Be Careful When Creating a Company Policy on Moonlighting

When addressing employee management issues like moonlighting, it’s often best to seek out a middle ground. If you’ll first establish clear work standards that fully protect your company’s intellectual property and ongoing research and development efforts, you should be able to accommodate those who can responsibly handle a second job outside their regular work hours.

Perhaps the best way to create a balanced moonlighting policy is to first review your main concerns about allowing employees to do any outside work. You should then try to objectively embrace your employees’ reasons for wanting to take on another job. Although you do have greater freedom to dictate when exempt workers put in their hours, that’s not always the case when interacting with at-will employees who are paid hourly.

Here’s a look at the competing interests involved when trying to design a moonlighting policy for your unique workplace. That information is followed by some general guidelines that you’ll want to review with your Houston employment law attorney. Employees do have certain privacy rights about how they conduct their lives outside of work and those must be respected.

Legitimate reasons why employers often want to limit moonlighting

  • To protect the company’s intellectual property. No employer wants to worry about employees knowingly (or accidentally) sharing confidential, proprietary information with another employer – or using such information while starting their own companies. Non-disclosure agreements are crucial to protecting these types of rights;
  • To maintain control over employee schedules for valid staffing purposes. Many companies require employee flexibility with work schedules in order to cover the ongoing, often unpredictable nature of their work volume. For example, customer “help” or call centers often experience times of peak calling. However, these fluctuations can change from week to week – or even day to day. People hired to work in these environments can be legitimately required to forfeit or greatly limit outside work – if those unique requirements were clearly stated in writing prior to their hiring;
  • A desire to have employees provide the company with their very best efforts. When employees take on “second” jobs – they’ll often be tempted to put in too many total work hours each week. It’s completely legitimate to want every worker to show up on time each day, fully rested and able to adequately focus on their assigned tasks;
  • Safety concerns. Moonlighting frequently causes many people to lose sleep. When they show up to your workplace greatly fatigued, they can pose a serious safety threat to their own health – and that of their coworkers;
  • Loyalty and commitment. While a moonlighting employee can provide you with these desirable attribues – you have every right to expect them to demonstrate respect for your company while interacting with others.

Although these aren’t the only reasons you may want to carefully limit employee moonlighting – they do touch upon common concerns. Keep in mind that it’s your right to carefully monitor the quality of work of your moonlighting employees to be sure it doesn’t start to decline.

Some of the valid reasons many workers want to do some moonlighting

  • Additional money to support themselves and other family members. Regardless of what you’re paying each worker, everyone periodically encounters unexpected medical bills and other crises that require extra income;
  • A desire to realize their own entrepreneurial dreams. Few people can afford to simply quit their “day jobs” while trying to launch new businesses. If employees pursue this type of goal while using their own resources outside of regular work hours, there may be few issues. However, if their companies will cause them to compete for clients with your business, restrictions are fully justified;
  • An interest in taking on paid union work to improve conditions for themselves and others in their industry. Employers must tread lightly when trying to restrict such activities. While company loyalty is a legitimate concern, this isn’t necessarily violated if the workers are openly addressing key safety and health issues that affect all employees.

These are just a few of the many reasons why some workers are strongly motivated to take on moonlighting jobs.

General guidelines for drafting a moonlighting policy

  • Companies should rarely try to completely forbid moonlighting. However, as your Houston employment law attorney will tell you, it’s best to inform all “new hires” if their jobs may require sudden changes in their weekly schedules or limited overtime hours on short notice. Whenever possible, try to remain flexible with workers – or your best and brightest ones may leave so they can pursue moonlighting and other privileges elsewhere;
  • Decide if you need to specifically address this topic in your employee handbook. If you don’t wish to create a “moonlighting” policy, you can ask your attorney to provide you with hiring contracts (and/or) non-disclosure agreements. These will clearly explain to all employees that they’re legally forbidden to share any company trade secrets, research and development data – or other proprietary information – with outside parties without first obtaining express, written permission from your company. It’s also wise to have all employees sign non-compete contracts with your company before they start to work;
  • Consider requiring employees to obtain your permission before taking on “second” jobs.  Should you decide that you want to expressly forbid an employee from taking on a specific “moonlighting” job, always immediately speak with your attorney – to be sure you’re within your legal rights to do so. You’ll need to carefully document all your reasons to protect yourself from any future litigation;
  • Try to be accommodating when an employee indicates that s/he will not be competing with your company in any way. After all, it’s entirely possible that you may one day become a client of your employee’s fledgling new company. Of course, you should still periodically touch base with all moonlighting employees to be sure no conflicts of interest have developed since they started their second jobs;
  • Use periodic job evaluations to your advantage. During these, be sure supervisors ask questions that can help determine if the employee’s outside job is starting to compromise his/her ability to provide you with top-quality work.

Please feel free to schedule an appointment with one of our Murray Lobb attorneys so we can help you draft the various contracts you need to protect your company’s proprietary interests. We can also help guide you as you create (or update) your current employee handbook on this and other topics.

10 Ways to Minimize Liability When Providing Employee References

Although it was far simpler twenty years ago to provide references for most departing and former employees, it now requires careful planning. Employers must take deliberate steps to protect themselves against possible lawsuits brought by disgruntled former employees who may claim that they’ve been harmed by defamatory or negative job references.

All companies should now consider requesting (as a hiring condition) that each new employee sign a release form granting permission for the company to provide future job references without threat of liability. As noted below, that paperwork can then be supplemented by new, signed and dated authorization forms for each future reference requested.

Before sharing ten ways your company can reduce its potential liability when providing job references, this article will first briefly review common legal arguments advanced by former employees when they sometimes sue claiming a reference harmed their future job prospects.

Types of arguments past employees advance when alleging harm due to a job reference

Keep in mind that defamation does not have to produce actual harm – it’s enough that the negative reference was published or communicated to a third party and might reflect poorly on a past employee’s good name or overall reputation. Courts will normally review all the surrounding circumstances to determine whether a reference was truly damaging.

  • Intentional infliction of emotional distress. An angry former employee may claim that the person who issued the reference used unjustified and inflammatory language. While this isn’t asserted often, it’s a reminder to create a clear and distinct policy for how all references should be handled – free of unsubstantiated opinions or undocumented gossip. For example, it’s always wise to avoid alleging that a former employee demonstrated clear signs of struggling with some form of substance abuse on the job;
  • Invasion of privacy. Your company must avoid publicizing private information about an employee. For example, if you investigated why an employee was late to work on several occasions, you should never publicly disclose that the person was repeatedly jailed overnight due to arrests for drunk driving;
  • Interference with contract. A business should never knowingly provide false or misleading information about a former employee that could reasonably bias a prospective employer against hiring the person. Be as honest as possible and rely on neutral, documented information in the employee’s personnel file whenever possible;
  • Title VII discrimination. You must never provide a negative reference because a past employee was a member of a protected class. So, do not claim you fired someone because of their disability or alleged problems due to their gender. Title VII of the Civil Rights Act of 1964 forbids this type of discriminatory behavior.

Ten practices that can help you provide safe and proper references

  1. Always obtain employee consent. You should require a written request from all past employees asking you to provide a reference to a specifically named individual. This is very important since references should only be provided to proper parties;
  2. Designate only one or two company officials to handle all employee references. Centralizing this operation can help your company avoid releasing poorly drafted forms or letters of reference. It’s usually best to forbid all supervisors and other employees from providing their own references. You may want to create your own simple form for providing all references;
  3. Maintain accurate personnel files for all employees. Furthermore, be sure to conduct regular employee evaluations – and have employees sign the bottom of all written evaluations. This information should provide the basis for future letters of reference. It must be free of any biased or highly negative comments whenever possible;
  4. Avoid providing references over the phone. This is important since phone requests can be placed by nearly anyone. You must always be sure you’re only providing information to legitimate parties. Secure, written communications are always best. And never provide a reference until after you’ve received a new, written authorization form signed and dated by the former employee. (It should state that your company will not be held liable for providing the requested reference.) You can email or fax this form to the past employee when you receive a new request;
  5. Only provide information to proper parties. Be aware that private investigators and others may contact you and just pretend to be potential employers. Your company could be sued if you release a reference to someone who is not a prospective employer;
  6. Try to stick to the scope of the requested information. Don’t volunteer opinions or offer unsubstantiated data. Depending on your firm’s established policy for providing references – just stick to basic facts. (However, be sure to review the last paragraph of this article about providing references for past employees who exhibited violent workplace behavior – made serious threats – or sexually harassed other employees);
  7. Keep detailed records regarding all reference requests. If you fail to keep all written data involved with these requests and copies of the information your company provided, you may have a very difficult time mounting an effective defense if you’re sued for defamation – or on the other grounds named above – by a former employee;
  8. Be careful and provide about the same amount of information about all employees. While it may be tempting to provide lengthy praise for some former employees, it’s best to only comment on factors that may apply to all employees. If you’re going to provide negative information, be sure to first check with your Houston employment law attorney to be certain you’re not being too harsh – or revealing too much;
  9. Try to avoid requiring or compelling self-publication. If you fired someone because they were recently convicted of a serious crime or are no longer qualified to maintain a certain level of a security clearance, be careful what reason you give for firing that person. Otherwise, you may be forcing that person to later “self-publish” negative facts about themselves. Ask your lawyer if there are other valid legal grounds you can state as the basis for the firing of an employee when controversial issues were also involved. This can cause complex problems — yet honesty is always crucial; and
  10. Only share objective information. Never tell a prospective employer about any workplace gossip tied to the past employee’s personal problems. You should only be sharing data that can be easily verified by reviewing the employee’s personnel file.

While all these tips should help you reduce your chances of being sued based on a claim of defamation (or the other grounds stated at the beginning of this article), you must remain aware that providing too little information about a past employee can potentially render you liable in a lawsuit brought by the new employer. More facts about that problem are provided below.

Can you be sued for negligent referral, fraud or misrepresentation due to your reference?

Those types of lawsuits are becoming more common. If you had knowledge that a past employee behaved violently in your workplace, made serious verbal or physical threats against others – or sexually harassed one or more workers, you might need to disclose some of that information. This is a topic you must discuss in much greater detail with your Houston employment law attorney since Texas law may or may not provide you with adequate protection from liability.

If you’re uncertain how to provide a reference for a past or departing employee, please feel free to contact one of our Murray Lobb attorneys. We can provide you with sound legal advice regarding such topics. Our firm can also help you create employee release and authorization forms. Should you be sued by a former employee, we’ll be available to defend you through every stage of any proceeding.

Brief Overview of Texas and Federal Whistleblower Laws

All employers must respectfully interact with employees who report alleged wrongdoings in the workplace. Often referred to as “whistleblowers,” these individuals are trying to correct illegal practices or behaviors they believe are harmful to many. Although some whistleblowers may have improper motives, you always ignore them at your own peril – especially since there are Texas and federal laws designed to protect them under certain circumstances.

The following information about whistleblower laws and related activities can help you better understand why an employer must obtain timely legal advice from a Houston business law attorney once any employee threatens to file this type of complaint.

The Texas Whistleblower Act

This statute is found in Sections 554.001 (and following) of the Texas Government Code. It only provides protection against employer retaliation for public employees – not private ones. The law expressly forbids public employers from suspending, terminating or otherwise imposing adverse personnel actions employees who report alleged legal violations by the employer or co-workers.

However, the complaining party – who must report the alleged wrongdoings to the appropriate law enforcement authority – must undergo (exhaust) all employer grievance or appeals processes before being allowed to sue the employer. Under the Texas statute, all whistleblower lawsuits must be filed within 90 days of the reported wrongdoing.

Damages may include obtaining a legal injunction against the employer – as well as receipt of all back pay owed if the employee was terminated (or demoted) in a retaliatory move. Successful whistleblowers (who meet all statutory requirements), are also entitled to receive full reinstatement, all fringe benefits owed, full seniority rights, actual damages, reasonable attorney fees, court costs and a set maximum of possible other compensatory damages.

Furthermore, a supervisor found to have violated the complaining employee’s rights under this Texas statute (Section 554.008) can be forced to pay up to a $15,000 civil fine.

While the burden of proof is on the whistleblower, the possible penalties can be formidable.

Federal laws often relied upon by various whistleblowers

  • The Sarbanes-Oxley Act (passed shortly after all the illegal Enron activities). It mainly addresses the penalties available in the wake of fraudulent accounting practices.
  • The Dodd-Frank Wall Street Reform and Consumer Protection Act.
  • OSHA violations. Many construction workers and other employees file “whistleblower” complaints based on these Occupational Safety and Health Administration statutes and regulations.
  • Various Department of Energy laws and statutes.
  • Environmental Protection Agency (EPA) laws and regulations.
  • Federal airline regulations.
  • The False Claims Act (as recently updated).
  • The Fraud Enforcement and Recovery Act of 2009.
  • Hazardous waste regulations.
  • The Patient Protection and Affordable Care Act — and other government statutes related to the provision and receipt of proper medical care.

While this list isn’t intended to be comprehensive, it provides a general overview of the types of statutes and regulations often referenced in many whistleblower complaints.

The following information reviews the most common types of illegal retaliation some employers take upon learning that a whistleblower complaint has been filed.

Forbidden, retaliatory actions taken by some employers

  • Job termination. Far too many employers look for “clever” ways to fire complaining employees once they learn a whistleblower complaint may be filed.
  • Demotion. An aggrieved employee may be called in and told that there have been long-standing complaints about his/her performance – requiring demotion to a lower position with considerably lower pay.
  • Thinly disguised harassment on the job.
  • Retaliatory discipline. This may include the placement of highly negative performance reviews in an employee’s file – making it much harder for the workers to receive any future promotions or favorable recommendations upon leaving the job.
  • Blacklisting. Some employers will “discreetly” contact their peers throughout the same industry, purposefully designating the specific, complaining employee in hopes of preventing that person from every landing another job in that same field.

Two high-profile whistleblower events help explain how such actions often unfold

One of the best ways to gain a stronger understanding of whistleblower activities is to read all you can about how former Enron employee Sherron Watkins reported her concerns about her employer. You may also want to learn more about all the late FBI agent W. Mark Felt (“Deep Throat”) did to expose President Richard Nixon’s illegal activities tied to the Watergate scandal.

As one Texas Monthly article puts it, the Enron scandal involved highly questionable financial practices that included the creation of financial entities to help Enron conceal the company’s growing debt from Wall Street, regulators and the general public. The book Power Failure provides an in-depth look at how all of Enron’s troubles began and how its illegal activities ruined the lives of so many.

Conclusion

Always make sure your company (or government office) provides all supervisory personnel with comprehensive training on the proper ways to respond once a whistleblower complaint has been filed (or is referenced by an employee). And remember that retaliatory acts must be avoided since they’re illegal and often very costly.

If you believe an employee is preparing to file a “whistleblower” complaint against you, please contact one of our Murray Lobb attorneys right away. We can explain your legal rights to you and help you take the proper steps to respond appropriately. Timely intervention can prevent critical misunderstandings and unnecessary litigation.