A group of more than 26,000 Costco employees are attempting to prove this point. They are pursuing a class action over company policies that allegedly restricted lower-wage workers from moonlighting or working for competitors.
Whatever happens in that case, the larger lesson for employers is much simpler: if you employ hourly workers, you generally shouldn't be telling them where they can work when they aren't on the clock for you.
Yes, there are exceptions. An employee shouldn't be stealing trade secrets, diverting customers, misusing confidential information, or taking outside work that creates a genuine conflict of interest. A second job can also become your legitimate concern if it causes the employee to miss shifts, show up exhausted for safety-sensitive work, or otherwise fail to perform. Those situations exist, but they are the exception.
Too many employers, however, treat moonlighting as if an employee taking a second job is somehow being disloyal. It isn't. An hourly employee doesn't owe you exclusivity simply because you employ them. If you want exclusivity, pay for exclusivity.
Costco's case illustrates what happens when employers blur that line. The plaintiffs contend that the company's outside-employment, conflicts-of-interest, performance, and ethics policies collectively operated as unlawful noncompetition agreements that prevented lower-wage employees from supplementing their incomes by working elsewhere.
State laws are becoming particularly hostile to competitive restrictions on lower-wage workers. But put the legal issue aside for a moment. There is a more basic management question employers should ask before trying to control an hourly employee's second job: why do you care?
If the answer is simply, "Because they work for a competitor," that is usually not much of an answer. A cashier picking up shifts at another retailer probably isn't walking out your front door with your five-year strategic plan. A warehouse employee working weekends somewhere else probably isn't threatening your competitive advantage. A bartender working at two breweries probably isn't committing industrial espionage.
They are working. More specifically, they are trying to earn enough money to live.
And that matters more today than ever. Housing costs more. Groceries cost more. Utilities cost more. Insurance costs more. Childcare costs more. Just about everything employees need to buy costs more.
For plenty of hourly workers, a second job isn't financing some extravagant lifestyle. It is paying rent, buying food, covering a car payment, paying down debt, or giving a family some breathing room at the end of the month.
Now imagine what your employee hears when you say, "We aren't going to pay you more, but we also won't let you earn more somewhere else." That is not a recipe for loyalty. It is a recipe for resentment.
The message employees hear is even worse: "We know you need more money. We aren't going to give it to you. And we aren't going to let you earn it somewhere else." Employers should not be surprised when workers react badly to that message.
And resentment has consequences. Start with turnover. If an employee needs additional income and your policy prevents them from earning it while working for you, eventually they are going to solve that problem. There is a good chance the solution will be leaving you. Congratulations. You just turned your moonlighting policy into a recruiting program for your competitors.
Then there's morale. Employees don't leave their economic reality at the workplace door. If they're worried about rent, groceries, healthcare, childcare, or another bill they can't quite cover, they know exactly what additional shifts somewhere else could mean to their household. When management blocks that opportunity without a legitimate business reason, employees will not see the policy as protecting the company. They will see it as the company making their lives harder. And they will probably be right.
There is also reputational damage. Hourly labor markets are local. Employees talk. Former employees talk. Applicants talk. Families talk. Become known as the employer that interferes with people's ability to make ends meet, and that reputation will travel much faster than whatever "people-first" slogan appears on your careers page.
No amount of employer-branding copy fixes a workplace culture that tells workers, "Your financial problems are yours, but your solution requires our permission."
And then there's the risk of unionization.
Employers often ask why employees turn to unions. Usually, it isn't because a union organizer suddenly appeared and hypnotized the workforce. It is because employees already feel ignored, disrespected, controlled, or powerless, and the organizer simply gives that frustration a place to go.
Policies like this help create exactly that environment.
If employees believe management is trying to control what they do off the clock, while doing little to address the economic pressures that caused them to seek a second job in the first place, don't be shocked when they start looking for someone to push back on their behalf. A rule that tells workers, "You need our permission to earn extra money somewhere else," is the kind of thing that can turn ordinary frustration into collective resentment.
And collective resentment is organizing fuel.
Broad moonlighting policies also create enforcement problems. One manager ignores the rule. Another treats it like the Eleventh Commandment. One employee gets permission. Another gets denied. One business counts as a "competitor." Another, doing essentially the same thing, somehow does not.
Soon you have inconsistent treatment, employee-relations problems, and potentially discrimination or retaliation allegations layered on top of a policy you probably never needed in the first place.
None of this means employers must tolerate legitimate conflicts. Protect your confidential information and trade secrets. Stop employees from diverting your customers. Require employees to report for scheduled work and perform their jobs. Address fatigue if it presents a genuine safety issue. And if someone's second job actually interferes with their performance, deal with the performance problem.
What you should not do is transform those legitimate interests into a blanket claim over employees' off-hours. A good outside-employment policy regulates conduct. It does not claim ownership.
You buy an hourly employee's labor during the hours you pay them to work. You don't buy the rest of their week.
And especially in an economy in which many workers are already feeling squeezed, employers should think very carefully before telling an employee who wants or needs additional income that the company gets to stand in the way.
There are very few circumstances in which stopping an hourly worker from taking a second job will make your workplace better. There are plenty in which it will make employees resent you, leave you, talk badly about you, or decide they need a union to protect them from you.
Which employer do you want to be?