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Discharged for moonlighting? Former employee may not be eligible for unemployment

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in Best-Practices Leadership,Leaders & Managers,Small Business Tax,Small Business Tax Deduction Strategies

Employees who work second jobs or who run their own businesses on the side can spell trouble for their employers. Second jobs or entrepreneurship may mean divided loyalties and less time spent on your organization’s work.

That’s why many employers ban moonlighting. If you do, and have to discharge the employee for breaking the rule, there may be a silver lining. If you discharge an employee who has been moonlighting, and he or she continues to work on the side, the moonlighting income may make the former employee ineligible for unemployment compensation.

Recent case: Joyce Barry applied for unemployment compensation when she lost her job. The state granted her benefits. Then it turned out that she was working on the side, earning at least as much as she was collecting in unemployment compensation.

The Department of Employment and Economic Development found out and demanded the money back, plus a fine. Barry argued that she didn’t really make anything because she had business expenses associated with the work. But she couldn’t prove those expenses. The Minnesota Court of Appeals upheld the repayment and penalty order. (Barry v. Department of Employment and Economic Development, No. A07-0253, Minnesota Court of Appeals, 2008)

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