Can an employment NDA prevent me from working on personal projects?

An NDA alone typically protects confidential information, but it is often paired with an IP Assignment Agreement that can claim ownership of your personal work. If your project relates to your employer's business or uses their resources, they may legally claim it.

What states have laws protecting employee inventions?

States including California, Washington, Illinois, and New Jersey have statutes that limit an employer's ability to claim ownership of inventions created entirely on your own time without using company equipment or trade secrets.

How do I know if my personal project is safe?

Review your contract for 'Invention Assignment' clauses. If the scope is overly broad, covering 'any work related to the company's business,' your personal projects may be at risk regardless of when you created them.

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Can an employment NDA block me from working on personal projects created on my own time?

Can an employment NDA block me from working on personal projects?

An NDA (Non-Disclosure Agreement) typically restricts the sharing of confidential information, but it rarely prohibits personal work on its own. However, most employment contracts include an Invention Assignment Agreement. If your contract contains broad language, your employer may legally claim ownership of personal projects created on your own time, especially if they relate to the company’s business or use company resources.

The Difference Between NDAs and IP Assignment Clauses

It is critical to distinguish between the two most common restrictive covenants in employment contracts. An NDA is designed to keep secrets; an Invention Assignment Agreement is designed to transfer ownership of your intellectual property to your employer.

Why NDAs are usually not the primary threat

An NDA prevents you from disclosing trade secrets, client lists, or proprietary software code. If your personal project does not involve your employer’s confidential data, an NDA should not legally prevent you from building it. The risk arises when your personal project inadvertently relies on the same technical methodologies or "trade secrets" you use at work.

The danger of broad IP assignment clauses

Most employment contracts include a clause stating that any work "related to the company's business" or "developed during the term of employment" belongs to the employer. This is the primary mechanism that allows companies to claim your side projects.

Key takeaway: Always check your contract for an 'Invention Assignment' section. If it claims ownership of anything 'related to the company's business,' your personal projects are at high risk of being legally claimed by your employer.

Jurisdictional Protections: The State-by-State Reality

Several U.S. states have enacted "Employee Invention Statutes" that provide a safe harbor for personal projects. These laws generally prevent employers from claiming ownership of inventions created on your own time, provided specific criteria are met.

Criteria for protection under state law

No company resources: You did not use company equipment, supplies, facilities, or trade secret information.
No relation to business: The invention does not relate directly to the employer's business or their actual or demonstrably anticipated research and development.
No work-related tasks: The invention does not result from any work performed by you for the employer.

State	Key Protection Statute
California	Labor Code Section 2870
Washington	RCW 49.44.140
Illinois	Employee Patent Act (765 ILCS 1060)
New Jersey	N.J.S.A. 34:1B-265

Action Item: Search your state’s labor code for "Employee Invention" to see if you are protected by statute. If you live in a state without these protections, your contract language is the only law that matters.

How to Protect Your Personal Projects

If you are concerned about your side projects, you must take proactive steps to ensure they remain yours.

Audit your contract: Identify the specific clause defining "Inventions" or "Work Product."
Document your process: Keep a clear record of when you work on your project and ensure it is done on personal hardware, using personal software licenses.
Disclose early: If your project is significant, consider disclosing it to your employer and requesting a written waiver or "carve-out" for that specific project.
Avoid overlap: Do not use company-specific methodologies or "secret sauce" in your personal work.

Red Flags in Your Employment Contract

When reviewing your agreement, look for these specific red flags that indicate an overly aggressive IP policy:

"Any and all" language: Clauses that claim ownership of "any and all ideas, concepts, or inventions" regardless of the subject matter.
"During the term of employment": Language that does not distinguish between work done on company time versus personal time.
"Related to the business": Broad definitions that could encompass almost any software or creative project in your industry.

Key takeaway: If your contract claims ownership of everything you create during your employment, you are essentially working for your employer 24/7. Negotiate for a 'carve-out' list of your existing personal projects before signing.

Conclusion

Your personal projects are your intellectual property, but only if your contract allows them to be. Understanding the intersection of your state's labor laws and your specific employment agreement is the only way to ensure your side hustle doesn't become your employer's property.

If you are unsure about the language in your employment agreement, TermScore can automatically analyze your contract to identify risky IP assignment clauses and explain your rights in plain English, helping you protect your work before you sign.