‘Outside work is not automatically misconduct’: How HR should navigate questionable side hustles

As side hustles become more popular in light of the biting cost-of-living crisis, employers are being urged to consider the nature of the side hustle before jumping into disciplinary action, while employees are also encouraged to consider any potential conflicts of interest before they become an issue.

In light of the now 27 per cent portion of working Australians actively receiving income from a side hustle in 2025, employers are having to navigate the increasingly grey line between investigating risk and breaching employee privacy.

According to LegalVision practice group leader Joel Hayden, the most important distinction for an employer to identify is whether a worker is “actively seeking profit, taking regular bookings, advertising, invoicing, using an ABN, selling products, or building a customer base” as a side hustle.

“For example, a marketing employee who works for a retail brand and also runs a private e-commerce consultancy may create a conflict if they use the employer’s customer data, supplier contact, advertising strategy, or campaign templates for their own clients,” he said.

“Another common example is a tradesperson, designer, recruiter, or consultant doing private work for the same customers they meet through their employer. The issue is not simply that the employee earns outside income. The risk is divided loyalty, misuse of information, competition, or diverting business opportunities that belong to the employer.”

Hayden explained that mitigating the risk begins with communication and an open mind that can acknowledge the employee’s objectives while not ignoring any potential conflicts of interest, and with a focus on disclosure, conflict management, and performance expectations.

“Employers should ask what the side hustle involves, when the work happens, whether it overlaps with the business, and whether any company information, resources, or contacts are being used,” he said.

“The right tone is practical: ‘We do not object to outside work, but we need to manage conflicts, fatigue and company resources’.”

In this way, he urged employers to remember that casual discussion is rarely an issue; rather, risks emerge if an employee promotes their side business during work hours, solicits colleagues and/or clients, distracts workers from their duties, or creates workplace conflicts.

Further, organisations should offer a secondary employment and conflict-of-interest policy that has practical regulations around performance, professional conduct, and fatigue risk.

Businesses that operate with remote working arrangements are particularly vulnerable to overlap, both in terms of resourcing and time. In this way, these organisations are encouraged to set clear output, time, information, device, and resource limitations.

In the same vein, managers should be focusing on these parameters rather than, as Hayden explained, “trying to police every part of an employee’s life”.

This, Hayden said, mitigates risks for employers, protects the organisation, and provides a benchmark for employees to consider when joining a business or before starting a side business.

Hayden explained that employers can operate under the misconception that work conducted out of hours is automatically safe from employment matters.

“That is not always true. If the side hustle uses knowledge, opportunities or relationships gained through the primary job, it can still breach contractual and confidentiality obligations,” he said.

In the same way, he said outside work is not automatically misconduct, but “the legal concern usually arises when the side hustle competes with the employer, affects performance, creates a safety risk, or uses company information, contracts, equipment, or paid time”.

Finally, he noted that it is relevant for employers to know that, while finance is the dominant driver of side hustles, passion and creativity are very much relevant, and this distinction is important for employers.

“Some side hustles are essentially financial pressure valves, such as delivery work, online retail, or freelance services. Others are identity or career-building projects, particularly in creative, digital and professional fields,” he said.

“A sensible policy should manage conflicts and performance without assuming every outside venture is disloyal.”

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