I work as a web developer. My employer recently found out that I am freelancing as a web developer on the side and he told me I am not allowed to do this as it "is a rule". I did not sign any contracts when I took this job and no where does it state this "rule". When I do freelance, I do it on my own time and it does not affect the company whatsoever. Is my employer legally allowed to stop me from continuing?
Is my employer legally allowed to stop me from continuing?
If you are in the US your employer cannot stop you from freelancing. Assuming you don't have a contract that says otherwise, they can't sue you simply for freelancing or sue the company that purchases your freelancing services. They have no laws on their side.
They can, however, fire you from an at-will job in most cases for this reason or for no reason.
You might be best served by going along with your company's rules or finding a company with different rules.
The OP asked if his employer could "stop" him from freelancing. The answer was "No." If instead the question was if his employer could "fire" him for freelancing, the answer would have been "Yes". I'm sorry if this wasn't clear. Hypothetical methods of "stopping" the freelancing (if the laws permitted) could potentially involve suing the employee or the company that hires his freelancing services. Neither of these could normally happen in the US.
As indicated by Joe Strazzere, they are free to release you for pretty much any reason that doesn't fall under discrimination laws if you live in a location that does "at will" hiring. For the purpose of things like unemployment, this does not count as being fired generally, which is a good thing.
To address the secondary question, when you mention that "it does not affect the company whatsoever", that's not necessarily true. First, sidejobs can create conflicts of interest. While the company that you're freelancing for may not currently be in conflict with your primary company, they might be in the future. Or, for that matter, there might be a conflict of interest that you are unaware of at the time. Second, and this is a stickier matter, there's a matter of availability. What happens when your company wants you to stay late, or be available on a weekend, and this bumps up against your freelance work? As I understand it, this is less of an issue if your primary job is contract work, as they would have to pay you for the hours that they expect you to be available. As a salaried employee, things get trickier, particularly if you work in an "exempt" position where you are not eligible for overtime, as your company technically pays you for your availability throughout the pay period, which is why you're guaranteed to be paid even if they don't have work for you at a given time. And, of course, even outside of billable hours, you still get that potential conflict of interest where they will never be certain whether you will be available for an emergency situation after hours.