What states offer the most protection for employee side projects?

California, Washington, Illinois, and several other states have specific statutes (like California Labor Code 2870) that invalidate employment contract provisions requiring employees to assign inventions developed entirely on their own time without company resources.

How can I protect my side project from my employer?

Document everything, use personal hardware and software, avoid company trade secrets, and have your employment agreement reviewed by a professional or AI tool to identify restrictive IP assignment clauses.

A TermScore is an AI-generated risk rating from 0 to 100 that evaluates the fairness and risk level of any legal document. A score of 86-100 means the contract is highly favorable, while 0-30 indicates dangerous terms you should walk away from.

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Can my employer claim ownership of side projects built on my own time under an NDA?

Q: Can my employer claim ownership of side projects built on my own time?

Generally, no, provided the project does not use company resources, does not relate to the employer's business, and is not developed during working hours. However, overly broad IP assignment clauses can legally override these protections.

Can my employer claim ownership of side projects built on my own time?

In most jurisdictions, your employer cannot claim ownership of side projects developed entirely on your own time, using your own equipment, and unrelated to your employer’s business. However, if your employment contract contains an overly broad 'Invention Assignment' clause, you may have inadvertently signed away your rights.

The Legal Framework of IP Assignment

Most employment contracts include an 'Invention Assignment Agreement' (IAA). This clause dictates that any intellectual property (IP) you create during your employment belongs to the company. While these clauses are standard, they are not absolute.

The Three-Pronged Test for Ownership

To retain ownership of your side project, you must typically satisfy three criteria. If you fail any of these, your employer may have a legal claim to your work:

No Company Resources: You did not use company laptops, software licenses, servers, or proprietary data.
No Business Relation: The project does not relate directly to the employer’s current or demonstrably anticipated business, research, or development.
Outside Working Hours: The work was performed entirely outside of your contracted working hours.

Key takeaway: Even if you work on your own time, if your side project competes with your employer's business, the company may claim ownership under the 'duty of loyalty' doctrine.

Action Item: Audit your current project. If you are using a company-provided Slack account or GitHub enterprise license to host your code, stop immediately and migrate to a personal environment.

State-Specific Protections

Several states have enacted legislation to protect employees from overreaching IP assignment clauses. These statutes often render contract provisions unenforceable if they attempt to claim ownership of inventions created on an employee's own time.

State	Statute	Key Protection
California	Labor Code 2870	Protects inventions made on own time without company resources.
Washington	RCW 49.44.140	Invalidates assignment of inventions not related to employer business.
Illinois	765 ILCS 1060/2	Prevents employers from claiming non-work-related inventions.
New Jersey	N.J.S.A. 34:1B-265	Limits assignment to inventions developed with company equipment.

Action Item: Check if your state has a specific 'Employee Invention' statute. If you reside in a state without these protections, your contract language is the sole governing authority.

Red Flags in Your Employment Contract

When reviewing your contract, look for specific language that signals potential trouble. These clauses are often buried in the 'Proprietary Information and Inventions' section.

'All-Encompassing' Language: Phrases like 'any and all ideas, concepts, or inventions conceived during the term of employment' are massive red flags.
Lack of Exclusions: A contract that does not provide a space to list 'Prior Inventions' is a warning sign.
Broad Definitions of 'Business': If the definition of the company's business is vague or covers 'any technology,' it may encompass your side project.

Review your contract for an 'Exclusions' or 'Prior Inventions' schedule.
If your side project existed before you were hired, list it explicitly in this schedule.
If you start a new project, notify your employer in writing if there is any ambiguity regarding its relation to their business.

Key takeaway: Never assume a verbal agreement with your manager protects you. If it is not in writing, it does not exist in the eyes of the law.

Action Item: Request a formal 'IP carve-out' letter from your employer if you are concerned about a specific project's status.

How to Mitigate Risk

Protecting your IP is a proactive process. You must maintain a strict separation between your professional duties and your personal creative endeavors.

Use Personal Hardware: Never store personal project files on a company-issued laptop.
Maintain Separate Accounts: Use a personal email and GitHub account for all side projects.
Document Your Time: Keep a log of when you work on your project to prove it occurred outside of 9-to-5 hours.

By maintaining a clear 'paper trail' of your development process, you create a defensive wall that makes it significantly harder for an employer to claim your work as 'work-for-hire.'

If you are unsure about the specific language in your employment agreement, TermScore can automatically analyze your contract to identify restrictive IP assignment clauses and highlight potential risks to your side projects, giving you the clarity you need to innovate with confidence.