Startup employment contract: IP, confidentiality and non-compete clauses

Startup employment contract: specific IP, confidentiality and non-compete clauses

In startups, 80% of value is intangible: source code, roadmap, data, know-how. A poorly drafted employment contract can be enough to let these assets leak or invalidate a strategic clause before the employment tribunal. Here is the actionable 2026 guide to securing your confidentiality, intellectual property (IP) and non-compete clauses, while respecting proportionality and the company’s legitimate interests.

The legal framework to know (without unnecessary jargon)

• Proportionality of restrictions on rights and freedoms: Article L1121‑1 of the Code du travail.
• General principles of employment contracts: Article L1221‑1 of the Code du travail.
• EU protection of trade secrets : Directive (EU) 2016/943.
• Employee inventions: categories and ownership, Article L611‑7 of the Code de la propriété intellectuelle.

For good practice on confidentiality and non-compete obligations, also see: Cadremploi, Saisir Prud’hommes, Legalstart and Éditions Tissot.

1) Confidentiality clause: precise, justified, effective

Confidentiality applies during and after the contract. It does not require financial consideration, but must be written, necessary and proportionate to the role (L1121‑1). Protection of trade secrets is strengthened by EU law (Directive 2016/943).

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• Defined scope of information: code and architectures, non-public datasets, algorithms, prototypes, product roadmap, commercial strategies and pricing, customer/prospect lists, internal documentation.
• Obligations: non-disclosure, no use outside assigned duties, return/deletion at the end of the contract, reasonable security measures.
• Duration: during the contract + post-contract period limited to the time the information retains value (e.g. 3 to 5 years for the roadmap, unlimited while the trade secret remains).
• Exceptions: information that is public, lawfully obtained from third parties, required by law/authority, ethical reporting/whistleblower protection.
• Sanctions: disciplinary and civil (damages), without an excessive automatic penalty clause.

Detailed good practice confirmed by practical legal commentary: Cadremploi, Saisir Prud’hommes, Legalstart, Éditions Tissot.

For more on source-code and data protection, see our guide to copyright applied to source code.

2) Intellectual property (IP): assignment of rights and employee inventions

Without a clause, copyright generally belongs to the employee-creator (except under specific regimes, particularly for software), hence the importance of a precise IP assignment clause. For patents, the employee inventions regime applies (CPI L611‑7) :

• Inventions made in the course of assigned duties (in performance of the role/inventive assignment): belong to the employer (salary remunerates the inventive assignment).
• Attributable inventions outside assigned duties (connected to the company, its resources/fields): the employer may claim ownership or use rights in return for a fair price.
• Non-attributable inventions outside assigned duties: remain the employee’s property.

IP assignment checklist (to include in the permanent/fixed-term contract)

• Works covered: code, documentation, mockups/UI, created datasets, marketing content, trained AI models/weights, databases, patents, designs.
• Rights assigned: reproduction, communication to the public, adaptation, translation, bug correction, internal reverse engineering, rental/lending where relevant.
• Territory and duration: worldwide, for the statutory duration of the rights.
• Remuneration: included in salary for ordinary duties (excluding the fair price under L611‑7 when acquiring an attributable invention outside assigned duties).
• Warranties: original works, no infringement of third-party rights, disclosure of embedded open source components.
• Pre-existing works: list of prior work (portfolio/side projects) expressly excluded.
• Delivery of deliverables: code deposit, repository access, keys/APIs, build artifacts, systematic handover.

If you are also arranging transferability of founder assets, see our dedicated article on assignment of intellectual property by founders.

3) Non-compete clause: validity conditions and compensation levels

A non-compete obligation restricts individual freedoms and is valid only under strict conditions (L1121‑1) and must protect a legitimate interest. It applies only after termination of employment and requires financial consideration.

Cumulative conditions

• Established legitimate interest: e.g. access to technical/strategic secrets (see Directive 2016/943).
• Limited duration: in practice 6–24 months (12–18 months is common in startups).
• Geographical limitation: areas where the company actually operates (region/country; avoid “worldwide” without justification).
• Activity scope: related markets/technologies/functions, no general sector-wide prohibition.
• Compensation paid while the restriction applies: in practice often 30–50% of gross remuneration, with the 33% threshold being commonly accepted in practice and legal commentary (see Saisir Prud’hommes, Legalstart, Éditions Tissot).

Provide an employer right to waive the restriction on termination (contractual notice period); otherwise compensation will be due. Consider the less restrictive alternative of non-solicitation (customers, employees), discussed in our guide to non-compete and non-solicitation in startups.

Case study (real, anonymized)

A Series A SaaS startup approached us after a lead developer left. Its non-compete clause prohibited “any activity in tech” for 24 months “in Europe”, without a precise product scope. The employee brought a claim before the employment tribunal: the clause was held disproportionate in view of the actual duties (no access to sensitive deals). Result: clause invalidated, compensation not due, and no ability to stop the competing activity. We rewrote the contract: (i) justification based on access to proprietary code and the roadmap, (ii) scope limited to the startup’s vertical market, (iii) 12-month duration, (iv) compensation of 35% of gross pay, (v) waiver possible within 10 days of termination. Since then, the clause has held up in negotiations and deterred opportunistic departures.

Drafting template: key points to copy, paste and adapt

Confidentiality

• Definition: “Confidential Information” means all non-public information relating to code, architectures, AI models, datasets, business plans, commercial strategy, pricing, customer/prospect lists, financial information, and any information marked “Confidential”.
• Obligations: no use, no disclosure, security, return/deletion at the end of the contract. Statutory and whistleblower exceptions.
• Duration: X years after the end of the contract (and while the information retains its value as a secret).

IP assignment

• Works: code, documentation, data, designs, content, AI models, databases, inventions.
• Rights: worldwide, statutory duration, all methods of exploitation known or unknown today, including adaptation/correction.
• Pre-existing works: annexed list of excluded prior work.
• Inventions: reminder of the categories under L611‑7 CPI and internal disclosure procedure.

Non-compete

• Subject matter: specific competing activities/products.
• Area: countries/regions where the startup actually operates.
• Duration : 12–18 months.
• Compensation: 33–40% of gross pay, paid monthly while the restriction applies.
• Waiver: the employer may waive the restriction within X days after notice of termination.

7-step procedure to secure your contracts

1. Map risks: who accesses what (code, data, pricing) and why.
2. Choose the right contract: permanent vs fixed-term, work-study, internship. See our “first employee” checklist.
3. Align clauses with duties: developer, data scientist, sales, CSM: different scopes.
4. Draft separate clauses: confidentiality ≠ IP ≠ non-compete (avoid mixing them and creating invalidity risks).
5. Check the collective bargaining agreement (Syntec, etc.) and proportionality (L1121‑1).
6. Plan offboarding: return of materials, removal of access, reminder of clauses, possible non-compete waiver.
7. Train and equip: up-to-date templates, external NDAs, access register. If unsure about status, read freelancer vs employee: reclassification risk.

Common mistakes that undermine everything

• Overly general clauses: “everything relating to the company” is vague → risk of invalidation.
• “Worldwide” 24-month non-compete without justification → almost systematically invalidated.
• No compensation for the non-compete → invalidity.
• No IP clause: litigation over ownership of code/designs/data.
• Overlooking pre-existing works: conflict over side projects.

If the worst happens (e.g. a code leak), see our practical advice: an employee stole the source code: what remedies are available?

Short FAQ

Does a confidentiality clause require compensation?

No. Unlike a non-compete obligation, it requires no financial consideration, but must remain proportionate (L1121‑1; practice: Cadremploi).

How much should be paid for a non-compete?

Employment tribunal practice often accepts 30–50% of gross salary, with a common floor of 33% (practical commentary: Saisir Prud’hommes, Legalstart).

Do inventions made outside working hours belong to the employer?

Not automatically. Only inventions made in the course of assigned duties belong to the employer. “Attributable inventions outside assigned duties” may be acquired for a fair price (CPI L611‑7).

Is confidentiality unlimited in time?

It lasts as long as the information retains value as a secret. Nevertheless, provide an indicative contractual period (e.g. 3–5 years) and a clause linking duration to the nature of the secret (Directive 2016/943).

For an overview of startup hiring (contract choice, formalities), also see our guide permanent or fixed-term contracts according to your needs.