This is true, but ultimately if your company wants to be a dick about it, you could still end up having to fight them in court. They just have to say "when we signed that form you said it was a <domain A> app, but now it's turned into a <domain B> app which competes with our business. Hand it over."

As Joel says, a judge/jury will probably be inclined to find for you, but you still have go through the pain and cost of litigation. Also, while it's not usually in a company's best interest to pick legal fights with their employees, the catch-22 is this: the only time it's worth it for them to be dicks is when/if your business takes off. I'm sure your employer doesn't care about your little news aggregator until you're shopping around for $100 million in VC funding.

Ultimately he's right. If you seriously want to start a side business, quit your day job.