Is Moonlighting Illegal In New Zealand? Conflicts, Contracts And Clauses

It’s a situation many small business owners run into sooner or later: you find out an employee has a side hustle, a second job, or they’re doing freelance work after hours.

A common question we hear is: is moonlighting illegal in New Zealand?

In most cases, moonlighting isn’t automatically illegal in New Zealand. But that doesn’t mean it’s risk-free for your business.

Note: This article is general information only and doesn’t take into account your specific circumstances. If you need advice about a particular employee or situation, get tailored legal advice.

Whether secondary employment is allowed (and what you can do about it) often comes down to a mix of:

• what the employee’s Employment Contract says
• whether there’s a conflict of interest (or a competing business issue)
• the employee’s good faith obligations (and, in some roles, a duty of fidelity to their employer)
• health, safety and fatigue risks
• confidential information and IP risks

Below, we’ll walk through how moonlighting works in practice for NZ employers, when you can restrict it, and how to draft secondary employment clauses that actually protect your business.

Is Moonlighting Illegal In New Zealand?

Generally speaking, moonlighting is not illegal in New Zealand. Employees can often have a second job or side business.

However, from an employer’s perspective, the real issue isn’t “legal vs illegal” in the abstract. The key question is:

Does the secondary work create legal or commercial risk for your business?

Moonlighting can become a problem when it:

• creates a conflict of interest (for example, the employee works for a competitor)
• impacts performance in their primary role (fatigue, missed shifts, poor quality work)
• involves misuse of confidential information (customer lists, pricing, supplier terms)
• creates health and safety risks (excessive hours, fatigue-related incidents)
• damages your business reputation (for example, they market themselves in a way that implies they represent you)

Even without an explicit clause, employees still have legal obligations at work. New Zealand employment law includes duties of good faith, and depending on the role (especially senior, client-facing, or trust-based roles), there can also be expectations around not acting in a way that seriously undermines the employer’s legitimate business interests.

So while “moonlighting illegal New Zealand” is a common search, the more accurate answer is:

Moonlighting is usually allowed, unless it breaches the employee’s legal duties or their employment agreement.

Why Moonlighting Becomes A Business Risk (Even If It’s Allowed)

As a small business owner, you’re usually not trying to control what someone does outside work for no reason. You’re trying to protect what you’ve built.

Here are the most common risk areas we see when employees moonlight.

1) Conflicts Of Interest And Competition

The biggest practical risk is that an employee’s side job is effectively competitive with your business, or it puts them in a position where they can’t act in your best interests while performing their role for you.

This can look like:

• a hairdresser working at another salon on weekends
• a sales employee doing sales work for a competitor after hours
• a tradie taking private cash jobs using skills and contacts gained through your business
• an employee setting up a business that targets your customers

Even if they’re doing it “after hours”, you may still have legitimate concerns about conflict, client poaching, or the employee using your systems and know-how to build their own competing operation.

If you want clear rules internally, a Conflict Of Interest Policy can help set expectations (and give you a cleaner process to manage disclosures, approvals and disputes).

2) Confidential Information And IP Leakage

Moonlighting can expose your business to information leakage, even when the employee isn’t being intentionally dishonest.

For example, if they do side consulting work, it might be tempting to reuse:

• templates, checklists or processes you developed
• customer or supplier lists
• pricing strategies and quoting tools
• marketing content or brand assets

This is where having the right confidentiality and IP clauses inside your employment agreement matters. If you’ve been relying on a “handshake understanding”, it’s easy for disputes to turn into messy “your word against theirs” situations.

3) Health, Safety And Fatigue Risks

If your employee is doing significant hours elsewhere, fatigue becomes a real issue. This is especially important in higher-risk work environments (construction, manufacturing, logistics, healthcare, security, hospitality late shifts, etc.).

Under the Health and Safety at Work Act 2015, you have obligations to ensure, so far as is reasonably practicable, the health and safety of workers while they’re at work.

You can’t control every aspect of their life outside work. But if you become aware they’re regularly exhausted (or working excessive hours) and you ignore it, you may be exposing your business to unnecessary risk.

From a practical perspective, a well-drafted secondary employment clause can require employees to disclose other work that could create fatigue or safety issues, so you can manage rosters and risk appropriately.

4) Performance And Availability Problems

Some moonlighting issues aren’t legal technicalities - they’re operational headaches.

For example:

• the employee becomes less flexible with shift coverage
• they show up late or call in sick more often
• quality drops, customer complaints increase, KPIs slip

You can address performance issues through a fair process. But it’s much easier when your documentation clearly sets out expectations around secondary employment, conflicts, and required disclosures.

What Does NZ Employment Law Say About Secondary Employment?

New Zealand employment law doesn’t ban employees from having multiple jobs. In fact, many people do, especially during cost-of-living pressure.

Instead, the legal position typically comes back to:

• the Employment Relations Act 2000 (including the duty of good faith)
• the terms of the employment agreement
• general obligations employees owe in employment relationships (including acting in good faith and, depending on the role, not undermining legitimate employer interests)

In practice, restrictions on outside work need to be connected to a legitimate business reason and applied reasonably. A blanket “no other work” rule may be difficult to justify or enforce unless you can show it’s necessary in the particular role and circumstances (for example, because of safety, conflict, or confidentiality risks).

But you can restrict secondary employment where it is reasonably necessary to protect legitimate business interests, such as:

• preventing direct competition
• protecting confidential information
• managing fatigue and safety
• avoiding real conflicts of interest

If you’re dealing with employees building a competing business while employed, it’s also worth being clear on expectations early, rather than trying to “fix it later” once customers have already been approached. In more serious scenarios, this overlaps with issues like an employee setting up a competing business.

Secondary Employment Clauses: What You Can (And Can’t) Put In An Employment Agreement

If you want control over moonlighting risks, your best starting point is a clear, tailored clause in the employment agreement.

There are a few common approaches, depending on your industry and risk profile.

1) Disclosure-Only Clauses (Low Control, Easy To Enforce)

This type of clause doesn’t automatically ban second jobs. It requires the employee to tell you about any secondary work that could cause a conflict.

This can be a good fit when:

• you’re not worried about competition, but you do care about fatigue or scheduling conflicts
• you operate in a smaller community where people often have multiple roles
• you want visibility so you can manage risks early

These clauses are often more enforceable in practice because they’re less restrictive, but they still give you a mechanism to intervene if a real issue appears.

2) “Consent Required” Clauses (More Control, Needs Careful Drafting)

These clauses say the employee must get your written consent before taking other work.

They can be effective, but you should be careful: if the clause is too broad or used unreasonably, it can create disputes and may be difficult to enforce in practice.

A more balanced approach is to say consent is required where the secondary employment:

• creates a conflict of interest
• is for a competitor
• could impact performance, availability, or safety
• involves use of your confidential information or resources

This focuses the restriction on legitimate business interests, rather than controlling the employee’s private life.

3) Non-Competition / Restraint Clauses (High Control, Must Be Reasonable)

Some employers try to deal with moonlighting by using a strong non-compete.

In New Zealand, restraint clauses (including non-competes) are not automatically invalid, but they generally need to be reasonable and connected to a legitimate interest you’re protecting (like client relationships or confidential information) to be enforceable.

If you want to restrict an employee from doing competitive work during employment (and potentially after employment), it’s worth getting advice on a Non-Compete Agreement or restraint wording that is properly tailored.

Overreaching restraints can backfire. They can be challenged, and they can also damage trust and retention if employees feel unfairly restricted.

4) Clear Definitions Matter (This Is Where Disputes Usually Start)

Moonlighting disputes often happen because the contract language is vague. Employees genuinely don’t think their side work counts as “competition”, or they don’t see why they need to tell you.

Strong clauses often define terms like:

• what “competitor” means (direct vs indirect competitors)
• what “conflict of interest” includes (financial interests, family businesses, supplier relationships)
• what “confidential information” covers (including information learned during employment)
• whether unpaid work, volunteer work, and gig-economy work is included

If you’re still using an old template, updating your Employment Contract can be one of the simplest ways to reduce risk from day one.

What To Do If You Discover An Employee Is Moonlighting

Even with a clause, how you respond matters. If you move too quickly (or too harshly), you can create a personal grievance risk. If you do nothing, the behaviour can become “accepted” and harder to address later.

Here’s a practical process many NZ employers follow.

Step 1: Gather Facts First

Before you confront the employee, get clear on what’s actually happening. For example:

• What is the secondary work (and for who)?
• When are they doing it (outside your hours, during breaks, during sick leave)?
• Is there evidence they used your resources (work phone, laptop, vehicle, client lists)?
• Is there a performance or safety impact?

Be careful about how you collect information. If you’re looking at digital activity or monitoring communications, privacy and employment process issues can arise. Any monitoring should be lawful, proportionate, and consistent with what you’ve told staff (for example, through clear policies and notices), including your obligations under the Privacy Act 2020 and general employment good-faith requirements.

Step 2: Check Your Documents (Contract + Policies)

Review the employment agreement and relevant workplace policies. In particular, look for:

• secondary employment / outside work clause
• confidentiality obligations
• conflict of interest requirements
• restraint / non-compete wording
• IP ownership and use of business resources

If you don’t have a clear framework, consider putting one in place for the future, such as a Conflict Of Interest Policy and updated contract terms.

Step 3: Raise It With The Employee Fairly (And In Good Faith)

Employment issues in NZ need to be handled with procedural fairness. That usually means:

• putting concerns to the employee clearly
• giving them an opportunity to respond
• considering their explanation with an open mind
• keeping written records of meetings and decisions

Sometimes the employee will disclose they didn’t realise they needed to tell you, or they’ll agree to stop the secondary work if it’s causing conflict.

Other times, you may need to move into a more formal process (for example, if they are competing, soliciting clients, or using your confidential information).

Step 4: Decide On A Proportionate Outcome

The “right” response depends on what you find. Options might include:

• approving the secondary employment with conditions (e.g. no overlap with your clients)
• requiring the employee to cease the secondary work if it breaches conflict rules
• performance management if fatigue/performance is the main issue
• disciplinary action if there’s serious misconduct (e.g. theft of clients/confidential info)

This is one of those areas where tailored advice can save you a lot of stress - not just on the “can we do this?” question, but on doing it in a way that reduces dispute risk. If you’re unsure, speaking with an Employment Lawyer early is usually far cheaper than trying to fix it after a relationship breaks down.

How To Protect Your Business From Moonlighting Issues (Best Practice Checklist)

If you want to stay protected from day one, the goal isn’t to ban moonlighting across the board. It’s to manage the risk in a way that’s clear, fair, and commercially sensible.

Here’s a practical checklist for NZ employers.

Use Clear Employment Agreements

Your employment agreement should clearly address:

• secondary employment disclosure and consent (where appropriate)
• confidentiality obligations
• IP ownership and return of business property
• expectations about performance and availability
• conflict of interest and competition boundaries

Having a properly drafted Employment Contract makes these conversations much easier because the expectations are set upfront, not in the middle of a dispute.

Put A Conflict Of Interest Process In Writing

Policies don’t replace a contract, but they help you apply rules consistently. A Conflict Of Interest Policy can explain:

• what must be disclosed
• how employees request approval
• how you assess conflicts
• what happens if an employee doesn’t disclose

This is especially useful if you employ staff in roles with sensitive info (sales, accounts, operations managers) or if your industry is highly relationship-driven.

Be Realistic About Restraints (And Get Them Drafted Properly)

If you need stronger controls (for example, to protect client relationships), restraints can work - but they need to be reasonable and fit your role and industry.

This is where targeted restraint of trade advice can make the difference between a clause that helps you and a clause that causes disputes (or is ignored because it’s too broad to enforce).

Train Managers On What To Look For

In small businesses, issues often surface informally first - a client mentions something, a colleague notices marketing on social media, or shift swaps start increasing.

Make sure anyone managing staff knows:

• not to accuse without facts
• to escalate concerns early
• to document performance issues consistently
• to treat employees fairly and in good faith

Consider The “Reputation” Risk

Sometimes moonlighting doesn’t compete directly, but it can still confuse customers (for example, the employee advertises their side services in a way that implies your business is involved).

Clear brand and conduct expectations, plus social media guidelines where relevant, can help prevent confusion and protect your reputation.

Key Takeaways

• Moonlighting is not automatically illegal in New Zealand, but it can still create serious risk for employers depending on the role and the type of secondary work.
• Secondary employment becomes a problem when it creates a conflict of interest, impacts performance, increases fatigue and safety risk, or involves misuse of confidential information.
• The best protection usually starts with a clear secondary employment clause and well-drafted confidentiality and conflict terms in your employment agreements.
• Non-competes and restraint clauses can be useful, but they generally need to be reasonable and tailored to be enforceable in practice.
• If you discover an employee is moonlighting, you should gather facts, check your documents, and follow a fair process before taking action.
• Policies and processes (like a conflict of interest policy) help you handle disclosures consistently and reduce disputes as your team grows.

If you’d like help updating your employment agreements, adding a secondary employment clause, or managing a moonlighting issue the right way, contact Sprintlaw on 0800 002 184 or email team@sprintlaw.co.nz for a free, no-obligations chat.