Does your employer own your startup?

Guidelines for protecting yourself and your new startup while you’re employed full-time

A lot of bootstrappers ramp up their startup while working full-time. 💼It’s a smart strategy, but many founders overlook the serious risks with this approach.

If you haven’t pored over your employment agreement, it might shock you to learn your employer claims ownership over what you produce at work..and in your spare time. Including your startup. 😨

Do you know what your agreement says? 👀

US employers are all over the map when it comes to intellectual property (IP) claims. 🗺Some make blanket grabs. These companies claim they own all your ideas, including the ones you work on at midnight on your own computer. (This is most likely not legal.) Other employers strongly encourage side jobs and applaud employees who work on them. 

Not sure where your employer falls? 💬

Pull out the agreements you signed when you were hired: employment agreement, non-disclosure agreement (NDA), non-compete, offer letter, employee handbook, and/or IP agreement. 📂

Ctrl+F or search for terms like: 🔍

  • Non-competition

  • Non-solicitation 

  • Moonlighting / freelancing 

  • Confidentiality 

  • Intellectual property 

  • Assignment of invention 

  • Trademark rights 

  • Work for hire 

The language around these terms should help you unravel your employer claims. Keep in mind your geographical context matters, too. 📍Some state laws override contract terms. California, for example, is lenient with non-compete agreements. 

If your contracts aren’t clear, ask your employer/HR for clarification, or reach out to an attorney.

5 options for aggressive IP claims 🔒

If your employer claims they own your spare-time work, don’t throw in the towel just yet. 🙇If your idea is gaining traction*, you have several options:  

 

  1. Stealth mode. 🙊Continue side work, without mentioning it to your employer.  With this option, you risk legal action and losing your job. Most founders who have been in your position do not recommend this course. 

  2. Ask for an adjusted contract. 🖊Your employer might remove or alter clauses in your contract, especially if you can outline a benefit to them doing so. If you need more time to work on your startup, you could also negotiate fewer work days for a reduced salary when they adjust your contract.
  3. Request a waiver. 📝If you have a great relationship with your employer, ask them to sign a separate contract waiving claims over your side project. They’re most likely to agree if you can demonstrate your idea isn’t a competitor and will not interfere with your daily responsibilities/productivity. 

  4. Switch jobs. ✌Yes, this one is time-consuming and stressful. But if your current employer is adamant about no side projects—and has legal clauses in place to claim them—working on your startup is going to be super challenging. This signals an unhealthy company culture and it’s a limiting stance we, quite frankly, hate seeing. In the long run, it’ll be healthier (physically, emotionally, and mentally) for you to switch settings. 

  5. Become a freelancer. ✊Freelancing gives you the flexibility to work on what you want, when you want. The caveat, of course, is being able to make enough money to cover your expenses. Pro-tip: know your personal finance needs.

*Your employer could say no, and you might risk your job when you make these requests. Make sure your idea is getting traction before you put your main source of income on the line. 

Something else to keep in mind: there are legitimate reasons for strict IP claims. In all likelihood, your employer is trying to protect themselves, not crush your hopes and dreams for starting a business. 💣 Some businesses also pull contract templates from sources online, without realizing exactly what the contract does and does not allow. 

How you can be extra careful with your startup 👏

Even if your employer is #chill about side projects, you still want to be careful. Here are some guidelines for protecting yourself and your new startup while you’re employed full-time:  

  • Do side work on your days off or outside of regular work hours (for real) 

  • Do side work at home, in coffee shops ☕...anywhere except employer workspaces 

  • Use only equipment, software, and tools you own—including notebooks and pens 📓

  • Keep receipts for anything you buy/rent for your side business  

  • Don’t use employer trade secrets or patented processes to develop your idea

  • Compete with someone other than your employer 🏬

  • Contract people who aren’t your coworkers 

  • Stay engaged and productive at your day job 🚀

  • Run your employer contract by an attorney if the IP claims aren’t clear or you’re worried about approaching your employer for clarification

Every startup and employment situation is unique; you may not need to follow every one of these. But it’s better to take a few extra steps and safely build your business, than deal with legal fees when you should be dealing with customers. 😬 

Obligatory disclaimer 👋

We’re not attorneys and this is not legal advice. If you have sticky questions about your employer agreement, IPs, and your side project, ask around for an attorney who specializes in IP issues—we know a guy if you need one. It’s nice to have legal help in your network anyhow. 😁