A Secondary Employment Restriction clause prohibits or limits an employee's ability to work for other employers or engage in outside business activities while employed. This clause typically specifies what types of secondary employment are forbidden (competitors, clients, suppliers), time restrictions (during employment, after termination), and geographic scope. The employer's rationale is to prevent conflicts of interest, protect confidential information, ensure the employee's full attention and availability, and avoid situations where an employee might divert business opportunities to a competitor or outside venture. This clause is particularly common in insurance where agents and brokers handle sensitive client information and must maintain undivided loyalty to their primary employer.
The enforceability of secondary employment restrictions varies significantly by jurisdiction. Courts generally scrutinize these clauses under reasonableness standards, examining whether the restrictions are necessary to protect legitimate business interests, whether they are geographically and temporally reasonable, and whether they impose an undue hardship on the employee. Overly broad restrictions may be unenforceable or subject to modification by courts. Additionally, some jurisdictions have statutory protections for certain types of outside employment (such as military service or political activity), which can override contractual restrictions.
Before signing, carefully review the scope and duration of the restriction. Negotiate to narrow the definition of "secondary employment" to exclude non-competing activities (such as teaching, volunteer work, or passive investments) and to limit the restriction to the employment period rather than extending indefinitely post-termination. Request a written list of specifically prohibited activities and employers. If the restriction is overly broad, propose a modified version that protects the employer's legitimate interests (such as non-competition with direct competitors) without preventing you from earning income in unrelated fields. Consider consulting an employment attorney in your jurisdiction to assess enforceability before accepting.
Frequently Asked Questions
What does this clause mean in simple terms?
A Secondary Employment Restriction clause prohibits or limits an employee's ability to work for other employers or engage in outside business activities while employed. This clause typically specifies what types of secondary employment are forbidden (competitors, clients, suppliers), time restrictions (during employment, after termination), and geographic scope.
Why should I care about this clause?
The employer's rationale is to prevent conflicts of interest, protect confidential information, ensure the employee's full attention and availability, and avoid situations where an employee might divert business opportunities to a competitor or outside venture. This clause is particularly common in insurance where agents and brokers handle sensitive client information and must maintain undivided loyalty to their primary employer.
What are my options?
The enforceability of secondary employment restrictions varies significantly by jurisdiction. Courts generally scrutinize these clauses under reasonableness standards, examining whether the restrictions are necessary to protect legitimate business interests, whether they are geographically and temporally reasonable, and whether they impose an undue hardship on the employee.
How does this affect small businesses?
Overly broad restrictions may be unenforceable or subject to modification by courts. Additionally, some jurisdictions have statutory protections for certain types of outside employment (such as military service or political activity), which can override contractual restrictions.