Well, it's a shitty situation.
They can fire your *** for looking at them cross-eyed, so how does anyone think he could fight this?
No, there was no conflict of interest when he started the job. But now the company wants to get into the business, perhaps because they have learned through back channels that he is building boxes for good money, perhaps not. Either way, it matters not.
Options:
1. Keep building and keep quiet. This will almost certainly not work, IMNSHO, especially if you're selling boxes locally. They will almost assuredly find out (through co-workers, people who come into the store to buy, word of mouth, whatever). It's just inevitable. If you do this, and they find out, you're canned. No question in my mind.
2. Stop building boxes at home. Looks like you're going to be building them at work, but not getting the extra dough. Maybe you'll be lucky enough to make some extra at work, as in more hours, some OT, something like that. Maybe not.
3. Talk to your employer... explain to the boss that this is something you've been doing for some time and it was never a conflict of interest and you'd like to keep doing it, but it is NOT a situation where you are trying to steal business out from under them. Maybe they'll be understanding about it and cut you some slack, or work out a deal where you can both make money, i.e., they sell the boxes and you make them at home for a set fee or commission or something. Worst case scenario they tell you tough shit and you need to stop or find a new job.
4. Find a new job. Yes, the terms of your employment are changing somewhat... you are not guaranteed much of anything, you do what they ask you. If your job suddenly involved not just what you do now but also cleaning the toilet once a day, would you throw a fit? Would it be worth losing your job? Perhaps, to some people. Could you go to the labor board and complain that toilet cleaning was not what you were hired for and they were legally obligated to keep you employed in the position and function you hired in under? No effing way, man... your job description changed, that's it. Live with it or GTFO. Welcome to real life.
No one's forcing you to work this job, you're not under an employment contract for a given length of time, so things can change on a whim... good luck, but anything other than talking to your employer I forsee as going badly for you in the longrun.
Just my $0.02.
As for my private ideas being company property, as long as I didn't use company time, resources or materials to physically develop my ideas, they can go get stuffed... and I believe 1000% it would stand up in court. If I work for Boeing designing airplanes and come up with a new propulsion idea which I didn't use their resources to develop, but instead outsourced it or worked on it in my garage (with my own materials), I'd patent it on my own and tell them where to stick it. The burden of proof in that instance is the employer who would need to prove that you used company time and/or resources to develop your private idea. Daydreaming doesn't count as long as your regular work gets accomplished. No company can own your brain.