Outside Employment and Activity Rules for Federal Employees
Federal employees who hold second jobs, run side businesses, or engage in outside professional activities must navigate a layered set of ethics restrictions that can affect their standing, pay, and continued employment. These rules derive from the Standards of Ethical Conduct for Employees of the Executive Branch codified at 5 C.F.R. Part 2635, as well as agency-specific supplemental regulations. Understanding what is permitted, what requires prior approval, and what is categorically prohibited is essential for any federal employee considering outside work. The framework applies across the executive branch and intersects with the broader federal employee ethics rules and standards that govern conduct on and off duty.
Definition and scope
Outside employment, in the federal ethics context, refers to any compensated or uncompensated work, service, or activity performed for a non-federal entity — including private employers, nonprofit organizations, sole proprietorships, or self-employment arrangements. The governing authority is the U.S. Office of Government Ethics (OGE), which issues binding regulations and guidance that all executive branch agencies must implement.
The scope of these rules extends beyond paid employment. Volunteer board service, freelance consulting, speaking engagements, writing for publication, and participation in professional associations can all fall within the framework if they create a real or apparent conflict with official duties. 5 C.F.R. § 2635.801 defines "outside employment" broadly to capture any outside activity where a financial or representational interest is involved.
Two distinct regulatory tracks govern this area:
- Governmentwide standards under 5 C.F.R. Part 2635 apply to all executive branch employees regardless of agency.
- Agency supplemental regulations, authorized under 5 C.F.R. § 2635.105, allow individual agencies to impose restrictions stricter than the governmentwide baseline — but not more permissive.
Employees in the Senior Executive Service and those holding positions with significant procurement or regulatory authority are subject to the most intensive scrutiny.
How it works
The operative mechanism is a two-part test: first, whether the outside activity is categorically prohibited; second, if not prohibited outright, whether it requires prior written approval before proceeding.
Step 1 — Categorical prohibitions. Certain outside activities are barred for all executive branch employees without exception:
- Representing a private party before a federal agency on a matter in which the United States is a party or has a direct interest (18 U.S.C. § 203 and § 205).
- Receiving compensation from a private source for performing any official government duty (18 U.S.C. § 209).
- Participating in outside financial interests that directly conflict with official duties, prohibited under 5 C.F.R. § 2635.402.
Step 2 — Prior approval requirements. For activities not categorically barred, many agencies require employees to obtain written approval before starting outside work. OGE's model prior approval regulation, which agencies adopt and adapt, typically covers:
- Outside employment with a for-profit entity
- Self-employment in a professional capacity (law, accounting, consulting)
- Paid speaking or teaching engagements
- Writing and editing for compensation
The approval process involves a supervisor review, ethics official assessment, and — in some agencies — written certification that the activity will not interfere with official duties, create a conflict of interest, or bring discredit to the agency.
Common scenarios
Teaching and lecturing. A federal scientist teaching a graduate course at a university is generally permissible if the subject matter does not overlap with specific pending agency matters and the compensation does not come from a source regulated by the employee's agency. OGE guidance distinguishes between teaching that draws on general expertise (typically approvable) and teaching that involves specific nonpublic agency information (typically not approvable).
Consulting and contracting work. An engineer employed by a federal agency who also provides paid consulting to a defense contractor in the same procurement sector faces significant restrictions. Even if the contractor does not have active contracts with the employee's agency, the appearance of a conflict — assessed under 5 C.F.R. § 2635.502 — may require recusal, approval denial, or full divestiture of the financial interest.
Nonprofit board service. Serving on a nonprofit board of directors without compensation is outside the definition of "employment" under most agency supplements but still requires disclosure if the nonprofit receives federal grants from the employee's agency. The federal employee rights and protections framework does not shield an employee from disciplinary action if undisclosed nonprofit roles create a conflict.
Writing and publishing. Receiving royalties or honoraria for published books or articles is generally permitted, but subject to the honoraria ban for certain speech topics under 5 U.S.C. § 7353 and the restrictions applicable to Members of Congress extended to executive employees in specific statutes.
Decision boundaries
The critical distinction in outside employment analysis runs between conflicting interests and parallel expertise. An employee's outside activity is evaluated against three primary tests drawn from 5 C.F.R. Part 2635:
| Test | Question | Consequence if Failed |
|---|---|---|
| Financial conflict | Does the employee hold a financial interest in the outside entity that could be affected by official duties? | Mandatory recusal or divestiture |
| Impartiality | Would a reasonable person question the employee's impartiality in official matters? | Recusal or approval denial |
| Misuse of position | Does the outside work derive improperly from official authority, title, or nonpublic information? | Prohibited outright |
An employee working for an agency with no regulatory or procurement jurisdiction over a proposed employer occupies a materially different position than one whose office directly awards contracts to, or oversees, that employer. This distinction determines whether prior approval will be granted and whether financial disclosure on OGE Form 450 or OGE Form 278 is required.
Violations of outside employment restrictions can result in disciplinary actions up to and including removal, criminal penalties under Title 18 for the most serious conflicts, and civil penalties administered by OGE. The federal employee disciplinary actions process applies in administrative cases, while criminal referrals proceed through the Department of Justice.
Employees navigating these rules should consult their designated agency ethics official before beginning any outside activity — the approval process exists precisely to produce a written record that protects the employee as much as it protects the government. Comprehensive reference coverage of the federal employment framework, including ethics, pay, and benefits, is maintained at federalemployeeauthority.com.