Authorizing moonlighting when cutting salaries

Design firms vary in how they treat “side gig” or “moonlighting” efforts by professional service employees. Most firms simply prohibit such services. The activity may not stop, but the firm must state its policy and, if it becomes aware of such activity, go on record as not supporting or condoning it in any manner. But now, as some firms cut salaries for professional staff amidst the ongoing COVID-19 pandemic, they are rethinking their absolute prohibitions on moonlighting and are looking at ways for professionals to supplement their reduced salaries.

There are very few instances where the law holds a design firm liable for the actions of a design professional conducting a practice outside of the normal employment relationship. Still, it makes sense for firms to address the issue from both practice management and professional liability perspectives. Clear policies on outside professional activities should be included in every employee handbook.  

Firm Policies When Allowing Moonlighting Services

Some firms actually encourage moonlighting as a way for a professional employee to gain experience, or to keep the employee as part of the firm without paying the full cost of employment. Firms that condone moonlighting often state that the employee must obtain from any outside client a signed statement recognizing that the services are being provided by the professional as an individual and not as an employee or agent of the firm and that no claims will be made against the firm. Firms should also make it clear that all moonlighting services are to be performed outside of the employer’s offices using the employee’s own supplies on the employee’s own time. Also, firms usually prohibit any contact with the outside client or any work on the outside project during normal working hours.

Some firms require employees who are contemplating providing moonlighting services to obtain prior approval from a principal in the firm. That way, the firm can assess the client type, the scope of services, and the potential risk faced by the employee and the firm. These firms reserve the right to prohibit their employee from taking on specific projects—especially for a current client or projects that compete with the firm’s services. 

During this recession, some firms that have previously prohibited outside projects due to conflict of interest or potential liability problems are becoming more flexible, issuing temporary revisions to their normal policies. Those that do so should consider the following as guidance for moonlighting employees:

  • Employees must notify the firm of any intention to engage in providing services outside the scope of their employment with the firm. The notification should be in writing—an email could suffice—and should include the name of the party for whom the employee intends to provide services.
  • The firm should reserve the right to prohibit the activity if it sees a conflict with the firm’s operations or the requirements of the employee’s duties for the firm.
  • The services must not be performed on office premises or with office facilities, equipment, or software either during or after regular office hours.
  • The employee must not use a company business card or any firm contact information when soliciting a project or communicating with a client.
  • The employee must inform the prospective client that the individual is solely performing the services without any support or supervision by the design firm.
  • The firm can, for a fee, review the employee’s design services using a peer review contract. If the employee is not licensed and asks the firm to sign and seal project plans for submittal to authorities, the firm must meet the licensing and statutory levels of review before doing so. At that point, the firm is assuming the risk of code compliance and the duty of protecting public health and safety. Its professional liability insurance policy will cover its exposure—but not the individual exposure of the “moonlighter”—and the firm should be compensated for both the service and the risk.
  • Unless the individual has purchased coverage for its outside design services—Victor and CNA can provide coverage to individuals and firms for their professional services whether or not the individual or members of the firm are also employees of another service provider—prospective clients should be told that the individual has no professional liability insurance coverage for the services. The firm can be supportive by making the employee aware that other coverages might be needed, such as a rider on the employee’s homeowner’s policy.

Employees who are working for reduced salaries need assistance if they are to stay in the profession. Modifying a firm’s prohibition on outside projects is a realistic level of assistance.

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