By the Bais Hora'ah
One of my employees made a significant sum of money using work time to invest in the stock market. When I heard about this, I claimed that his profits belong to me based on the principle of yad poel k’yad baal habayis — an employee’s hand is an extension of his employer’s hand. The employee offered to repay me for the unjustified salary he took while playing the market but insists that the stocks and earnings are his.
Q: Do I have any claim to his stock earnings?
A: Shulchan Aruch (Y.D. 177:29, Levush) addresses the situation of Reuven who hires Shimon to manage his store and they agree to split the profits. In this arrangement Shimon is not permitted to buy and sell his own merchandise while working; an employee must give his full attention to the store. Attending to his personal business will distract him from properly managing the store. If he does sell his own merchandise during work hours, half of those profits belong to Reuven in accordance with their employment agreement that they will share profits earned during the hours that Shimon works for Reuven.
The above applies when the employee is expected to work for his employer the entire time. If the employee is hired to complete a task and the employer does not have any demands on the employee’s time, the employee may spend time pursuing his own interests. Each situation must be considered in light of the employer’s expectation of the employee’s work time (see Taz, Y.D. 177:44; Shach, Y.D. 177:67).
Accordingly, it would appear that when an employer does not permit employees to pursue their own interests, whatever the employee earns on his employer’s time would belong to the employer. However, based on the writings of the Poskim this is not the case.
When Reuven hires someone to find lost objects (for example, to collect fish from a dammed river), whatever the employee finds belongs to Reuven, even if unrelated to the dammed river (e.g., he finds a wallet). In contrast, if the job description is not specific, and certainly when the employee is hired to perform a particular task, lost objects that he finds belong to him (C.M. 270:3; Chut Hashani 38, cited by Pischei Teshuvah, C.M. 270:1). Found objects are not included in general job descriptions, since it is possible to earn a fortune from them in a short period of time (Rav Shimon Shkop, B.K. 20:2).
Similarly, in the case where Reuven hired Shimon to work in his store, if Shimon was expected to do all the jobs Reuven assigns to him, Shimon is an extension of Reuven. This is like partners who partnered for all business endeavors so that even if one of the partners uses his own funds, the profits generated by those funds are shared equally. On the other hand, if the partnership is limited to one specific pursuit, although neither partner may use partnership time for personal pursuits, one partner has no claim to profits made by the other in personal pursuits.
Accordingly, if Shimon was hired only to tend to the store and his job description does not include any jobs that Reuven gives him, Reuven has no claim to Shimon’s personal earnings generated during work time (Nesivos 176:20; Rei’ach Sadeh 13; see also Nesivos Shalom and Chelkas Binyamin to 177:29 who explain differently).
In your case, since Shimon’s job description was specific, although he should not have spent time pursuing personal interests (See Rambam, Sechirus 13:7 and Mesillas Yesharim ch. 11), Reuven has no claim to those earnings, beyond a refund for the hours he paid Shimon when he was buying and selling his own stocks (cf. Beis Yehudah, end of vol. 2).