Is this "Outside Interests" clause in an employment contract taking it too far?

Question

Seems like it states that even going out at the weekend to volunteer at a soup kitchen needs to be agreed via written consent by the CEO. I understand they want to limit conflicting work interests, but this one seems worded too broadly.

Is this standard wording or is it taking it too far?

1. Outside Interests
   10.1 During the Employment (including without limitation during any period for which clause 2.5 is operated) the Employee shall not (save with the prior written consent of the Chief Executive Officer, or as already disclosed to the Chief Executive Officer prior to the Effective Date)

   a. directly or indirectly be engaged, concerned or interested in any capacity in any business, trade or occupation other than that of the Company except as a holder of not more than five per cent. of the issued shares or securities of any companies which are listed or dealt in on any recognized stock exchange or market. For this purpose "occupation" shall include any public, private, or charitable work which the Chief Executive Officer considers may hinder or interfere with the performance of the Employee's duties

Am I misinterpreting this clause or is it saying that they can prevent me from doing volunteer work?

Answer 1

In theory, yes it seems that your employer could forbid you from volunteering at a soup kitchen. Though I doubt that is the sort of activity that your employer wishes to prevent. Of greater concern to companies is those activities that conflict with the interests of the company.

Things that your employer would be more likely to object to:

• Employment in a second job
• Ownership(full or partial) of company in excess of the amount allowed(5%)
• Organizations that have been named as Terrorist organizations or restricted or prohibited due to their illegal activities.
• Participation in illegal activities
• Activism in groups like Occupy Wall Street, PETA, Sea Shepherds, et.
• Activism in groups whose mission runs counter to your employers business interests
• Participation in a militia

It is unlikely that your company is going to have a problem with your volunteerism though it is possible so I would recommend that you disclose an membership and activities you are involved in. If you are reluctant to do so then you should probably consult a solicitor(Lawyer) about your concerns and liabilities if you choose not to disclose. It is possible that you have rights that are being violated by this clause though a solicitor would be in a better position to judge this.

Answer 2

You are not misinterpreting it. The clause is absurd for the vast majority of employment cases. Unless the company was giving me a stupid amount of money, I would never sign something like that.

I would recommend not relying on their good intentions and hoping they won't enforce this for charity work or other activities.

Obviously, check with an attorney if you believe such a clause is not enforceable in your area.

Answer 3

Am I misinterpreting this clause or is it saying that they can prevent me from doing volunteer work?

You are not misinterpreting it but they are — most likely — not going engage in preventative efforts against you. That’s simply time and resource consuming.

That said, clauses like this are basically “gotchas” in a contract designed to give the person creating the contract an advantage over you if/when the proverbial crap hits the fan.

Meaning, let’s say someone on staff just doesn’t like you and can’t pin something on you (i.e.: they don’t like you and want you gone). Then they could just dig up a clause like this — or another — and suddenly decide to use this against you.

Then again, that is not something most sane and functional organizations engage in. It’s a waste of time and effort. The chances are slim.

But clauses like this are put in place to make sure that in the oddball chance that they need you gone and have no other choice, they can hold this against you. From a corporate, bureaucratic and organizational standpoint contracts like this are drawn up to ensure the company is always in control of the situation and the signer is not on equal footing.

If that makes you feel ill, don’t worry. Have you looked at your apartment lease or rental agreement yet? Or any other casual contract you have. Heck, software usage agreements! Check them out! You might be shocked at how many of these “gotchas” exist in boilerplate language everywhere.

Answer 4

In my opinion this is unacceptable language and I would not sign something like this. Now it's entirely possible and likely that this is "boilerplate" drafted by an overzealous company lawyer but that doesn't make it okay. Regardless of the intent, the actual legal obligation is created by the wording of this clause.

It's actually perfectly okay to challenge this (respectfully). Contracts and agreements can be changed and edited and that's not uncommon. You can go back to your manager and/or recruiter and basically ask for clarification or removal of this statement. Example

"So I have read clause 10.1.a and I have a few questions: This seems to restrict pretty much any activity I do outside of work, regardless whether it has anything to do with work or out. For example, I play with a band once a month in a local bar and we get paid a few bucks per night. According to wording of this paragraph I would need the CEO's specific approval every time I play with my band. I don't believe that this is the intent of this paragraph, so can you please reword this to better represent what you have in mind?"

As a manager, I would appreciate this type of response. If we have something stupid in the boilerplate we should fix it and I would value an employee who takes the time and has the attention to detail to plow through this stuff, reads it critically, and provides constructive feedback.

The companies reaction will be telling: They may dig in and refuse to make any changes or accommodations, but this should be setting of big red warning lights with you. Or they may say "wow, you are right, that's not what we intended, thanks for pointing this out".

Answer 5

I'd pick up on the part that says "or as already disclosed to the Chief Executive Officer prior to the Effective Date". In other words, before you start working, make sure you casually mention to the CEO that you do volunteer work, play in a band, whatever. Then it counts as something you've "already disclosed" (it doesn't say this prior disclosure has to have been in writing). That still doesn't help if you decide to join a band or start a bit of volunteering later, but at least you're covered for any hobbies you already had at the beginning.

Answer 6

I work in the US and I have had contracts with clauses like these in them. It is not an uncommon practice in my experience. I am not an attorney so I don't know its legality.

The intent is the employer doesn't want want you having a 2nd job (or something job-like) that could interfere with your job performance working for them. It is not unheard of for people, even professionals, to have 2nd part-time jobs. Some of them even work on their part time jobs during their full time job, which is naturally undesirable to the employer.

A few strange examples:

I worked with a production supervisor in a fortune 100 company who was absent a lot. It turned out he was working in his father business the days he was absent. The department manager found out and terminated his employment.

One company I heard about had several employees who owned small businesses which sold raw materials to and performed services for the company. This is a huge conflict of interest.

A knew a chemistry manager who one weekend I found serving tables in a local low quality seafood restaurant.

Answer 7

It is fairly common in the US for the employment contract for creative folks to basically say that all intellectual property created during the period of employment that can be construed to be in the employer's fields of interest will become their property unless they release it to you. They're paying for your creativity, and on salary you're never really "off the clock".

The more clueful/polite employers will phrase this in such a way that hobby-level activity and/or activity outside of the profession that they hired you to practice will not be captured that way. My employer had no problem with me developing shareware that didn't compete directly with a current product, and indeed encouraged writing articles about interesting ways to use their products.

Some companies do have blanket "you're renting us your whole brain" agreements. In some cases it's possible to negotiate those into more acceptable form if you're savvy enough to challenge them and willing to accept a compromise such as the one in the preceding paragraph.

Certainly if you anticipate a problem it makes sense to say "I'd love to work for you but I'm planning to do X, Y, and or Z and this clause seems to be a problem. Can I get an explicit statement that those will be approved, or at least a clearer statement of what I would need to do to get approval?"

The time to negotiate contract terms is always before you sign.