Can An Employer Refuse A Side Hustle?

Finding out that one of your employees has a side business can feel awkward. Maybe it's harmless weekend work, or maybe it looks a little too close to what your business does.

So, can an employer stop a side hustle in Australia? The answer is: sometimes. You usually need a real business reason, a clear contract or policy, and a fair process before you tell an employee what they can and can't do outside work.

The good news is that this doesn't have to become a big workplace drama. With the right employment contracts, confidentiality protections, conflict of interest policy and a sensible secondary employment policy, you can set clear expectations before problems start.

Can An Employer Stop A Side Hustle In Australia?

Yes, you may be able to stop or restrict an employee's side hustle, but only where your direction is lawful and reasonable.

Employees are generally allowed to have a life outside work. That can include a second job, freelancing, content creation, selling products online or starting a small business. You don't automatically get to control everything they do after hours.

However, you can step in where the side hustle creates a real issue for your business, such as:

• the employee is competing with your business
• the employee is using your confidential information, client lists, pricing, processes or templates
• the side hustle affects their performance, availability, safety or fatigue levels
• the employee is working on the side business during paid work time
• the employee is using your equipment, software, email accounts or intellectual property
• the side business damages your business reputation or breaches workplace policies

The Fair Work Act 2009 matters here because any action you take should be fair, consistent and not for an unlawful reason. For example, you should be careful not to treat employees differently because of protected attributes, or punish someone for raising a genuine workplace concern.

As a starting point, check what the employee has actually agreed to. If your employment contract says the employee must disclose secondary employment and get written approval before taking it on, you're in a stronger position. If your documents are silent, you may still have options, but the conversation can be harder.

When Is A Side Business A Conflict Of Interest?

A side business is usually a conflict of interest when the employee's personal business interests could interfere with their duties to your business.

Not every side hustle is a problem. A bookkeeper who sells handmade candles on weekends may pose no issue at all. A bookkeeper who starts servicing your clients through their own bookkeeping business is a very different story.

A conflict is more likely where the employee is:

• offering the same or similar services as your business
• targeting your current clients, suppliers or leads
• using knowledge gained through your business to win work
• making decisions at work that could benefit their own business
• promoting their side business to your customers or staff
• working with one of your competitors

Say Mike runs a cleaning business in Melbourne. One of his full-time supervisors works 38 hours a week and has access to client schedules, pricing and staff rosters. Mike discovers the supervisor has started a weekend cleaning business and has quoted two of Mike's commercial clients at a lower rate.

In that situation, Mike has a strong reason to act. The issue isn't just that the employee has a second business. The issue is that the employee may be competing, using confidential information and interfering with client relationships.

Compare that with the same supervisor doing paid photography on Saturdays for weddings. Unless it affects performance, creates safety risks due to fatigue, or breaches another workplace rule, refusing that side hustle may be much harder to justify.

What Should Your Employment Contract Say?

Your employment contract should clearly explain when an employee needs permission for outside work and what activities aren't allowed.

A short, vague line saying employees must act in your best interests may help, but it often won't be enough on its own. If you want practical control over side hustles, your contract should be more specific.

Useful Clauses To Include

Your employment contract can deal with side hustles through clauses covering:

• Secondary employment: when the employee must tell you about outside work and when they need written approval
• Conflict of interest: what counts as a conflict and the employee's duty to disclose it early
• Confidentiality: protecting client lists, pricing, business plans, processes, supplier terms and internal documents
• Intellectual property: making clear who owns work created as part of the employee's role
• Use of company property: stopping employees from using your laptop, software, accounts, subscriptions or branding for side work
• Restraints: limiting certain competitive conduct after employment ends, where the restraint is reasonable

For example, your contract might say the employee must not engage in paid work or business activities that conflict with their duties, compete with your business, or affect their ability to perform their role safely and effectively, unless you give written approval.

Try not to make the clause wider than it needs to be. A blanket ban on all outside work can be difficult to defend, especially for casual or part-time employees. A tailored clause is usually more useful because it focuses on the risks that actually matter to your business.

Templates can be a helpful starting point, but employment contracts work best when they reflect your industry, award coverage, role types and commercial risks.

How Do Confidentiality, IP And Restraints Help?

Confidentiality, IP and restraint clauses help by giving you clear rights if an employee uses your business assets to build their own venture.

These clauses do different jobs, so it helps to keep them separate.

Confidentiality

Confidentiality clauses protect information that isn't public and has value to your business. This can include client lists, pricing models, proposals, marketing plans, recipes, code, supplier arrangements, training materials and internal processes.

If an employee uses that information in their side hustle, you may have a breach of contract. You may also have practical grounds to direct them to stop using the information and return or delete business records.

Intellectual Property

IP clauses deal with ownership. If an employee creates work as part of their role, your business will often expect to own it. That could include copy, designs, software, photographs, course materials, manuals or product concepts.

Problems arise when an employee says something was created after hours, while you say it was created using your ideas, tools or confidential information. A clear IP clause reduces that argument.

Restraints

Restraint clauses may limit an employee from competing with you, soliciting clients, poaching staff or dealing with certain customers after they leave.

Restraints are only enforceable to the extent they're reasonable to protect a legitimate business interest. Courts usually look at the role, seniority, access to clients, access to confidential information, the area covered and the length of the restraint. In NSW, the Restraints of Trade Act 1976 can also affect how restraints are treated.

For many small businesses, non-solicitation and confidentiality clauses are more practical than a broad non-compete. The aim is to protect your relationships and information, not stop someone from earning a living altogether.

What Should You Do If You Discover A Side Hustle?

You should pause, gather the facts and follow a fair process before you make a decision.

It can be tempting to react quickly, especially if you feel blindsided. But if you jump straight to a warning or termination without checking the facts, you may create a bigger employment law problem.

Step-By-Step

1. Check the documents: review the employment contract, position description, policies, award or enterprise agreement, and any confidentiality or IP deed.
2. Record what you know: keep screenshots, dates, client names, examples of competing services, emails or evidence of work done during paid time.
3. Separate suspicion from proof: write down what is confirmed and what still needs to be checked.
4. Meet with the employee: explain the concern and give them a fair chance to respond.
5. Assess the risk: look at competition, confidentiality, client contact, performance, fatigue, safety and reputation.
6. Decide on a proportionate response: this might be written approval with conditions, a direction to stop certain conduct, a warning, updated duties, or further disciplinary action if the conduct is serious.
7. Confirm the outcome in writing: set out what has been agreed or directed, including any deadlines.

Keep privacy in mind too. If you're collecting information from social media or monitoring work devices, only collect what you reasonably need for a legitimate workplace purpose. Depending on your state or territory, workplace surveillance rules and an employee privacy policy may require notice before monitoring computers, emails or cameras.

If the side hustle has affected work performance, connect your concerns to the role. For example, under the National Employment Standards, a full-time employee can work a maximum of 38 hours per week unless additional hours are reasonable. Awards or enterprise agreements may also set ordinary hours and other rules. If someone is working long hours elsewhere and turning up exhausted for safety-sensitive work, your work health and safety duties may be part of the conversation.

What Should A Secondary Employment Policy Include?

A secondary employment policy should tell employees when they need to disclose outside work, how you assess it and what conditions may apply.

This policy is especially useful if you employ casuals, part-time staff, commission based employees, client-facing employees or employees with access to confidential information. It gives everyone a clear process, rather than leaving each situation to an awkward one-off conversation.

Here is a practical outline you can use as a starting point. A lawyer should tailor it before you use it, especially if your industry has award, safety, confidentiality or client relationship risks.

1. Purpose: explain that the policy manages conflicts, safety, confidentiality and performance risks.
2. Who It Applies To: cover employees, and decide whether contractors should have a separate process.
3. What Counts As Secondary Work: include second jobs, freelancing, running a business, directorships, paid content creation and unpaid roles that may create a conflict.
4. Disclosure Requirement: state when employees must tell you about outside work and what information they need to provide.
5. Approval Process: explain who approves requests, how long approval may take and that approval should be in writing.
6. Assessment Criteria: list the risks you'll consider, such as competition, confidentiality, performance, fatigue, safety and reputation.
7. Conditions Of Approval: allow conditions like no use of company property, no contact with your clients, no work during rostered hours and no use of confidential information.
8. Ongoing Duty To Update: require employees to tell you if the outside work changes.
9. Breach Consequences: explain that breaches may lead to directions, warnings or disciplinary action.

Also keep the Fair Work Act's right to disconnect rules in mind when managing these issues. These rules started for many employers on 26 August 2024 and for small business employers with fewer than 15 employees on 26 August 2025. They don't stop you from managing conflicts, but they do mean you should be thoughtful about contacting employees outside hours unless it's reasonable.

Key Takeaways

• You can sometimes refuse or restrict a side hustle, but you need a lawful and reasonable business reason.
• The biggest red flags are competition, client poaching, misuse of confidential information, poor performance, fatigue and work done during paid time.
• Employment contracts should include clear secondary employment, conflict of interest, confidentiality, IP and company property clauses.
• Restraints need to be reasonable. Often, protecting clients and confidential information is more practical than trying to ban all competition.
• If you discover a side hustle, gather facts, speak to the employee and confirm any decision in writing.
• A tailored secondary employment policy can prevent misunderstandings before they become disputes.

If you'd like help with your employment contracts, secondary employment policy, confidentiality clauses or restraint wording, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.