Employee or sub-contractor???
Employee or sub-contractor???
If you are an EMPLOYEE of the day job company, I believe htey have to right to have this policy, and I believe you are in violation of their policy.
HOWEVER, if, instead, you are a SUB-CONTRACTOR (paid on a 1099 rather than a W-2), then they absolutely CANNOT tell you this. If the employer exercises any type of control over your activities you are, under the tax laws, an EMPLOYEE, not a sub-contractor. Therefore, if the day job guy is paying you on a 1099, you are a sub-contractor, and he cannot tell you what else you may or may not do.
Good luck.