Employment Contract Red Flags
You have 48 hours and you really want the job. Here's what's worth slowing down for - and what could follow you out the door years later.
The offer is in writing, the number looks good, and the recruiter is casually mentioning that they need it back by end of week. This is exactly the conditions under which most people sign employment contracts - excited, in a hurry, and not wanting to seem difficult.
Most of what's in there is fine. But a few clauses can follow you for years after you leave, and they're worth finding before you sign.
Non-competes: more enforceable than you think
A lot of people assume non-competes aren't worth the paper they're printed on. In California, they're largely right - non-competes are broadly unenforceable there. But in most other states, a reasonably scoped non-compete - 12-24 months, your specific industry, a defined geography - is enforceable. Check: how long does it last? What counts as a competitor? Is the definition of "competition" so broad it covers your entire career field? These details matter.
IP assignment: who owns what you build
Standard employment contracts include an invention assignment clause - anything you create during employment belongs to your employer. That's expected. But some go further: they claim ownership of work done on your own time if it's "related to the company's business in any way." If you have side projects, freelance work, or open source contributions you plan to continue, this clause needs a specific carve-out before you sign. Get it in writing. Your employment contract may also come bundled with or reference a separate NDA - what NDAs actually restrict is worth understanding separately.
Sign-on bonus repayment
Sign-on bonuses almost always come with a repayment clause. Leave within 12-24 months and you owe the money back - sometimes the full amount, sometimes prorated. This is standard and generally fair, but read the exact terms. Some contracts require repayment even if the company lays you off. That's a different deal than most people assume they're getting.
Equity and RSUs: what "vesting" actually means
Equity only matters if you're there long enough to vest it. A four-year vesting schedule with a one-year cliff means you get nothing if you leave before year one - even if you've worked there 11 months. Understand the full vesting schedule, what happens to unvested shares if you're laid off, and whether there's an acceleration clause for acquisitions. The recruiter will emphasize the total grant; the contract will tell you what you can actually count on.
Mandatory arbitration
Most modern employment contracts require disputes to be resolved through private arbitration - not courts. This means no jury trial and no class action participation. Arbitrators are often selected from lists that both parties agree to, but the employer typically has more experience with the process. This clause is usually non-negotiable, but it's worth knowing it's there and what it means.
Things worth flagging before you sign
- Non-compete with broad industry scope or duration over 18 months
- IP assignment covering work done "on your own time" without carve-outs
- Sign-on bonus repayment required even in the event of layoff
- Bonus structure that's fully discretionary with no written criteria
- Arbitration clause that explicitly waives class action rights
- "Garden leave" keeping you on payroll but inactive - sometimes up to 6 months
- At-will language that contradicts verbal promises about job security
Non-compete violations don't usually end with a lawsuit. They end with a cease-and-desist letter right as you're starting a new job - which is expensive in its own way.
Upload your employment agreement and find out exactly what you're agreeing to before you sign. $4.99.
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