What to Check in an Employment Contract Before You Sign
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Most people spend more time negotiating salary than reading the contract they're asked to sign. This is backwards: the contract governs what happens when things go wrong — when you leave, when you're let go, when there's a dispute about who owns your work.
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.
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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