What to Check in an Employment Contract Before You Sign
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Employment contracts are written by company lawyers. Every clause that benefits the employer was put there intentionally — and every clause that's missing or vague was left out intentionally. Before you sign, there are specific sections that regularly cost employees money, limit career options, or transfer intellectual property rights. This guide covers what to check in an employment contract before your first day, with examples of what to look for and what to request.
Employment contracts are written by the employer's legal team to protect the employer. That doesn't make them unfair by default — but it means you need to read them with that context in mind.
The 7 Most Important Employment Contract Clauses
1. Compensation and benefits
Confirm the exact base salary, bonus structure (discretionary vs. guaranteed, based on what metrics), equity terms (cliff, vesting schedule, exercise window, what happens on acquisition), and any deferred compensation. Verbal promises that aren't in the contract aren't enforceable.
2. At-will employment vs. term contract
Most U.S. employment is at-will — either party can end it at any time. If you're being hired for a defined term, understand what triggers early termination and what compensation is owed if the employer ends the contract early.
3. Non-compete agreement
Non-competes restrict where you can work after leaving. They vary enormously in scope — some cover only direct competitors for 6 months; others are industry-wide for 2 years. Several states (California, Minnesota, Oklahoma) refuse to enforce them. Know what you're agreeing to and research enforceability in your state.
4. IP and invention assignment
Most employment contracts include an IP assignment clause stating that anything you create during your employment — or sometimes related to your employer's business — belongs to the employer. Check whether this extends to work done on personal time and your own equipment. Some states require "moonlighting carve-outs."
5. Non-solicitation agreement
These restrict you from recruiting former colleagues or soliciting former clients after you leave. They're separate from non-competes and often more enforceable. Understand the scope, duration, and geography.
6. Termination and severance
What notice is required from each side? Is severance offered, and if so, under what conditions? Does the employer's right to terminate "for cause" include a broad subjective definition? Severance agreements often require you to sign a release of claims — understand what you'd be waiving.
7. Arbitration clause
Many employment contracts require mandatory arbitration of disputes, which waives your right to sue in court or join a class action. This can significantly affect your options if there's a wage dispute, discrimination claim, or wrongful termination.
What You Can Actually Negotiate
Most employees assume employment contracts are take-it-or-leave-it. Many terms are negotiable, especially: the scope and duration of non-compete clauses, IP assignment exclusions for personal projects, severance terms and triggers, and the definition of "for cause" termination.
The negotiation is much easier before you sign than after you've started. Employers expect reasonable negotiation from professional candidates.
Employment Contract Red Flags to Watch For
Some contract terms are worth flagging immediately — not necessarily as deal-breakers, but as things that warrant a direct conversation before you sign.
Non-compete covering your entire industry
A non-compete that bars you from working in your field for 12–24 months — regardless of your role or what you actually knew — is a career risk. Ask for geographic limits, a shorter term, or a carve-out for your existing clients and skills. In some states (California, Minnesota, North Dakota, Oklahoma) these are unenforceable regardless.
IP assignment that extends to personal projects
If the clause assigns ownership of anything you create "relating to the company's business or anticipated business," it could cover side projects built on your own time. Ask for a written carve-out listing any pre-existing work you want to retain and excluding work done on personal equipment with no company resources.
Clawback provisions on bonuses or equity
Some contracts let employers claw back bonuses or unvested equity if you leave within a certain period, are terminated for cause, or if financial results are restated. Read these carefully — "for cause" definitions are often broad, and clawback windows can extend years after the compensation was received.
"Garden leave" without compensation
Some contracts include a notice period during which the employer can place you on "garden leave" — barring you from working elsewhere but not requiring you to report in. If your contract has a 6-month notice period but only pays through 30 days, understand what the actual financial obligation is on each side.
An Employment Contract Review Checklist
Before signing any employment contract, work through this checklist:
Compensation: confirm it in writing
Base salary, bonus (guaranteed vs. discretionary, tied to which metrics), equity (type, cliff, vesting schedule, acceleration on change of control, exercise window if options), benefits start date, and any signing bonus repayment obligations if you leave within a set period.
Restrictive covenants: scope and enforceability
List every restriction: non-compete, non-solicitation of employees, non-solicitation of clients, non-disparagement. For each, note the duration, geographic scope, and definition of prohibited activity. Check whether your state enforces them. If the scope is broad, propose narrower language in writing.
Termination: notice, cause, and severance
What constitutes "cause"? How much notice is required from each side? Is severance defined in the contract, or at employer discretion? If severance requires you to sign a release, ask to see the release template before you accept the job.
Dispute resolution: arbitration and jurisdiction
If arbitration is required, note whether it's before JAMS, AAA, or another body, whether class actions are waived, and what law governs. Some arbitration clauses are more favorable to employees than others — this matters if you ever have a dispute over unpaid wages or discrimination.
The Cost of Not Reviewing Your Employment Contract
Employment contract disputes are among the most expensive legal matters individuals face. A non-compete that prevents you from working in your industry for a year has enormous financial impact. An IP assignment that transfers ownership of a side business you built before joining can cost far more than any bonus.
Most employment lawyers offer free or low-cost consultations for contract review. For senior or specialized roles — or any contract with equity, non-competes, or unusual terms — an hour with an employment attorney before signing is cheap insurance.
Even without legal counsel, running your contract through an AI contract analyzer before signing gives you a clear map of every clause that deserves attention. The goal isn't to make signing adversarial — it's to enter the relationship with eyes open.
Revealr Editorial Team
Reviewed for accuracy by the Revealr editorial team. Our articles are written and reviewed by contract specialists to ensure the information reflects common legal standards and current practice. This article is for informational purposes only.
Not legal advice. This article is for informational purposes only. It does not constitute legal advice and is not a substitute for consultation with a licensed attorney in your jurisdiction. Laws vary significantly by state and country.
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