How can I minimize the risks of moonlighting in violation of my contract? [closed]

Question

I am currently making a decent salary developing web applications in a Fortune-50 consulting firm, but have high-interest student loans I want to pay off more quickly.

My current contract specifically forbids moonlighting, but I do not want to renegotiate that clause at the moment since my company is an at-will employer currently restructuring, so a request like that may make me an easy target.

How can I minimize the risks of going against my contract to start a side business? I plan to reduce my working hours from 60 to 45, and use the additional time during the week and on weekends to grow the separate business (outsourcing whenever possible).

Answer 1

Executive Summary

Disclaimer: The below is not a recommendation to violate the terms of an employment agreement or violate any laws of any sort.

To minimize risk of violating your moonlighting clause, I would recommend:

1. Consulting an attorney
2. Doing work unrelated to your day job
3. Building a business that can support you without a day job

Legal Consequences

Your contract may not only contain a clause restricting your right to do outside employment, it may contain a clause that says the company owns the right to your work even if that work is done outside working hours. Depending on your jurisdiction, the company may be able to claim consequential damages or at least take you to court and make your life miserable even if they know they will eventually lose.

These could all cause more harm than the current high-interest loans you want to start a side business to pay back.

Consult an employment attorney before doing anything with the side business. Give the lawyer your employment contract and any other relevant material. Make sure you fully understand the legal consequences under the law and under your contract for the violation. This will cost money, but it is money that will be well spent if it prevents you from making a colossal blunder that costs more than you'd make off the side gig.

Employment Consequences

If you do get caught, there will likely be a range of consequences. As you said yourself:

The climate in my particular group is a bit tense right now as there's some re-org going on so any hint that I'm not 100% into my team could very likely leave me in poor standing at best or unemployed at worst.

If you get caught, you want the employer to err on the side of a lighter punishment if at all possible.

To minimize the risk of getting screwed over in the worst way possible, you want to minimize the consequences to the company of doing the side business. That means any work you do would be unrelated to your current company -- make sure there isn't even the slightest inkling that what you're doing could compete with your company in any way. Do not make careless mistakes or reduce your performance in your day job -- if you end up underperforming, your company is more likely to wonder why, and more likely to be angry when they find out you've made excuses to hide the real reason.

Reputation Consequences

Violating an agreement is not something looked upon kindly in most reputable businesses. Assume that any future employer will be able to learn that you have intentionally violated an employment agreement for personal profit. Think about what that will do for your future career prospects, and balance that against any additional money you would make from the side job.

Consider whether or not you will be better off if you get found out, have your employment terminated, and need to take a significant pay cut to get another job as a result.

The only way to minimize the consequences of being blackballed from future employment is to build a business that can support you 100% even if that happens. Think long and hard about whether or not you are willing to take the risk, and are getting something worth that risk in return by starting a company on the side.

Addendum (Personal Opinion)

I cannot make the decision for you, but I can't urge caution enough. The potential consequences may be worse than the benefits in the best case.

Assuming 8% interest rate, 60k loan, 20 year payback, the interest on the loan will be about 60k. Let's say you start your new business, and are able to double your loan payments (10 year payback). Your interest will drop to 27k total interest. If you lower the interest rate, or reduce the payback term, the benefit will get even lower. Let's say interest is 5%, and payback is 10 years (reduced to 5 with the side business). Now you are paying 16k in interest vs. 8k in interest -- that gap can be covered with a good raise or a promotion.

Do the math for whatever your situation is, and consider if X thousand dollars over the next Y years is really worth potentially being unemployed for the next six months.

Answer 2

While it may seem smartest to have a side business doing exactly what you do at work, that is the riskiest thing to do. And on a practical note, few people want web work done weekends and evenings.

If you want to take advantage of all that youthful energy and free time, do something that:

• does not create any intellectual property your employer could claim
• does not require the use of any equipment your employer could have provided
• does not compete with your employer in any way

Some simple examples: teaching at a gym, walking or grooming dogs, mowing lawns, helping a caterer, modelling. The pay on those is spread over a large range, but all involve being paid only for your time, and have nothing to do with your employer's business. They are also services that are often consumed at the times of the day and week that you have free. Manage them with an email address you never touch from the work network (use your phone's data plan) and you should be in a pretty defensible place.

Answer 3

Starting a business from scratch is a long slog to get to the point where it's actually making a decent amount of money, and it is initially going to cost you - in that you'll lose the income from your present employer for the hours you are dropping. How long is it going to take before your business is reliably producing more than that loss? What intangible costs are there - to your personal time, to your family and friends, to your mental health? Will consistently working 45 hours a week in the day job and 30 a week evenings and weekends be sustainable for the length of time it takes to get your business securely established? If it's not sustainable you might well end up losing both. Will you chuck in the day job when your business takes off (and if so, what about the loss of salary) and if not, how long can you last working at that rate?

There is a very good reason that employers discourage moonlighting as much as legally possible, and that's because employees who drive themselves to a breakdown doing two jobs are a major risk to both the employer and themselves.

An alternative is to look at refinancing the high-interest loan. YMMV, but borrowing rates are at a low and you may be able to find a better deal if you have anything to secure the loan against. Keep repayments the same, and the loan term will reduce significantly, even if you just knock a couple of percentage points off the rate.