Employment contracts define your compensation, benefits, restrictions, and rights as an employee. While many jobs are "at-will," formal employment contracts are standard for senior roles, tech positions, and any job involving equity or specialized skills. These contracts often contain non-competes, IP assignment clauses, and arbitration provisions that can significantly impact your career. Most people are so excited about a new job that they sign without scrutinizing the fine print.
Common Red Flags
Broad non-compete (12+ months, wide geography)
A non-compete that prevents you from working in your industry for over a year, anywhere in the country, can leave you unemployed. Many states are limiting or banning non-competes — check your state's laws.
IP assignment covers personal projects
Some contracts claim ownership of anything you create during employment — even personal projects built on your own time with your own equipment. Look for carve-outs for personal and prior work.
Mandatory arbitration with class action waiver
Forced arbitration means you can't sue in court and must use the company's preferred arbitrator. Combined with a class action waiver, it makes it nearly impossible to challenge systemic issues.
Clawback provisions on signing bonus or relocation
If you leave within 1-2 years, you may owe back your signing bonus or relocation costs. Check the repayment schedule and whether it's prorated.
No severance or garden leave provisions
If the contract includes a non-compete, there should be a garden leave or severance provision to compensate you during the restricted period.
Vague performance-based termination criteria
If the contract allows termination "for cause" based on subjective performance standards, you could lose severance and equity vesting on arbitrary grounds.
Must-Have Clauses
Compensation and benefits
Base salary, bonus structure (targets and payout formula), equity/stock options (vesting schedule, cliff, acceleration on termination), benefits, and PTO.
Role and reporting
Job title, responsibilities, reporting structure, and location (remote, hybrid, in-office). This prevents bait-and-switch after you start.
Termination and severance
How either party can end employment, notice period, severance amount and conditions, and what happens to unvested equity.
Non-compete and non-solicitation
Specific scope, duration, and geographic limitations. Should be narrow and proportional. Ideally accompanied by garden leave pay.
Intellectual property
What IP you assign to the company, carve-outs for personal projects and prior inventions, and whether you retain any rights.
Change of control / acceleration
What happens to your equity and contract terms if the company is acquired. Single or double trigger acceleration protects against being fired post-acquisition.
Negotiation Tips
- Non-competes are often the most negotiable clause. Push to narrow the scope, shorten the duration, or add garden leave pay.
- If the company insists on broad IP assignment, negotiate explicit carve-outs for personal projects and prior inventions.
- Request double-trigger acceleration for equity — this protects you if you're terminated after an acquisition.
- Negotiate severance before you start. It's much harder to negotiate on the way out.
- If there's a clawback on signing bonus, negotiate prorated repayment (not full repayment) based on time served.
- Get verbal promises in writing. If the hiring manager promises flexibility on remote work, put it in the contract.
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Review My ContractFrequently Asked Questions
Should I negotiate my employment contract?
Yes. Employers expect negotiation, especially for senior roles. Focus on compensation, non-compete scope, IP ownership, severance terms, and equity vesting. Even if salary is fixed, other terms are often flexible.
Are non-competes enforceable?
It depends on your state. California, Minnesota, Oklahoma, and North Dakota generally don't enforce non-competes. The FTC has proposed a nationwide ban. Other states enforce them if they're reasonable in scope, duration, and geography. Check your state's specific rules.
What happens to my stock options if I leave?
It depends on your contract. Standard is a 4-year vesting schedule with a 1-year cliff. Upon voluntary departure, you typically have 90 days to exercise vested options. Some companies offer extended exercise windows. Unvested options are usually forfeited.
Can my employer change my contract after I sign?
Generally, changes require mutual consent. However, at-will employment means either party can terminate. If you refuse changes, the employer could terminate and re-offer on new terms. Document any changes and get them in writing.
What is "at-will" employment?
At-will means either party can end the employment relationship at any time, for any legal reason, with or without notice. Most US employment is at-will. An employment contract can modify this by specifying termination procedures, notice periods, and severance.