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

An employment NDA primarily protects trade secrets, but it is rarely the only clause at play. Most employment contracts include an Invention Assignment Agreement that can legally claim ownership of your side projects if they relate to your employer’s business, use company resources, or are developed during work hours.

The Distinction Between NDAs and Invention Assignments

Employees often confuse NDAs with Invention Assignment Agreements. An NDA is a defensive tool; it prevents you from leaking company data. An Invention Assignment Agreement is an offensive tool; it transfers the legal rights of your intellectual property (IP) to your employer.

Why NDAs Usually Don't Stop Side Projects

An NDA restricts the use of information, not the act of creation. If you are building a mobile app on your own time using your own laptop, you are not violating an NDA unless you incorporate your employer's proprietary code, customer lists, or trade secrets into that app.

The Danger of Overly Broad Clauses

Many standard employment contracts contain "catch-all" language. These clauses often claim ownership of any invention "conceived, developed, or reduced to practice" during the term of your employment. If your contract lacks a specific carve-out for personal projects, you are legally vulnerable.

Key takeaway: Always look for a "PIIA" (Proprietary Information and Inventions Agreement) section in your contract. If it does not explicitly exclude projects developed entirely on your own time, you are at risk of your employer claiming your IP.

Jurisdictional Protections: The "California Rule"

Several states have enacted legislation to protect employees from overreaching employers. If you live in a state with strong labor protections, your employer's claim to your side project may be legally void, regardless of what your contract says.

Action Item: Search your state's labor code for "Invention Assignment" or "Employee Invention Rights" to see if your contract's restrictive language is preempted by state law.

Three Red Flags in Your Employment Contract

When reviewing your contract, watch for these specific phrases that signal an attempt to control your off-hours work:

• "Relating to the business of the Company": This is often interpreted broadly. If you work for a software company, any code you write could be considered "related."
• "Conceived during the term of employment": This phrasing ignores whether you were on the clock or using company hardware.
• "All intellectual property created by the Employee": This is a "blanket assignment" clause and is highly aggressive.

How to Mitigate Risk

1. Document Everything: Keep a log of hours worked on your side project to prove it was done outside of company time.
2. Use Separate Hardware: Never use a company-issued laptop, cloud storage, or software license for your personal project.
3. Disclose Early: If your project is significant, provide a written disclosure to your employer explicitly stating that the project is unrelated to your job duties.

Key takeaway: If you are planning to monetize a side project, consult with an attorney to draft a "carve-out" agreement that your employer signs, formally acknowledging your ownership of the project.

Assessing Your Contract with AI

Manual contract review is prone to human error, especially when navigating complex "Invention Assignment" language. TermScore uses advanced AI to scan your employment agreement, identifying aggressive IP clauses and highlighting potential conflicts with your side projects. By uploading your contract to TermScore, you can instantly see if your employer's language is standard or if it contains restrictive "red flags" that could jeopardize your personal work.