October 14, 2026
Usually yes, but your employment agreement and your state’s law decide how safely. The three things that matter most are who owns what you build, whether you’ve agreed not to compete, and whether you use anything that belongs to your employer. Work on your own time and your own equipment, keep the idea outside your employer’s business, and read your agreement before you write a line of code. Leaving your job first is the cleanest path, but it isn’t the only one.
Key takeaways
It depends on your invention assignment clause and your state. Most tech employers have employees sign an agreement assigning inventions to the company. Broad versions reach anything you create while employed, even at night and on weekends.
A number of states limit that. California, Delaware, Illinois, Kansas, Minnesota, New Jersey, New York, North Carolina, Utah and Washington bar employers from claiming inventions you develop entirely on your own time, without the employer’s equipment or confidential information, unless the invention relates to the employer’s business or results from your work there. If you live in one of these states and stay on the right side of those lines, the side project is yours. Elsewhere, the wording of your agreement controls.
The “relates to the employer’s business” exception is the one founders trip over. If your startup is close to what your employer does, or plans to do, assume your employer may have a claim.
Timing matters too. The more of the product you build while you’re still employed, the more a former employer has to point to. And what an employer can claim isn’t limited to code. Depending on your agreement, business plans, know-how and what you learned about its customers can be covered as well. See Who Owns Startup IP?
A non-compete usually restricts what you do after you leave, so check whether you have one and what it covers. There’s no federal ban. The FTC’s 2024 rule never took effect and has been withdrawn, so state law decides. California, Minnesota, North Dakota and Oklahoma ban employee non-competes, Washington’s ban starts in 2027, and many other states limit them by income level or other conditions. See Non-Compete Clauses.
While you’re still employed, a separate rule applies. Employees owe their employer a duty of loyalty, which generally means you can prepare to compete but can’t actually compete, take its customers or recruit its people while you’re on the payroll.
Look for an outside activities or moonlighting clause, which may require you to disclose or get approval for outside work. A non-solicitation clause can bar you from recruiting co-workers or approaching your employer’s customers, during your employment and for a period after. See Non-Solicitation Clauses. Confidentiality terms cover everything you learned on the job, from code to customer lists to strategy, and they last after you leave.
You can, and sometimes it makes sense, for example when a co-founder is ready to start. Incorporating doesn’t change what your employer owns, though. If your employer may have a claim to the IP, don’t assign it into the company until that’s resolved, because investors will check. See When Should I Incorporate My Startup?
Stop, move your work to your own devices and accounts, and write down what was done and when. Then talk to a lawyer before you raise money or sign a co-founder. Investors’ lawyers ask founders about prior employers, and it’s far easier to deal with now than during a financing.
For more, see How Do I Protect My Startup Idea? and The CIIA Agreement. If you’d like us to review your employment agreement before you start, contact us.
