Well the policy was clear that it is not permitted so if you accepted the job that would mean that you would be getting paid to not moonlight. It doesnt matter what it is that you do on the side.
I have had guys with lawn routes on the side, then come a busy saturday and they cant work because they have yards they got behind on. Guys that try and do jobs during lunch that get their heads preoccupied before and after or end up coming back late. Guys that work a night job and drag all day long. People that get hurt on their side gigs, this is a huge deal and I have personal experience with this. I have people moonlight here for me and weve had shop supplies from their employers used, parts taken with them to their actual jobs to get worked on when the boss isnt watching etc. It doesnt work. I want peoples head in the game 100%.
If I was up watching tv until 5 am and came into work tired everyday, you'd fire me. If I constantly came back late for lunch, no matter the reason... You'd fire me. If I "borrowed" parts or tools and took them home, without at least giving you a heads up... I'd also expect to be fired.
Guess how many people I've seen fired for the above reasons, working in many different industries for the past 20 years? Now guess how many of them were fired due to them reasons being the cause of moon lighting?
There's good employees, and there's bad employees. The reason why they're bad shouldn't make a difference.
Just like there's good employees, and bad employees. My employer treats me more like family, than an employee. And for that... I give them my all. I work 5x harder than anyone else at the company. Just today I skipped lunch and breaks to finish a project that needed to be done - didn't even have to be asked to, didn't even bother telling anyone to get any "praise" for it.
I worked for a big company, moved my way up to lower management. It was a family.owned business... I worked 12 hour days because we were so busy. The owners never expected it, and often showed up at 5 am just to drop us off some breakfast. I worked my ass off, newvr phoned it in. Then they sold the company to a corporation - everything was about money and penny pinching. Everyone's attitude changed. They expected us to do 12 hour days... Every single day. Guess what happened? Week after week employees that have been part of the company for 10-20 years left. Before I finally got burnt out, there were 4-5 faces out of 30 that I recognized. All within a year, almost a complete turn over.
Point is... If you have faith in your employees and go everyone them leeway... You'll have an exceptional worker. If you don't trust them / make their lives harder exceptional employee turns into your above examples.
I'm not saying moonlighting is right when she signed a non compete. Just saying, odds are she didn't know she signed a non compete... Which is why we can yap about how it's right or how it's wrong all day, but it means nothing.
Everyone manages their company differently. And every employee is different. What's right for one employee isn't always right for the next. Part of her yearly negotion could be she's allowed to do side jobs... She gets a new contract, all the other employees still have non competes... Nothing to worry about. IF that's what you want. It is your business, she sounds like a good employee... But if you'd rather lose her, that's up to you. I think it'd be a mistake based on what you've related to us, but mistake or not, its your choice to make.