[CyberFonic]

Your client is most certainly going to view your work as encroaching upon their intellectual property. That is simply how managements think. Regardless of the merit of their beliefs.

It might be possible to avoid future problems by having a contract where you disclose that you are working in the same space as the startup and that you will not use your code in their product, nor their code in your product. It is of course, difficult to prove that down the track.

If I was in your situation, I would decline the work. 10-16 hours doesn't generate enough revenue to pay for lawyers in the future.