You got the job offer. The salary looks good, the benefits are solid, and you are excited to start. Then HR sends over the employment contract, and you are faced with pages of dense legal language covering everything from intellectual property assignment to arbitration provisions.
Most people skim the contract, sign it, and move on. That is a mistake. Employment contracts contain clauses that can follow you for years after you leave the company, limiting where you can work, claiming ownership of your side projects, and stripping away legal rights you did not know you had.
Here are 10 red flag clauses you should check before accepting any job offer.
1. Overly Broad Non-Compete Agreements
What it says: “For a period of 24 months following termination of employment, Employee shall not engage in any business that competes with the Company, directly or indirectly, within the United States.”
Why it is a red flag: A non-compete that covers the entire country for two years can effectively prevent you from working in your industry. If you are a software engineer at a tech company, a broad non-compete could theoretically block you from working at any other tech company.
What is reasonable: Non-competes should be limited in three dimensions: time (6-12 months is typical), geography (the specific metro area or region where the company operates), and scope (specific competitors or market segments, not the entire industry). Many states, including California, Colorado, Minnesota, and Oklahoma, have banned or severely restricted non-compete agreements.
What to negotiate: Ask for a narrower scope, shorter duration, or a list of specific named competitors. If the company insists on a broad non-compete, request “garden leave” compensation, meaning the company pays your salary during the non-compete period.
2. Blanket Intellectual Property Assignment
What it says: “Employee hereby assigns to the Company all right, title, and interest in any invention, discovery, improvement, or creative work conceived, developed, or reduced to practice during the term of employment, whether or not during working hours and whether or not using Company resources.”
Why it is a red flag: This clause claims ownership of everything you create while employed, including side projects built on your own time with your own equipment. That app you are building on weekends? The novel you are writing at night? Under this clause, the company owns it.
What is reasonable: The company should own work you create within the scope of your employment, using company resources, and related to the company’s business. Work created on your own time, with your own tools, and unrelated to your job should remain yours. Several states, including California, Delaware, and Illinois, have laws limiting employer IP claims to work related to the employer’s business.
What to negotiate: Request an exclusion for personal projects. Many companies will accept an exhibit or schedule attached to the contract listing your pre-existing projects and any ongoing side projects that are explicitly excluded from the IP assignment.
3. Mandatory Arbitration Clauses
What it says: “Any dispute arising out of or relating to this Agreement or Employee’s employment shall be resolved exclusively through binding arbitration administered by [arbitration organization], and Employee waives the right to a jury trial and to participate in any class or collective action.”
Why it is a red flag: Arbitration is a private process. There is no public record, no jury, and limited appeal rights. Studies by the Economic Policy Institute have found that employees win less frequently in arbitration than in court, and when they win, they receive smaller awards. The employer typically has more experience with the arbitration process and may have an ongoing relationship with the arbitration provider.
What is reasonable: Some companies offer optional arbitration as an alternative to litigation, which can be faster and cheaper for both parties. The problem is when arbitration is mandatory and the only option available. At minimum, the arbitration clause should allow for disputes to be heard in the employee’s local area, and the employer should pay the arbitration fees.
What to negotiate: Push for optional rather than mandatory arbitration. If the company insists on mandatory arbitration, negotiate for the right to select the arbitration provider and for the company to pay all arbitration fees.
4. At-Will Employment with No Severance
What it says: “Employee’s employment is at-will and may be terminated by either party at any time, for any reason or no reason, with or without notice. No severance shall be payable upon termination.”
Why it is a red flag: At-will employment is standard in the United States, but combining it with zero severance means you can be let go at any time with nothing. You might relocate your family for the job, only to be terminated two months later with no financial cushion.
What is reasonable: Even in at-will arrangements, many companies offer severance provisions, particularly for employees above a certain level. A common formula is one to two weeks of salary per year of service, with a minimum of two to four weeks.
What to negotiate: Request a severance provision that provides a minimum payout if you are terminated without cause. Also negotiate for a notice period (30-60 days) for termination without cause, giving you time to find alternative employment.
5. Clawback Provisions
What it says: “In the event Employee voluntarily resigns within 24 months of receiving a signing bonus, relocation reimbursement, or tuition reimbursement, Employee shall repay 100% of such amounts within 30 days of separation.”
Why it is a red flag: Clawback provisions can leave you owing the company thousands of dollars if you leave. A $20,000 signing bonus with a two-year clawback means you are financially locked in, even if the job turns out to be terrible. Some companies have extended clawback provisions to training costs, where employees are charged thousands for onboarding training if they leave within a set period.
What is reasonable: Pro-rated clawbacks are more fair. If you received a $20,000 signing bonus with a two-year clawback and leave after one year, you should repay $10,000, not the full amount. Training cost repayment agreements (sometimes called TRAPs) should only apply to genuinely optional, portable certifications, not basic onboarding.
What to negotiate: Request pro-rated clawback schedules and caps on repayment amounts. Ensure that clawbacks do not apply if you are terminated without cause.
6. Non-Solicitation Agreements That Go Too Far
What it says: “For a period of 12 months following termination, Employee shall not directly or indirectly solicit, recruit, or hire any employee, contractor, or customer of the Company.”
Why it is a red flag: A broad non-solicitation clause can prevent you from working with former colleagues who want to follow you to a new company, or from doing business with clients you brought to the company in the first place. The word “indirectly” is particularly dangerous, as it could include simply posting a job listing that a former colleague happens to see and respond to.
What is reasonable: Non-solicitation should be limited to active, direct solicitation of specific individuals. It should not prevent you from hiring someone who independently applies to your new employer. Customer non-solicitation should be limited to customers you personally serviced or had a relationship with.
What to negotiate: Narrow the definition of “solicitation” to active, targeted outreach. Exclude scenarios where former colleagues or customers approach you independently.
7. Overly Broad Confidentiality Clauses
What it says: “Employee agrees to maintain the confidentiality of all information obtained during the course of employment, including but not limited to business strategies, financial information, customer lists, employee information, technical data, and any other information not generally known to the public.”
Why it is a red flag: When everything is classified as confidential, you cannot discuss your job experience in future interviews, describe the type of work you did, or even reveal your former salary in some interpretations. Overly broad confidentiality clauses can also be used to prevent employees from reporting legal violations or unsafe working conditions.
What is reasonable: Confidentiality should cover genuinely proprietary information: trade secrets, unpublished financial data, specific customer details, and proprietary technology. It should explicitly exclude your general skills, knowledge, and experience, as well as information that becomes publicly known through no fault of yours.
What to negotiate: Request a clear definition of what constitutes confidential information. Ensure the clause includes carve-outs for legally protected disclosures (whistleblowing, reporting safety violations) and for discussing general skills and experience in job interviews.
8. Restrictive Moonlighting Policies
What it says: “Employee shall devote full professional time, attention, and effort to the Company and shall not engage in any other employment, business, or professional activity without prior written consent of the Company.”
Why it is a red flag: This clause gives the company veto power over anything you do outside of work hours, from freelancing to teaching a class to starting a side business. The requirement for “prior written consent” means the company can arbitrarily deny permission and potentially terminate you for engaging in outside activities.
What is reasonable: The company has a legitimate interest in ensuring you do not work for a direct competitor or use company time for personal projects. But blanket prohibitions on all outside activity go too far. You should be free to pursue non-competing activities on your own time.
What to negotiate: Narrow the restriction to activities that compete with or conflict with your employment. Remove the requirement for prior written consent and replace it with a notification requirement. This is similar to the non-compete issues freelancers face, but in an employment context.
9. Unilateral Contract Modification
What it says: “The Company reserves the right to modify the terms and conditions of this Agreement, including but not limited to compensation, benefits, and job responsibilities, at any time and in its sole discretion.”
Why it is a red flag: This clause allows the company to change your deal after you have accepted it. Your salary, benefits, job title, and responsibilities could all be modified without your consent. While practically the company cannot reduce your pay below minimum wage, they can make significant adverse changes and frame them as a contract modification rather than a termination.
What is reasonable: Material changes to the terms of employment, particularly compensation, benefits, and job responsibilities, should require mutual agreement. Minor policy updates and handbook changes are different from fundamental contract terms.
What to negotiate: Remove or narrow unilateral modification clauses. At minimum, require written notice and a reasonable period to accept or reject material changes. If you reject a material change, termination should trigger any applicable severance provisions.
10. Mandatory Return and Transition Requirements
What it says: “Upon termination of employment for any reason, Employee shall immediately return all Company property, complete all transition activities as directed by the Company, and cooperate fully with the Company for a period of 90 days following separation, including making themselves available for up to 20 hours per week for knowledge transfer.”
Why it is a red flag: The obligation to cooperate for 90 days after leaving, potentially without compensation, can interfere with your new job and imposes ongoing obligations with no clear boundaries. “Complete all transition activities as directed” is open-ended and could be used to extract significant unpaid labor.
What is reasonable: Returning company property (laptop, badges, documents) is standard and expected. A reasonable transition period of one to two weeks during the notice period is normal. But post-employment cooperation obligations should be limited in scope and duration, and compensated at your regular rate.
What to negotiate: Limit post-employment cooperation to a specific number of hours over a specific period, and require compensation at your regular hourly rate. Define “transition activities” specifically rather than leaving them open-ended.
What to Do Before You Sign
Get a Professional Review
For senior roles or contracts with complex equity, non-compete, or IP provisions, consider having an employment attorney review the agreement. The cost of a legal review is typically $500-$1,500, a fraction of what a bad contract clause could cost you over time. If cost is a concern, our guide on how much contract review costs breaks down the options.
Use an AI Contract Scanner
For a quick initial review, tools like Fineprint can scan your employment contract and flag red flag clauses in seconds. It translates legal jargon into plain English so you understand what you are agreeing to before the negotiation even begins.
Remember: Everything Is Negotiable
Companies expect candidates to negotiate. An employer that refuses to modify any contract terms is telling you something about how they will treat you as an employee. A reasonable employer will explain why a clause exists and work with you to find language that protects both parties.
Document Your Side Projects
If you have existing side projects, inventions, or creative works, document them before signing the employment agreement. Include them in an exhibit or schedule attached to the contract so there is no ambiguity about what belongs to you and what the company can claim.
Read the Employee Handbook Too
Many employment contracts incorporate the employee handbook by reference, meaning the handbook’s terms become part of your contract. Review the handbook for additional restrictions on moonlighting, social media use, dress code, and other policies that could affect your day-to-day experience.
The Power Imbalance Is Real
Employment contracts are drafted by the employer’s lawyers and presented to candidates who are excited about a new opportunity and reluctant to push back. This power imbalance is why problematic clauses persist: companies include them because most people do not challenge them.
But you have more leverage than you think, especially before you start. Once you have an offer in hand, the company has already decided they want you. Use that moment to negotiate the terms that will govern your professional life. After you sign, your leverage drops significantly.
Your career is your most valuable asset. Protect it by understanding every clause in the contract that governs it.