You're free to set certain terms and conditions for employees' jobs. But make sure none of those conditions step on employees' constitutionally protected rights, particularly rights that apply to their personal lives.
As the following case shows, courts will react harshly to organizations that place conditions on employment that have nothing to do with the person's ability to perform the job. Examples of such "employment blackmail": requiring employees to do business with the company's top customer, or asking employees' family members not to work for your competitors.
While you may have legitimate reasons to want to regulate employees' off-duty activities, you can only do so if the activity is related to job performance. Have a strong business reason for the decision, backed by a company policy.
Recent case: A principal told substitute teacher Patrick Barrett that he wouldn't gain a permanent teaching position unless he enrolled his son in public school.
So, Barrett pulled his son out of private school and enrolled him in the public school. Even after that, he still wasn't offered several available teaching jobs. When Barrett reminded school officials of their job promise, they denied it. Rethinking his decision, Barrett transferred his son back to private school. He then was fired, allegedly for disloyalty.
He sued, claiming that school officials wrongfully discharged him and violated his constitutionally protected "liberty interest", or individual freedom under the First and 14th Amendments, to direct the education of his children.
A district court sided with Barrett and a federal appeals court agreed. Parents have a constitutionally protected right to rear their children, the court said, and an employer can't condition employment upon the waiver of that right. (Barrett v. Steubenville City Schools, No. 03-4373, 6th Cir., 2004)