Employment Contracts: Red Flags to Watch For

You've aced the interviews, negotiated your salary, and received an offer letter. Now comes the employment contract.

Most people skim it and sign. But that document determines your rights, your obligations, and what happens if things go wrong.

Here are some red flags to watch for:

1. Non-Compete Clauses

These clauses restrict where you can work after leaving the company. Some are reasonable. Others are not.

Watch out for:

• Duration longer than 1 year
• Geographic scope covering entire countries
• Broad industry definitions that limit your options

Some states (like California) don't enforce non-competes. Know your local laws.

2. IP Assignment Clauses

Many contracts include clauses that give the company ownership of anything you create — even outside work hours.

Look for language like:

• "Work product created during employment..."
• "Inventions related to the company's business..."
• "Regardless of when or where created..."

If you have side projects, negotiate an exception.

3. At-Will Employment

"At-will" means the company can fire you at any time, for any reason (with some legal exceptions).

This is standard in the US, but understand what it means:

• No guaranteed job security
• No required notice period
• Limited severance (unless negotiated)

4. Arbitration Clauses

These force you to resolve disputes through private arbitration instead of courts.

Arbitration often favors employers because:

• The company chooses the arbitrator
• There's no jury
• Limited appeals
• Confidentiality (you can't warn others)

5. Claw-Back Provisions

Some contracts allow the company to "claw back" bonuses or other compensation if you leave within a certain time.

This can mean owing the company money if you quit.

6. Garden Leave

This clause means you're still employed (and paid) during your notice period, but you can't work. Sounds nice, but:

• You can't start your new job
• Your non-compete clock might not start
• You're in limbo

What To Do

Don't just sign. Take time to read your contract. If something seems unfair, ask about it. Many terms are negotiable.

Not sure what a clause means? Upload your contract to OpenClauses.

Start your job on solid ground.