of the agreement.
• Clear performance expectations. Each party understanding the expectations of the other goes a long way to avoiding any potential headaches. Don’t be afraid to make expectations explicit at any time.
• Employees should not leverage any business relationship whatsoever for outside work – including referrals. This could muddle the line between the employee and Company in such a way as to introduce liability for the company. Anything remotely in this territory should be discussed with the Company by the employee.

Maximizing the Benefits of Outside Work

• Encourage employees to bring products in house. If any employee is developing a product that the company thinks could be useful but doesn’t compete (e.g. some new office productivity tool), consider asking to make it an official company project. At the very least, the company could potentially beta test the product for free – an arrangement that could work out very well for both parties.
• Employees respect the risk and effort that an employer undertakes to make this happen. This is a personal matter. Employees should recognize the excellent value of a company allowing for this sort of arrangement, and respect it accordingly.
• Both parties resolve to talk any issues out as soon as they arise. No matter how minor they seem.

Appendix A: Sample outside Work Agreement

It’s important to note that I am not a lawyer. Below is a “plain English” good-faith agreement between an employer (“the Company”) and an employee (“the Employee”).

Employee

Employee Will:

(Initial next to each bullet)

• Notify the Company of any commercial or non-commercial outside work, unless the Company deems this unnecessary.
• Take reasonable measures to insulate the Company from any liability, such as by entering into written agreements as an individual only, or by forming a LLC.
• Offer the company first use (as a free customer) of non-competitive products if they might benefit the Company.
• Manage her/his outside work effectively in a way that does not jeopardize work for the Company
• Bring up any concerns quickly if they are dissatisfied or believe The Company is dissatisfied with this arrangement. We’re all here to work together.
• Generally prioritize skill development for their role over skill development for outside work.
• Trust the Company, when acting in good faith, to have the final say over whether work qualifies as competitive or not.

Employee Will Not:

(Initial next to each bullet)

• Use the company name in the course of outside work in any way that would give the impression that the company is performing the work or endorses the work.
• Use any company resources (computers, office, etc.) in the course of outside work
• Perform outside work on company time or on company premises.
• Enter into any contract that would conflict with or supersede the Employee’s agreement with the Company
• Perform any work that could conflict with the Company. This includes:
  • Work for a current or recent client
  • Work for an acquaintance of a current or recent client
  • Work in the same industry as the Company (i.e. transportation technology and government contracting)
  • Work or ideas that the Company might reasonably pursue in the interest of its client relationships or new relationships in their given industry (e.g. a new transportation IT solution)
• Attempt to use outside work to explain sub-par or reduced performance.
• Use clients or associates of clients as referrals for outside work (e.g. writing software for the friend of a client in a different industry)

Employer

Employer Will:

• Be clear about the expectations for employee time, particularly if they are worried that the Employee is not meeting obligations of the current workload.
• Bring up any concerns quickly if they are dissatisfied or believe The Company is dissatisfied with this arrangement. We’re all here to work together.

Employer Will Not:

• View the Employee’s outside work as a loss of potential work time unless it affects performance, in which case the Company will address it as a performance concern.
• Unreasonably alter the Employee’s work duties or schedule with the intent of interfering with outside work.

What do you think?

Do I get it right? Am I way off track? I’d love your feedback in the comments.