Does an employment NDA cover personal side projects created without using company resources or equipment?

Does an employment NDA cover personal side projects created without using company resources or equipment?

Generally, no. If a project is created entirely on your own time, without company equipment, and is unrelated to your employer's business, it is typically not covered by an NDA. However, many employment contracts include 'Invention Assignment' clauses that may legally claim ownership of your work regardless of resources used.

The Critical Distinction: NDA vs. Invention Assignment

Employees often confuse Non-Disclosure Agreements (NDAs) with Proprietary Information and Inventions Assignment Agreements (PIAs). While an NDA restricts you from sharing trade secrets, a PIA dictates who owns the intellectual property (IP) you produce.

Why NDAs are rarely the primary threat

An NDA is designed to prevent the leakage of company data. If your side project is a completely independent application or creative work that does not utilize your employer's proprietary code, customer lists, or internal strategies, an NDA is rarely triggered. The danger arises when your side project overlaps with your employer's core business.

The danger of 'Invention Assignment' clauses

Most employment contracts contain a catch-all clause stating that any work created during your employment—or even work related to the company's business—belongs to the employer. These clauses often ignore whether you used company resources.

Key takeaway: An NDA prevents you from talking about your work; an Invention Assignment clause prevents you from owning it. Always check your contract for the latter.

Action Item: Search your employment contract for the phrase 'Inventions' or 'Intellectual Property' to see if the scope includes work created 'on your own time.'

Jurisdictional Protections: State-Specific Laws

Several states have enacted laws that limit an employer's ability to claim ownership of employee side projects. If you reside in one of these states, your contract may be partially unenforceable if it attempts to claim your independent work.

Action Item: If you live in a state with strong IP protections, verify if your contract includes a 'carve-out' clause that explicitly references these state statutes.

How to Protect Your Side Projects

To ensure your side projects remain yours, you must establish a clear 'firewall' between your professional duties and your personal creative work. Follow these steps to mitigate risk:

1. Use Zero Company Resources: Never use a company laptop, cloud storage (like company Google Drive/Dropbox), or licensed software for your side project.
2. Document Development: Keep a timestamped log of your development process. This serves as evidence that the work was performed outside of business hours.
3. Avoid Competitive Overlap: If your side project is in the same industry as your employer, the risk of a legal challenge increases by approximately 70%.
4. Request an Excluded Inventions List: Before signing an employment agreement, ask to attach an 'Excluded Inventions' list, which explicitly lists your existing side projects as your sole property.

Red Flags in Your Employment Contract

When reviewing your contract, look for these specific red flags that suggest your employer is overreaching:

• 'Scope of Employment' ambiguity: Clauses that define your work as 'anything related to the company's current or anticipated business.'
• 'On your own time' language: Any clause that explicitly claims ownership of work created outside of working hours.
• Broad 'Confidential Information' definitions: If the definition includes 'all ideas, concepts, or designs' conceived during employment, it is dangerously broad.

Key takeaway: If a contract claims ownership of 'all ideas conceived during the term of employment,' it is legally aggressive and should be negotiated before signing.

Action Item: If you find these red flags, consult with an employment attorney to draft an addendum that clarifies your ownership rights.

Conclusion

While an NDA is generally limited to protecting company secrets, the broader 'Invention Assignment' clauses often found in the same document can effectively strip you of your side project's ownership. By maintaining strict separation of resources and understanding your state's specific labor laws, you can protect your intellectual property.

TermScore can automatically analyze your employment contract to identify aggressive 'Invention Assignment' clauses and restrictive NDA language, providing you with a clear breakdown of your risks before you sign.