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Take a step back, and don’t rush into signing any job offer. Employment Contract Red Flags are all right there and waiting — right in the legal jargon, and that could cost you money, flexibility and legal security down the road. These clauses can be used in a way that is beneficial to the employer, ranging from ambiguous job descriptions to unbalanced termination provisions. This guide will explain the six most common warning signs, and when you review your contract knowingly and intentionally, you can do so with confidence, knowing that you are safeguarding your employee rights.
Quick Facts
| Red Flag | Why It Matters | What to Do |
| Ambiguous job description | Employers may change one’s job at any time! | Have clear expectations about what is expected. |
| Asymmetrical termination notice | You are owed 90 days’ notice; they have no obligation. | Discuss mutually agreed notice terms |
| Restrictive non-compete | It may take years to blow your job out of the water | Limit duration & geography |
| Mandatory arbitration | Takes away from your ability to go to court and file a lawsuit. | Press for mutual negotiations and resolution of issues. |
| Overbroad IP clause | Your side project results may be used for the employer’s benefit | Include a personal project carve-out |
| Vague compensation | It is legal to withhold bonuses | Have specific data in writing |
Why Reviewing Your Contract Matters
An employment contract is not a piece of paper, but rather a legally binding document that will affect your rights, responsibilities and financial security while you’re working. Most people skimp on it, sign it and move on. However, unfair contractual conditions hidden in the fine print of a contract can gradually remove those benefits without your awareness.
Here are the 6 Employment Contract Red Flags that every employee should look out for before signing the contract.
1. Ambiguous Job Description
The Risk: Companies retain the freedom to re-evaluate your key job functions anytime, using ambiguous language, like “and other duties as assigned”.
The Solution: Make sure that you define your designation, responsibilities and hierarchy. Get a clear picture of your job functions so that there is no risk of a “bait and switch” situation down the road.
2. Asymmetrical Termination Notice
The Risk: If you have an employment contract that includes a long notice period – 90 days or more, and you give it to the company, and they terminate you with no notice or severance.
The Solution: Advocate for cross notice obligations. The termination provision should be bilateral, with clear severance terms defined.
3. Excessively Restrictive Non-Compete Provisions
The Danger: Over-aggressive non-competes can stand in the way of your future career by making it impossible for you to work in your chosen field for years, or within the geographical reach of the agreement.
The Solution: Ask for a reasonable time period – typically 6 to 12 months; and a reasonable geographic area – local, within 50 miles.
4. Mandatory Arbitration Clauses
The Risk: If you have a forced arbitration agreement, you cannot go to a public court with an employment dispute (such as an unpaid wage claim or wrongful termination), but rather you must go into a private and binding arbitration instead.
The Solution: Carefully read this section and look for dispute resolution clauses in any contract that you have, preferably with the help of an employment lawyer.
5. Overbroad Intellectual Property Clauses
The risk: Some IP clauses of the contract you sign take ownership of anything you make, including side projects and freelance work that you do completely outside the scope of your contract, on your own equipment and at your own time.
The Solution: Request a personal projects carve-out that provides a guarantee that any project that comes from outside of the hours worked, without the use of any company resources, is 100% personal.
6. “Discretionary” or Vague Compensation
The Risk: If you are paid bonuses or commissions, then if the language in that bonus is “based on company performance”, your employer has no obligation to pay you for anything you can say about.
The Solution: Be clear about all metrics, targets and conditions in the employment contract itself.
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Employment Contract Checklist: Spotting Red Flags Before You Sign
- The tasks and reporting structure for jobs are clearly defined
- They must give each other notice of termination; it is not one-sided.
- Non-compete length of time and geographical scope are reasonable.
- The terms of dispute resolution are easy to understand and fair.
- IP covers personal/side projects.Personal/side projects are covered under the IP.
- Compensation metrics are in writing, not fuzzy.
FAQs
Are you able to strike a deal on employment contracts?
Yes. The majority of employment contract provisions, such as notice, non-competes and benefits, are subject to negotiation prior to signing. Changes are more difficult once SIGNED.
If I discover unfair clauses in my contract, what can I do about them, if anything?
Discuss them with HR or the hiring manager, and you might want to get an employment attorney to look over the agreement before you respond.
Would a non-compete clause be normal in a contract?
Relatively common, but the terms should be reasonable. One of the most typical Employment Contract Red Flags to fight is excessive length of time or geographical limitations.
Would it be advisable to have a lawyer look at my contract?
It’s not always, but for senior jobs, contract deals with arbitration provisions, or equity, IP or non-compete concerns.
Key Takeaways
- The signs of Employment Contract Red Flags can be disguised in the seemingly innocuous terms of employment contracts.
- Be very careful about provisions that are inequitably terminated, have restrictive non-competes, or are compensation clauses that are ambiguous.
- Many clauses in intellectual property litigations offer too much protection and can be used to effectively restrict your rights. Arbitration clauses and overly broad provisions in IP cases can restrict your rights without you realising it.
- Don’t go on unconfirmed verbal promises; make sure it is done in writing — it will be required later.
- These are the 6 red flags to look for before signing your contract – it’s the easiest way to protect your employee rights!
