4 top tips for a legally savvy side hustle
Working your way to your side hustle dream
Whilst it sounds romantic to quit your job and start building your own business empire, in reality it can take time and patience to replace your full time income. It's daunting to quit your job, regardless of whether you love it or hate it.
It's a sensible step where you can plan and develop your ideas and audience before you take the plunge into your own business. There are some big pitfalls to keep in mind as you build up the lady boss business of your dreams, while still working your nine to five.
And so here are my top tips for being side hustle savvy and keeping your values, integrity, bridges and intellectual property intact.
Intellectual property
Confidential information
Conflict of interest
Restraint of trade clauses
Non-solicitation clauses
Grab a cup of tea (or stronger) and your employment agreement and let’s get savvy!
Yours and Theirs - Protect your IP, Respect their IP
Almost every Business has some form of Intellectual Property (IP). For a business, IP can include trademarks and copyright from website content and other written works. It can also include patents and other formal registered Intellectual Property. These IP rights can be extremely valuable.
If you are creating an amazing side hustle, you might be surprised to discover the business you work for owns all the IP and copyright in your developments if you make use of the business' resources to create that side hustle or create it during your work times. Most employment agreements actually say that any kind of content you create during your time as an employee using company resources is owned by the employer.
Imagine… That blog you just wrote using your work laptop? Those photos you took using the work camera? The website you built using work software licenses? Not yours anymore!
If you're using Business resources, such as laptops, software licences, or other resources, the Business has paid for those resources. And the Business is paying you a wage for your work. It wouldn't be fair if the Business paid for resources and wages) and you could use the resources and skip off into the sunset with a new invention.
Standard employment contracts usually include clauses so any IP you create during your employment is owned by the Business. This applies whether you create that IP on the job, in the office, or outside normal work hours using Business resources or information.
Side hustle savvy - Keep it separate.
So, if you want to build up and create your own intellectual property and own it, keep it separate.
Have a separate laptop or phone or equipment or other tools you use at work. Try not to blend work hours with side hustle hours - work on work during work hours.
Keep a clear and distinct distance between work and your side hustle separate to make sure you own the content you create.
Confidential Information - Secret strategies and key contacts
The second pitfall to avoid, is to not make use of company confidential information for your own purposes.
Future moves, sales, buys... Marketing strategies and product roadmaps... Exclusive partnerships and top clients lists...
Businesses gain a competitive advantage with trade secrets as well as their commercial information. As an employee, you're often trusted with access to different kinds of commercially sensitive information.
Under an employment relationship, there is usually an implied relationship of trust and confidence.
In your employment contract, there will generally be conditions to make it clear what the obligations are around accessing, using, protecting, and disclosing the commercially sensitive information of the Business.
Hopefully this is common sense, but you can't use the confidential information from one company in your new company. You can steal or recreate your employer's secret sauce or steal particular algorithms or programs.
Side hustle savvy
Don't try to use confidential information or knowledge about upcoming market moves they might make to your advantage, there's likely to be a clause in your employment agreement that protects confidential information.
If you use this information and cause your employee damage, they could seek compensation for costs you cause them by breaching your obligations of confidence.
Conflict of interest - Cheating on your main squeeze
Just like in a serious romantic relationship, Businesses want their Employees to only have eyes for them. So when you work for one Business, you generally can't have other interests that might go against the best interests of that Business (unless you get permission).
Examples of conflicts of interest include:🛆
A financial interest in a competitor (such as an Employee owning part of a company that competes with the Business)
Working a second (or third!) job with a competing business or setting up a new business
Employees having close personal relationships with co-workers, customers, or suppliers
Using confidential business information for non-Business related reasons (such as to buy or sell shares)
Businesses are often concerned you might misuse their company information, overstretch yourself, not work as well or might be more difficult to schedule.
Standard clauses will set out that Employees cannot work a second job without the Business' consent. The Business is entitled to ask for details about the second job and from there, give permission for the second job unless there is a genuine concern.
Side hustle savvy
Get permission for your activities. If you don't feel that you can get that consent for the exact thing that you want to do, such as setting up a competing business, then it is likely it is a conflict of interest, in breach of your employment agreement.
Remember though, you don't need to launch straight into having a new business, but perhaps you want to start a blog or write articles on LinkedIn. Perhaps you want to start speaking at conferences or volunteering in a similar industry to network and build your profile. Get written permission for these basic activities, and update the permission regularly.
These preparatory steps which don't involve a conflict can still help you in your future business.
Restraint of trade - Chasing waterfalls when you leave your job
Another key clause to check for in your employment agreement is a restraint of trade clause.
Sometimes also called 'non-compete' clauses, 'restraint of trade' clauses are used by Businesses to protect themselves from Employees who might otherwise try to steal customers or other employees away from the Business - during or after employment.
If you agree to one of these 'restraint of trade' or 'non-compete' clauses, you are agreeing you won't compete with the Business for a certain time, for certain activities, within a particular market.
For example, this might mean not working in the same role, for a competitor, whilst employed by the Business and for at least 3 months after the employment contract ends.
These kinds of restrictive clauses can be unfair if they go too far beyond what is reasonable and an employee is unable to earn a living.
It is common to see a 'waterfall' clause with different options, for example…
Restrictions that last for
(a) 3 months,
(b) 6 months,
(c) 12 months),
…so that if one is unfair in the circumstances, the unfair condition is struck out and another (shorter, more reasonable) one will apply. This is called a 'waterfall clause'… like a 'choose the most reasonable adventure' book. It's quite forceful to prevent someone from making an income, especially if they have a particular skill or work in a particular industry to earn their living. So, if the clause is considered to be too harsh, then a judge would read it down to be more reasonable or strike out sections that are unfair.
Restrictions that last for
(a) 3 months,
(b) 6 months,
(c) 12 months),
Side hustle savvy -
If you see these clauses before you sign an employment agreement, try to negotiate them down if they are too harsh. Try to push back on the scope of the restraint / non-compete clause.
For example, instead of a restriction that says an Employee cannot 'run any business for 12 months that follows the end of the contract anywhere in the State', be specific about the type of business - 'run an in-person yoga business for 3 months within 5 km radius of the Studio 'If you are stuck with this clause in your employment agreement, remember that Businesses can only enforce restraints in contracts if they are clear, specific, and only go so far as to protect legitimate business interests. Any restraints must be reasonable. Your employer cannot unfairly restrict you from making a living after you leave.
Non-solicitation clauses - Hands off customers and other employees
Non-solicitation is about not trying to steal other employees or customers away from a Business during or after your time with a company ends. This means you can't try to induce either customers or other employees, away from the business for a certain amount of time, after you leave the business.
So even if you're super popular, or if you've got lots of clients you can't then go to those other employees and clients and say 'Hey I'm going to do this amazing new business and you should come work for me or come do business with me'. If you do this and the business loses clients, they might seek to recover the loss of that revenue from you.
Check your contract to see what the limits are and seek advice if you aren’t sure.
Put a value on your integrity
At a basic level, you're employed by your employer to do the work they reasonably ask. So please don't work on your side hustle when you *should* be working on your day job.
You need to do the work you agreed to during the required hours. Don't fake the hours or work. Don't be silly. Do your work. Your employer will notice and you could end up discrediting your business before it gets off the ground.
That being said, you don’t need to burn yourself doing hours of extra, thankless work for little recognition. If your employer is being unreasonable about your hours or overtime or other entitlements, you might need some specialist advice (see links below for the Fair Work Ombudsman).
By building your business with integrity, you won't burn bridges on your way out the door. You can hold your head high, and protect your fledgling business from accusations from your former employer or colleagues.
Top tips for happy hustling on the side
Read your employment contract, know what’s in there!
Get consent from your employer in writing (email)…. Start small (e.g. podcast or blogging, no income) and build up (sponsored episodes or commissioned articles, income-generating)
Keep your work life and side hustle life separate (separate time, separate resources, don’t mix IP)
Act with integrity, if it feels like it might not be the right thing to do, it could land you in trouble and headaches
Make sure you are working to your values. If you do, you can leave a company when the time comes without burning your bridges, with your intellectual property intact and your head held high, ready for your exciting full time hustle!
Finding help and advice
If your employer is treating you badly or you think might be underpaying you or other serious issues, take a look at information from the Fair Work Ombudsman: https://www.fairwork.gov.au/employee-entitlements
As always, a reminder to seek advice for your situation
This is general information and may not be appropriate for your situation or your needs.I am a lawyer but I am not your lawyer unless we enter a formal agreement. Always seek independent financial and legal advice where you can. See this list for help with legal advice and free referral services.
For (non-boring) help with your side hustle or other contract issues,
Get in touch with us today!
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