What states have laws protecting employee side projects?

States like California (Labor Code 2870), Washington, Illinois, and Delaware have specific statutes that invalidate employment agreements that attempt to claim ownership of inventions developed entirely on an employee's own time without using employer resources.

How can I ensure my side project is safe from my employer?

Document your development process, use personal hardware and software licenses, avoid using company trade secrets, and request a written 'IP carve-out' or 'Prior Inventions' disclosure from your employer.

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Does an employment NDA cover personal side projects built without company resources?

Generally, no. If a side project is developed entirely on your own time, using your own equipment, and does not relate to the employer's business, it is typically excluded from NDA and IP assignment clauses. However, overly broad contract language can create significant legal risk, making it essential to audit your specific agreement.

Understanding the Scope of IP Assignment Clauses

Most employment agreements contain an 'Inventions Assignment' clause, which is often bundled with an NDA. These clauses dictate who owns the intellectual property (IP) you create during your employment. While an NDA protects trade secrets, an IP assignment clause determines ownership of the code, designs, or products you build.

The Three-Prong Test for Ownership

To determine if your employer has a claim to your side project, courts typically look at whether the project meets these three criteria:

Time: Was the project developed entirely outside of your working hours?
Resources: Did you use any company-owned hardware, software, servers, or proprietary data?
Relevance: Is the project related to the employer's actual or anticipated business, or does it result from work performed for the employer?

Key takeaway: If you use a company-issued laptop to write a single line of code for your side project, you may have inadvertently granted your employer a claim to the entire project. Always use personal hardware.

Action Item: Audit your current employment agreement to see if it contains a 'Prior Inventions' schedule. If it does, ensure your side project is listed there before you begin active development.

Jurisdictional Protections: The California Exception

Some states provide statutory protection for employees, effectively overriding overly aggressive contract language. California Labor Code Section 2870 is the gold standard for these protections.

State	Key Protection
California	Invalidates agreements that claim inventions made on own time/resources.
Washington	Protects inventions developed without employer equipment/trade secrets.
Illinois	Limits employer claims to inventions related to the employer's business.
Delaware	Provides narrow exceptions for employee-developed IP.

Even in these states, the protection is not absolute. If your side project competes directly with your employer’s business, they may still claim a breach of your duty of loyalty, regardless of whether you used their resources.

Action Item: Check your employment contract for a 'Choice of Law' clause. If your contract is governed by a state without specific IP protections, you are at higher risk and should seek a formal IP carve-out.

Red Flags in Your Employment Agreement

Not all NDAs are created equal. You must watch for 'catch-all' language that attempts to claim ownership of everything you create during your term of employment. Look for these specific red flags:

'Related to the business': This phrase is often defined so broadly that it could encompass almost any software or creative work.
'During the term of employment': This implies that any idea conceived while you are employed belongs to the company, regardless of when or how it was built.
'Work made for hire': This legal term of art can be used to claim ownership of your personal creative output if the contract is not properly scoped.

Action Item: If you find these phrases, do not sign without requesting a 'Carve-out' addendum that explicitly lists your side project as excluded property.

Steps to Protect Your Side Project

If you are building a project while employed, follow this strict protocol to maintain your ownership rights:

Document Everything: Keep a log of hours worked on your project, ensuring they never overlap with your company's core business hours.
Strict Resource Separation: Never use company email, Slack, GitHub, or cloud storage for your project. Use personal accounts and hardware exclusively.
Avoid Trade Secrets: Ensure your project does not utilize any proprietary knowledge, algorithms, or client lists you gained access to through your employer.
Disclose Early: If your project is significant, provide a written disclosure to your HR or legal department and request a written acknowledgment that the project is excluded from your employment obligations.

Key takeaway: Silence is not a defense. If you do not disclose a project that could be construed as related to your employer's business, you risk a future lawsuit for breach of contract or misappropriation of trade secrets.

Action Item: Create a 'Project Folder' containing your development logs and a copy of your signed employment agreement. This serves as your primary evidence in the event of a dispute.

How TermScore Simplifies Contract Analysis

Navigating the nuances of IP assignment and NDA clauses can be daunting, but you don't have to do it alone. TermScore uses advanced AI to automatically scan your employment agreements, highlighting restrictive IP clauses and identifying potential risks to your personal projects. By uploading your contract to TermScore, you can instantly see if your agreement contains the 'red flag' language that could jeopardize your side hustle, allowing you to negotiate with confidence.