Does an employment NDA prevent me from working on personal side projects during my off-hours?

Does an employment NDA prevent me from working on personal side projects?

An NDA (Non-Disclosure Agreement) typically restricts the sharing of confidential information, but it rarely prohibits side projects on its own. However, most employment contracts include an Invention Assignment Agreement. If your contract contains broad IP assignment clauses, your employer may legally own any work created during your employment, regardless of whether it was done on your own time.

The Difference Between NDAs and IP Assignment

It is critical to distinguish between confidentiality and ownership. An NDA is a shield; it prevents you from leaking trade secrets. An Invention Assignment Agreement is a sword; it transfers the legal rights of your creative output to your employer.

The Scope of Invention Assignment

Most standard employment agreements include a clause stating that any invention, software, or creative work 'conceived, developed, or reduced to practice' during your employment belongs to the company. You must check if your contract includes these three common triggers:

• Business Relevance: Does the project relate to the company's current or anticipated business?
• Resource Usage: Did you use company laptops, software licenses, or proprietary data?
• Temporal Scope: Was the work performed during your standard 9-to-5 hours?

Key takeaway: Even if you work on your own time, if the project is in the same industry as your employer, they may claim it is a 'conflict of interest' or a direct violation of your assignment agreement.

Action Item: Search your contract for the section titled 'Proprietary Information and Inventions' or 'Intellectual Property Rights' and highlight any language that claims ownership of work created 'solely or jointly with others' during your term of employment.

Jurisdictional Protections: The California Exception

Not all states view these clauses equally. If you are employed in California, Washington, or Illinois, state law provides specific protections for employees working on side projects.

Action Item: Check if your employment contract includes a 'Choice of Law' clause. If you live in a protective state but your contract specifies the laws of a state like Delaware or New York, your protections may be significantly weaker.

How to Safely Pursue Side Projects

If you intend to build a side project, you must mitigate the risk of a legal challenge. Follow this protocol to maintain a clean separation between your employment and your personal venture.

1. Audit Your Contract: Identify if you have signed a 'Prior Inventions' disclosure form. If you have, ensure your project is listed there.
2. Strict Resource Segregation: Never use company-provided hardware, cloud storage (like company Google Drive or Slack), or proprietary software licenses for your personal work.
3. Document Your Hours: Maintain a log of when you work on your side project to prove it occurred outside of your contractual employment hours.
4. Negotiate a Carve-out: If you are starting a significant venture, ask your employer for a written waiver or a 'side letter' explicitly excluding your project from the scope of your employment agreement.

Key takeaway: The 'clean room' approach is your best defense. If you use zero company resources and the project is unrelated to your employer's business, your legal risk is significantly lower.

Action Item: Before launching, consult with an attorney to draft a 'Prior Inventions' disclosure if your contract allows for it, ensuring your project is legally 'carved out' from your employer's reach.

When to Seek Legal Counsel

If your side project has the potential to generate revenue or intellectual property, do not rely on general advice. You should seek counsel if:

• Your project directly competes with your employer’s product roadmap.
• You are a senior employee or executive with fiduciary duties.
• Your contract contains a 'non-compete' clause that is enforceable in your state.

TermScore can automatically analyze your employment contract to identify restrictive IP assignment clauses and potential conflicts of interest, giving you a clear breakdown of your risks before you start your next side project.