An employee’s involvement in her own side business began to affect her performance at her day job. After being let go from her position, is she entitled to unemployment benefits under South Dakota law?
Employee Promotes Home Business at Work
“Nia” was hired by “Paris” to manage Mode, the women’s clothing store she owns in Rapid City. Kiefer’s job duties included supervising employees and managing the store, selling clothing and other items, and booking two VIP parties per month for customers.
Nia is also a business owner in her own right, teaching yoga and selling bath and body oils as part of her home-based business, Athena’s. In June 2016, she announced via Facebook that she was hosting a party at which products from her business would be available. The social media post was made while she was on duty at Mode.
Paris confronted Nia about her Facebook post, informing her that she couldn’t sell products from her business at Mode or engage in activities related to her business while she was on duty at Mode. Nia indicated that she understood Paris’ instructions. However, she continued to book parties to sell her own products, used Facebook to announce her parties, and even allowed customers to come to Mode to pick up products purchased through her home business.
In January 2017, Paris became frustrated that Nia wasn’t booking VIP parties for Mode and that store sales were declining under her management. She was also concerned that Nia continued to conduct business for Athena’s while she was on duty at Mode. As a result, she informed Nia that their employment relationship wasn’t working out. She permitted Nia to continue working at Mode until February 10, 2017, when a new store manager was hired.
Outside Interests Cause Work at Mode to Suffer
Nia filed a claim for unemployment and was awarded benefits. Paris appealed that determination to the South Dakota Department of Labor and Regulation’s Unemployment Insurance Appeals tribunal.
The first issue was whether Nia voluntarily quit or was terminated from employment. The administrative law judge (ALJ) determined that she was terminated. Paris informed her that her employment at Mode wasn’t working out but allowed her to stay on for another month until a new manager was hired. The ALJ concluded that Paris was unlikely to allow Nia to continue working for her indefinitely. It was Paris’ conversation with Nia about her work performance that set things in motion for her separation from employment.
The second issue was whether Nia was terminated for work-related misconduct. The ALJ found that she engaged in her own business activities while she was on duty at Mode, which caused her work for Paris to suffer. She continued to transact and promote her business at the expense of Mode’s sales. The ALJ determined that behavior constituted work-related misconduct, which disqualified her from receiving unemployment benefits. The judge therefore reversed the original award of benefits.
Bottom Line
Plenty of employees have business ventures outside their employment. Having outside business interests isn’t a reason to terminate someone in and of itself, but it becomes an issue when the employee’s outside business interests conflict with her employer’s interests.
It appears that Nia was more interested in promoting her own interests over her employer’s interests. Her outside business became a drain on Mode’s resources, and it wasn’t possible for her to run her own business without affecting her employer’s business in some way.
You should inform your employees up front what you deem to be a conflict of interest with respect to their outside business interests. You should also firmly establish that you won’t tolerate anyone conducting outside business transactions on company time, and such behavior will be considered misconduct punishable by termination.
Finally, enforce the policy consistently, so you don’t send the wrong message or confuse your employees. Clear policies and consistent enforcement will ensure that employees know the boundaries and avoid sacrificing your resources for their personal business gains.
Kassie McKie Shiffermiller is an editor of South Dakota Employment Law Letter and can be reached at kmckie@lynnjackson.com.