What to Look for in an Employment Contract10 Sections That Require Careful Review

Most people negotiate salary and then sign the contract without reading it. That's understandable — you're excited, you want to show commitment, and the contract looks like boilerplate. It isn't.

Employment contracts can bind you to non-compete obligations that prevent you from working in your field for years, assign ownership of personal projects you built on your own time, strip you of severance if you're terminated for a broadly-defined "cause," and require you to resolve disputes through mandatory arbitration rather than the court system.

The stakes are especially high for roles that involve equity, senior compensation, or specialized technical work. A missed clause can cost you six figures — in restricted career mobility, forfeited stock, or waived legal rights.

The good news: most employment contract terms are negotiable. Employers expect negotiation on offers, especially at the senior level. And even junior employees can push back on the most egregious provisions without jeopardizing the offer. You just need to know what you're looking at.

The compensation section should be the easiest part to review, but errors and omissions here are more common than you'd expect. Don't assume the contract reflects what was discussed verbally — check every line.

Base salary: Confirm the exact amount, currency, and pay frequency. If you negotiated a raise after the initial offer, make sure the contract reflects the final number, not the original offer.

Bonus structure: This is where contracts frequently disappoint. A "target bonus of 20%" sounds clear, but look carefully at how it's calculated. Is it tied to individual performance, company performance, or both? What are the specific targets? Is the bonus discretionary (meaning the company can simply choose not to pay it) or formula-based? Discretionary bonuses are worth significantly less than formula-based ones — the company can always decide the timing is wrong.

Benefits: Health, dental, vision coverage — which plans, what are the premium splits, and when does coverage start? Many offers include a 30-90 day waiting period for benefits that's easy to miss. If you're leaving a job with benefits, that gap has real cost. Also confirm PTO policy: is it accrued or unlimited? "Unlimited" PTO plans often result in employees taking less time off, not more, and they typically don't pay out unused PTO upon termination.

Signing bonus: If there's a signing bonus, check the clawback clause. Many contracts require you to repay the full bonus if you leave within 12-24 months. Look for prorated repayment (you owe less the longer you stay) rather than all-or-nothing clawback, and confirm whether the clawback applies if the company terminates you — it usually shouldn't.

Expense reimbursement: If the role involves travel, equipment, or professional development expenses, confirm what's reimbursable, what the approval process is, and the reimbursement timeline. Vague language here leads to disputes.

Non-competes are the most negotiated — and most contentious — provisions in employment contracts. A broad non-compete can leave you unable to work in your field for years after leaving a job. The FTC proposed a nationwide ban in 2024, but enforcement has been uneven; many states still permit them if they're "reasonable."

What makes a non-compete problematic: An overbroad non-compete specifies a long duration (12-24 months is common, but some run longer), a wide geographic area (nationwide, when the role is local), and sweeping industry restrictions ("may not work for any company that competes with Employer's current or future products or services"). That last phrase is especially dangerous — it covers anything the company might build in the future.

The enforceability question: California, Minnesota, Oklahoma, and North Dakota generally refuse to enforce non-competes against employees. If you're in one of those states, the clause may be unenforceable — but that doesn't mean you should ignore it, because a company can still threaten litigation that's expensive to defend even if it ultimately loses.

What to push for: Negotiate the non-compete down to the specific role you're filling, not the company's entire competitive landscape. Limit duration to 6 months maximum. Narrow the geographic scope. And critically: if the company insists on a meaningful non-compete, push for garden leave — paid compensation during the restricted period. A non-compete without compensation is particularly unjust.

Non-solicitation: Distinct from a non-compete, a non-solicitation clause prevents you from recruiting the company's employees or soliciting its customers after you leave. These are generally more enforceable than non-competes. Reasonable non-solicitation clauses (targeting customers you had direct contact with, for 12 months) are often acceptable. Blanket bans on contacting any customer of a large company for 2+ years are not.

Invention assignment clauses are standard in employment contracts — and for good reason. An employer who pays you to develop software, designs, or other work product should own that work. The problem is when these clauses are drafted so broadly that they claim ownership of work you do on your own time, with your own tools, for your own projects.

The standard clause: Most invention assignment clauses say something like: "Employee assigns to Company all inventions, discoveries, improvements, and works of authorship created during employment, whether or not made during working hours or using Company resources."

The phrase "whether or not made during working hours" is the dangerous part. Under this language, a mobile app you build on weekends using your personal laptop could belong to your employer — even if it has nothing to do with their business.

California's employee invention carve-out: California Labor Code Section 2870 (and similar laws in several other states) limits employer IP claims to inventions that either relate to the employer's current or planned business, or resulted from work performed for the employer. You cannot be required to assign IP to work you did entirely on your own time, with your own equipment, that does not relate to the employer's business or result from your work for them. If you're in California, this protection applies automatically — but having it stated explicitly in the contract is still better.

What to do: Before signing, list every personal project, side business, open-source contribution, or prior work you want to protect. Ask the company to attach an exhibit to the contract listing excluded prior inventions by name or category. This is standard practice and almost always granted without pushback.

Work made for hire: Related but distinct: "work made for hire" doctrine under copyright law means that certain work created within the scope of employment automatically belongs to the employer. Employment contracts typically include explicit work-for-hire language. This is standard for work done during your job — the concern is overreach into personal work.

How your employment can be terminated, and what happens when it is, has major financial consequences. This section deserves careful reading.

At-will employment: The default in most US states is at-will employment: either party can end the relationship at any time, for any legal reason, with or without notice. Many employment contracts explicitly state at-will status even while including other contractual protections. At-will doesn't mean the company can fire you for illegal reasons (discrimination, retaliation, etc.) — but it does mean they don't need to justify a termination.

Termination for cause: Some contracts allow the company to terminate you "for cause" with reduced or eliminated severance. The definition of "cause" matters enormously. Narrow definitions (fraud, conviction of a felony, willful misconduct causing material harm to the company) are reasonable. Broad definitions that include "failure to meet performance expectations" or "conduct detrimental to the company's reputation" are problematic because they're subjective and can be used to deny severance on thin pretexts.

Constructive dismissal: Be aware of scenarios where the company doesn't formally terminate you but makes your working conditions untenable — reducing your compensation, demoting you, removing your responsibilities, or requiring relocation. In some jurisdictions, this constitutes constructive dismissal, which may entitle you to severance. Having clear contractual terms around role changes protects you.

Notice period: If the contract requires advance notice of termination (from either party), confirm how notice is defined — written, delivered how, to whom? A notice period protects you by providing transition time and potentially a period of continued compensation.

Severance is not legally required in the US — unlike many other countries, American employers have no statutory obligation to pay severance. That makes the severance clause in your employment contract critically important: if it's not in the contract, you have no right to it.

What good severance looks like: Meaningful severance for a professional role is typically 1-3 months of base salary per year of service, subject to a minimum and maximum. It should be payable without conditions other than signing a separation agreement, and that separation agreement should be presented, reviewed, and signed after termination — not a blanket waiver built into the employment contract before you even start.

Conditions on severance: Severance is almost always conditioned on signing a release of claims — meaning you waive your right to sue the company for issues arising from your employment. This is standard and generally unavoidable. What's not acceptable is requiring you to sign broad, open-ended waivers or non-disparagement clauses that prevent you from discussing the working conditions you experienced.

Equity and severance: In roles with equity compensation, severance should address what happens to unvested options or restricted stock upon termination. Standard language forfeits unvested equity. Better language provides some form of accelerated vesting on termination, especially for long-tenured employees or in change-of-control situations.

The negotiation: Negotiate severance terms before you start. It's human nature to skip this conversation — it feels like planning for failure — but employers understand it's professional to address it upfront. Senior professionals routinely negotiate improved severance as part of the offer. It's much harder to negotiate after termination when leverage has evaporated.

Every employment contract includes confidentiality provisions — and for the most part, they're reasonable. You shouldn't share your employer's trade secrets, client lists, or proprietary product information. The concerns arise when confidentiality clauses extend beyond what's genuinely proprietary.

What's standard: Protection of trade secrets, proprietary technology, customer data, business plans, and financial information. Obligations that survive employment termination. Prohibition on using confidential information for personal benefit or disclosure to competitors.

What to watch for:

Overly broad definition of "confidential information"*: If the definition covers "any information related to the company's business," it could be interpreted to restrict you from discussing your own compensation, your working conditions, or your job responsibilities — which is both overbroad and potentially illegal (the NLRA protects employees' rights to discuss wages and working conditions).

Duration*: Confidentiality obligations that last forever for all categories of information are overreach. Most business information has a natural shelf life. Trade secrets warrant long-term protection; general operational details don't.

Post-employment restrictions*: Some confidentiality clauses include post-employment restrictions so broad they effectively function as non-competes — prohibiting you from working anywhere that might require drawing on your general knowledge of an industry. These provisions, when challenged, often fail — but they create litigation risk.

Whistleblower protections: Your employment contract should not be able to override your legal rights to report fraud, safety violations, or other illegal conduct to government regulators. Make sure any confidentiality clause includes a carve-out for legally protected disclosures and communications with regulatory agencies.

The dispute resolution clause determines where and how any legal conflict between you and your employer will be resolved. It often gets the least attention during contract review and has among the largest implications.

Mandatory arbitration: Many employment contracts require all disputes to be resolved through binding arbitration rather than the court system. Arbitration is not inherently unfair, but it has structural features that systematically favor employers: arbitrators are often selected from a pool the employer helps establish, the proceedings are private (no public record), discovery is limited compared to litigation, and arbitration awards are almost impossible to appeal.

Class action waivers: Arbitration clauses frequently include class action waivers — meaning you cannot join other employees in a collective action, even if you all experienced the same discriminatory or unlawful conduct. This effectively removes a powerful legal tool from employees facing systematic problems.

What you can negotiate: Push to delete mandatory arbitration entirely. If the employer won't budge, negotiate for: (1) arbitration administered by JAMS or AAA under their employment rules (not a company-selected forum), (2) the employer pays all arbitration fees, (3) the right to have claims heard by a single experienced employment arbitrator, and (4) no waiver of your right to file administrative charges with the EEOC or state equivalents.

Governing law and venue: The contract will specify which state's law governs disputes and where litigation or arbitration takes place. If you're working remotely in a different state than the company's headquarters, make sure the governing law and venue are practical for you. Litigating in a state where you don't live is expensive.

Equity compensation is often the most valuable part of a compensation package at early- and mid-stage companies — and the most misunderstood. The terms governing your equity can mean the difference between significant wealth creation and walking away with nothing.

Vesting schedules: The standard vesting schedule is 4 years with a 1-year cliff. This means: nothing vests in the first year (the cliff), then 25% vests on your one-year anniversary, with the remaining 75% vesting monthly or quarterly over the following three years.

The cliff exists to retain employees through an initial period. Be aware of what happens to unvested equity in various termination scenarios — this should be explicit in the contract.

Types of equity: *Stock options* give you the right to buy shares at the strike price (the fair market value at grant). Options only have value if the company's value increases beyond the strike price. They typically expire 90 days after you leave the company — a critical constraint that can force premature exercise decisions with significant tax implications.

RSUs (Restricted Stock Units)* are grants of shares that vest over time. RSUs have value as long as the company has value; there's no strike price. They become taxable when they vest.

ESPP (Employee Stock Purchase Plan)* allows employees to purchase company stock at a discount, typically in publicly traded companies.

Key questions to ask:

1. What is the current strike price (for options) and what is the company's current 409A valuation? 2. How many shares are outstanding (total diluted shares)? This determines your actual ownership percentage. 3. Has there been a recent 409A valuation, or is it stale? 4. What is the post-termination exercise window? The standard 90 days often forces employees to exercise or lose options on departure. Some companies offer extended windows (2 years, 5 years, or even until expiration) — ask for this explicitly.

Acceleration provisions: Single-trigger acceleration means your equity vests automatically upon a change of control (acquisition). Double-trigger acceleration requires both a change of control AND termination of your employment without cause within a defined window. Double-trigger is more common and considered more appropriate — single-trigger can create perverse incentives. If you're joining a pre-IPO company with significant equity, negotiate for double-trigger acceleration.

If you're working remotely or in a hybrid arrangement, the employment contract should explicitly capture this — not just rely on verbal assurances from your hiring manager.

Why it matters: Managers change. Company policies shift. An unwritten understanding that you're "effectively remote" is not contractually enforceable. If the contract specifies a physical office location with no remote work provision, the company can later require in-office attendance without breaching the contract — even if you turned down other opportunities because you expected remote flexibility.

What to get in writing:

Location of work*: Specify that your primary workplace is your home office (or wherever you're working), not the company's headquarters. This also has tax implications — the state where you perform work may have jurisdiction to tax your income regardless of where the company is incorporated.

Travel requirements*: If the role requires periodic travel (quarterly onsite, for example), specify the frequency, who bears the cost, and advance notice requirements.

Equipment and expenses*: Who provides equipment? Is there a home office stipend? What are the reimbursement procedures for internet, phone, and other home office expenses?

Remote work policy changes*: Some contracts include a clause allowing the employer to require in-office attendance with X days notice. Know what your employer can change and with what notice.

State tax considerations: If you work remotely in State A for a company headquartered in State B, you may owe income taxes in State A. Some states (New York's "convenience of the employer" rule, for example) can tax remote workers in other states under certain circumstances. While this isn't a contract negotiation issue per se, it's something to understand before finalizing your arrangement.