Forced to sign intellectual property agreement or be terminated after 4 years of service

I have worked for a small 25 employee non-profit in the US for the past 4 years. About 9 months ago, I identified some deficiencies within the company in the areas of data management and collaboration. Since there were no services out there that provided a solution to this deficiency, I decided to contact a friend of mine who has about 12 years of experience of programming. As a side project, the two of us have been working for the past 9 months on building an online management system for professionals in my field that will greatly increase productivity. Before we began working on the project, I checked the employee handbook and any contracts that were signed when I was first hired. There was absolutely nothing about intellectual property and the handbook specifically said that outside jobs were allowed. About 3 months ago, I told my boss what I was working on outside of the office to help increase my productivity and told him my intention to eventually sell this service to others. We have since completed the first version of the online management service, established an LLC, and are ready to begin beta testing.

Here is my predicament... Yesterday, I was called into my boss's office and I was told that I would be asked to sign an intellectual property agreement next week. This agreement states that any product, service, or company developed by an employee with the use of any experience, knowledge, or relationship from their current job will belong to the non-profit. This effectively gives them ownership of my company, the service we have built, etc. If I refuse to sign this contract, they have threatened to terminate my employment.

Can they legally do this? If I have already established a side business and built the product, can they retroactively force me to sign an agreement giving them ownership of this business and the product we have built? As a side note, this new company and our product does not compete with the non-profit; rather it provides a service to the non-profit that will increase productivity. The non-profit also does not develop or sell products, so its not like they would have developed this on their own and sold it.

Any help anyone can provide would be great. I plan to contact a contract lawyer soon to further protect myself and my new business.

Get hold of the handbook that says "Outside projects are allowed".
For the contract you have to be very careful, they shouldn't be able to retrosepcitvely include "pre-existing work" may say "for all new projects created beyond the date i sign, I will agree, but any prior art to this date is not subject to the agreement".

Ask to get a copy of the agreement and find a lawyer to take it to, "I would like to get a professional opinion on this before signing, I will have it back to you 1 5 business days". Which means you haven't said no and they have a timeframe for you signing it.

Finally ask them what a not for profit organisation is going to need the ownership for, if they aren't aiming to make a profit out of it.

It sounds like one or two people (like your manager) have got the wrong end of the stick and are trying to either cover themselves or make themselves look good.

Lastly, I'm not a lawyer, I think its time you found one to have in your corner.

I highly doubt they can do this, but the sad reality is, most places in the US are at-will employment. So if you don't go along with it (even if legally correct) they may simply terminate your employment for some other reason. Obviously speaking to a lawyer would be the smart move here.

Talk to a lawyer. To the next meeting with your boss make an appointment and TAKE THE LAWYER WITH YOU. You wil be surprisd by the result.

At the current I would consider your boss borders extortion - the crime. At least he plays with it. You may loose your job, but you likely can sue the ass out of your former employee. Discrimination, contract fraud, extortion.