Don't Lose Your Day Job: Court Rules Against Moonlighting Employee

Written By James J. Heelan, Barbara J. Stratton, Matthew Riskin, Tatum J. R. Woywitka and Jackie Hosking

Can an employee keep his or her full-time job, while operating a personal business on the side (also known as moonlighting)? This issue was considered in Ross v IBM Canada Limited, 2015 ABQB 563 [Ross], where a senior salesman was terminated by IBM Canada Limited (IBM) on the basis that he was also regularly working for his own personal company during the office hours of IBM (IBM time). 

IBM had clear conduct guidelines and Mr. Ross signed off on them multiples times, confirming his understanding of them, and agreement to them. One particular guideline expressly prohibited using company time to perform non-IBM work, or use IBM assets for any outside work. It was clear that a violation of IBM guidelines could result in dismissal.

While it can be difficult for an employer to show just cause for termination, the court in Ross held that termination of the employee in this case was justified, and stated that it was clear to the employee that the role was a full-time job, paid a substantial salary, and required all of his work energy to be devoted to the interests of IBM. The court accepted the evidence that the employee spent, on average, three to four hours per week conducting private businesses while on IBM time, and concluded that this amounted to a significant breach of the employment relationship, given the clear guidelines against doing so. As concluded by the court at paragraph 60, this breach evidenced a breakdown in the employment relationship that was sufficient to warrant termination with cause, as the employee’s misconduct:

constituted a clear breach of a clear conduct standard that was emphasized by the employer as being at the core of the employment contract. The repeated breach of the conduct guidelines was inconsistent with the fulfillment of the express terms of his employment contract. 

It is of note that the situation in Ross was not an isolated incident where the employee occasionally attended to his personal business during company hours. It was the case that the employee regularly engaged in personal business, to the point that it was a breakdown in the employment relationship with IBM.

While there is no blanket prohibition at common law that restricts an employee from moonlighting, given the decision in Ross employers may impose a contractual restriction within an employment contract or within policies of the organization. Depending on how explicit the prohibition against moonlighting is, an employer may have support for the termination of a moonlighting employee with just cause. 

As a practical point, employers should ensure that the employment contracts, policies and guidelines of the company clearly speak to any restrictions on moonlighting, or using company time for personal business. Moreover, these restrictions should be made known to the employees, to ensure that acknowledgment and acceptance of the restrictions are obtained on a regular basis.

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