Building something on the side? Read your employment contract first.

What the law says without a contract

• Copyright. Under the Copyright Act, your employer owns copyright in work you create in the course of your employment, unless you have agreed otherwise. Code you write for your job belongs to your employer. Code you write on your own time, for your own purposes, generally does not.
• Inventions. Canada has no statute that hands employee inventions to the employer. Courts have generally held that an employee owns their invention unless they were hired to invent, or a contract says otherwise.
• Confidential information. Your employer’s confidential information belongs to your employer whatever your contract says. A new business that uses it is exposed, however original the rest of the work.
• Loyalty. Every employee owes a duty of good faith and fidelity. Senior employees and officers can also owe fiduciary duties, which stop them from taking business opportunities that belong to the employer — during employment and, in some cases, after it ends.

What your contract may add

• Broad IP and invention assignments. Some clauses assign anything you create during your employment that “relates to the business” of the employer, whether or not you made it at work, on work equipment or on work time. The wording decides how far this reaches.
• A prior-inventions schedule. Many contracts ask you to list what you owned before you started. Anything you leave off may be harder to claim later.
• Disclosure obligations. Duties to disclose inventions, or any outside business activity, to the employer.
• Outside-activity and conflict-of-interest policies, often incorporated into the contract by reference.
• Non-competes and non-solicits. In Ontario, the Employment Standards Act, 2000 has prohibited non-compete agreements with employees since October 25, 2021, with exceptions for executives and for the sale of a business. Non-solicitation and confidentiality clauses are not covered by that ban. Outside Ontario, non-competes are judged under the common law, and courts read them strictly. See are non-competes enforceable in Canada.

Building it cleanly

1. Read the contract and every policy it incorporates before you write the first line of code or file anything.
2. Use only your own time, equipment and accounts. No work laptop, work cloud account, work email or work software licence.
3. Use none of your employer’s confidential information — no customer lists, internal data, roadmaps or code.
4. Keep dated records of what you built and when — commit history, notebooks, design documents. People sometimes call this a clean-room record.
5. Stay out of your employer’s market where you can. The closer the new business is to what your employer does, the stronger any claim becomes.
6. Get advice before disclosing. Disclosure under a policy can create a useful record, but the wording matters, and once it is sent it cannot be taken back.
7. Ask for a written carve-out. Many employers will confirm in writing that a described project falls outside their IP clause. The best time to ask is when you are negotiating a new offer.
8. Incorporate and assign. Once the business is real, put the IP into a corporation through a written assignment from each founder. See incorporating in Ontario.

When to get advice

Before you accept a new job, so you can negotiate a carve-out. Before you disclose the project to your employer. Before you resign. And before you raise money, because investors will ask you to represent that the company owns its IP, and their lawyers will ask where it came from.

Advice from Smutylo Law+ is given on Ontario law. For employees elsewhere in Canada the principles are similar, and the firm will say where a question needs local advice.