This is perfectly clear from a legal perspective: the programmer guy (the OP) owns all the IP that he created. Don't pay the money back, just keep going.
It looks like "a work specially ordered or commissioned for use as a contribution to a collective work" to me. But, again, I agree that he should keep whatever money he has earned.
Software actually does not fall into that category. What that category means is "magazine article." If you go further down in the page, you'll also note that one of the other stipulations is that there is an explicit written contract stating that is a work for hire.
this page probably explains the situation better than my random comments:
