January 2021

Legal Risks To Consider When Starting A Side Hustle During This Pandemic

Legal Risks To Consider When Starting A Side Hustle During This Pandemic

As a result of the COVID-19 pandemic many Canadians are unfortunately facing income insecurity. Their employers are forced to pause or significantly scale back operations, which leaves them employed but concerned for their future. These unique circumstances have inspired an entrepreneurial spirit and some have begun to explore starting their own side business to supplement their income. Before you start what is also commonly known as a ‘side hustle’, there are legal risks and obligations to consider.

If you are still employed it is prudent to first examine your current employment contract. Some employment contracts include a “non-compete” clause which may prevent you from starting a side business that would directly compete with your current employer’s business. The last thing you want to do is put in time and effort into your side hustle, only to receive a cease and desist letter from your current employer and face the legal costs resulting from a breach of contract. Furthermore, your current employment contract may contain a clause stipulating that your employer owns your work product and it is considered their intellectual property. Failing to thoroughly examine your employment contract prior to starting a side business can be detrimental to your success.

While many companies do not explicitly prohibit employees starting their own business alongside their current employment, there is the expectation (whether stated or not) that the primary employer’s work will remain a priority. This is particularly at issue while employees are working from home during this pandemic. Ensuring that you continue to devote the same number of hours and focus to your primary employer is crucial. Being true to the definition of a ‘side hustle’ is key, whereby time and effort should only occur once your regular work day is over. Therefore starting a practice of documenting the time spent working on your side business can help to avoid discrepancies and possible misperceptions with your current employer. 

Stealing company time to work on your side business can have serious repercussions, as can using company resources. To create a distinction, purchasing alternate work materials and documenting purchases by keeping receipts can help prevent legal issues down the road. When in doubt, document everything related to your new business. Poaching co-workers or taking clients away from your current employer is also a big ‘no-no’. Besides the legal action this can spur, the tarnished relationship with your employer and potentially with those clients can have lasting negative effects upon your chance of success.

The rising popularity of individuals presenting themselves on Instagram or other social media platforms that they are online fitness and nutritional coaches, brings the issue of information accuracy to the forefront. While some of these online coaches may have educational backgrounds in health sciences, nutrition or kinesiology, others may lack the relevant education and experience, and yet still present themselves as a fitness expert or ‘guru’. Legal issues can arise where a customer follows your advice if you are inexperienced and lack the educational background which then results in injury, illness or worse. Therefore it is important to accurately list your education and experience within your online profile or website, and provide a disclaimer indicating that customers should seek the advice of their healthcare provider prior to commencing any exercises or diet plans. Honesty really is the best policy, and this principle of disclose and disclaim should be applied to any business-to-consumer or business-to-business service based side hustle.

Prior to commencing a side business, it is critical to examine the potential legal and ethical issues noted above and determine whether you are able to devote the time and resources needed to succeed. DAS Legal Expense Insurance policyholders have unlimited access to a Legal Helpline, whereby information and questions can be posed to a Helpline Lawyer to help ensure their side hustle s legal risks do not become a distracting and unfortunate  ‘side headache’.    

Posted: 1/26/2021 12:36:57 PM by Joanna Milnes

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