Let’s talk about remote employees working at two jobs. Have you come across this before? A recent Wall Street Journal article covers stories of employees taking advantage of working from home to make more money and double their salary. The article says there is a rise of such practices among white-collar workers in industries ranging from tech to banking to insurance.
The Wall Street Journal spoke with workers who have been working in multiple full-time jobs during the pandemic while working remotely. According to the paper, “Most of them say they are on track to earn a total of $200,000 to nearly $600,000 a year, including bonuses and stock”.
You might think that this practice is completely illegal, but Richard Greenberg, an employment attorney with Jackson Lewis PC in New York, says that outside employment or secondary employment is not always illegal. However, “it depends on the employment contract, but a company could theoretically sue a duplicitous worker for disclosing confidential information”, which can create significant issues for both the employee and the employer.
Firms should review their policies to check if they prohibit outside employment. In some cases, when secondary employment is permitted, companies must require employees to disclose their outside activities and potential conflicts of interest.
What does this mean for your business?
It can become a serious issue for financial services firms to have employees with secondary employment. FINRA, for example, requires employees or registered representatives to notify their firms in writing of proposed outside business activities (OBAs) so the firm can determine whether to limit or allow those activities.
Firms are required to track their employees’ outside business activities and determine whether there is a potential conflict of interest that could expose both the firm and its customers to potential risk. This could lead to public attention on the issue if firms fail to disclose and manage employees’ outside business activities. Not properly managing OBAs and monitoring conflicts of interest means that a firm isn’t fulfilling its core regulatory obligation and compliance responsibility.
How to effectively ask employees to disclose outside activities?
Ideally, an employee should be asked to disclose this information before starting at a company, so the firm can decide whether to continue the employment or not. In addition, it will demonstrate to the employee that the firm takes conflicts of interest seriously and discourages bad actors.
Firms can implement an automated disclosure process to capture and manage employee outside business activity that can include pre-clearance of contracts, volunteer work, secondary employment, and other activities. Technology enables efficient identification, monitoring and disposition of potential conflicts of interest, including gifts and entertainment, trading activities and more.
Don’t be terrified! MCO can help you track outside business activities.
The work environment has changed, and so have compliance departments and the way they manage challenges. Don’t be terrified. MyComplianceOffice is here to help you in this journey.
We enable firms to take an updated approach to compliance management and improve their compliance program management by helping them with:
- The Management of Potential or Actual Conflicts of Interest
- Outside Business Activities
- Policies & Procedures
- Attestations and Certifications
- Dynamic and Customisable Disclosures
- Configurable Forms and Questionnaires
- Compliance Calendars and Tasks
- Compliance Document Management
- Configurable Dashboard Reporting
Would you like to learn more about our Outside Business Activities Compliance solution or our approach to Conflicts of Interest Automation? Contact our team here.