A thorough guide for reviewing an employment contract before signing, covering compensation, non-compete clauses, intellectual property, termination terms, and benefits.
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Compensation and Benefits Details
Verify base salary amount, payment frequency, and any performance-based bonuses
Confirm whether the salary figure is annual or monthly and whether bonuses are guaranteed or discretionary. A 'target bonus of 15%' means you could receive anywhere from 0% to 30% depending on company and individual performance.
Review equity or stock option details including vesting schedule and cliff period
Standard vesting is 4 years with a 1-year cliff, meaning you get nothing if you leave before 12 months. Clarify whether options are ISOs or NSOs since tax treatment differs by $10,000-50,000 on a typical grant.
Confirm benefits start dates for health insurance, retirement, and paid time off
Some companies start benefits on day one while others have a 30-90 day waiting period. If there is a gap, you may need COBRA or marketplace insurance to cover the interim, costing $400-700/month for individual coverage.
Check signing bonus terms including any clawback or repayment clauses
Most signing bonuses must be repaid if you leave within 12-24 months, prorated or in full. A $10,000 signing bonus with a 24-month clawback means leaving at month 6 could require repaying $7,500. Negotiate this down to 12 months.
Non-Compete and Restrictive Covenants
Read the non-compete clause for geographic scope, duration, and industry restrictions
Enforceable non-competes are typically limited to 6-12 months and a specific geographic area or industry. Some states like California do not enforce non-competes at all. Anything over 2 years or covering all industries is likely overbroad.
Review non-solicitation clauses covering former clients and coworkers
Non-solicitation agreements prevent you from recruiting colleagues or contacting clients for 12-24 months after leaving. This is more commonly enforced than non-competes and can significantly limit your next career move.
Check confidentiality and NDA terms for scope and duration
Reasonable NDAs protect genuine trade secrets with no expiration. Overly broad NDAs that cover 'all company information' or restrict you for 5+ years may be difficult to comply with. Ask to narrow vague language.
Negotiate to narrow or remove overly restrictive clauses before signing
You have the most negotiating power before you sign. Ask to reduce non-compete duration from 24 to 12 months, limit geographic scope, or add carve-outs for specific industries. Get all changes in writing as a contract amendment.
Intellectual Property Clauses
Review the invention assignment clause to understand what the company owns
Many contracts claim ownership of all work created during employment, including side projects on personal time. Some states like California and Delaware limit this to work related to the company's business or created with company resources.
List any existing personal projects or IP you want to exclude from the assignment
Most contracts include an exhibit for prior inventions. List every side project, open-source contribution, or creative work you want to protect. Getting this in writing before signing prevents disputes later.
Clarify whether the company claims rights to work done on personal time and equipment
An overbroad clause saying 'all inventions conceived during employment' could capture your personal blog, hobby app, or freelance work. Push back to limit IP assignment to work done on company time, with company resources, or related to company business.
Termination and Severance Terms
Understand whether employment is at-will or for a fixed term
At-will employment means either party can end the relationship at any time with no reason. Fixed-term contracts specify an end date and typically include early termination penalties. Most US employment is at-will.
Review severance package terms including payout, benefits continuation, and conditions
Typical severance is 1-4 weeks of pay per year of service. Confirm whether severance requires signing a release of claims. Negotiate for continued health benefits during the severance period since COBRA is expensive.
Check the notice period required from both you and the employer
Two weeks is standard in the US, but some contracts require 30-90 days, especially for senior roles. Verify whether the company pays out the notice period if they want you to leave immediately.
Review what happens to unvested equity, bonuses, and commissions upon termination
Many contracts forfeit unvested stock options upon departure. Bonuses earned but not yet paid may or may not be owed depending on contract language. Get clarity on the cutoff dates for each type of compensation.
Probation Period and Performance
Review the probation or introductory period length and terms
Probation periods typically last 30-90 days. During this time termination is usually easier for the employer and some benefits may be limited. Clarify whether successful completion triggers any changes in benefits or status.
Understand how performance will be evaluated during and after probation
Ask for written performance criteria and the evaluation schedule. Companies with 30-60-90 day review frameworks give you clear milestones. Without written criteria, evaluations become subjective and harder to contest.
Confirm your title, reporting structure, and primary responsibilities in writing
Job titles and responsibilities sometimes shift between the interview and the contract. Verify that the contract matches what was discussed during negotiations. Any significant differences should be resolved before signing.
Dispute Resolution and Final Review
Check whether the contract requires arbitration instead of litigation
Mandatory arbitration clauses are common and mean you waive your right to sue in court. Arbitration is faster but often favors employers since they are repeat customers of arbitration firms. Note whether arbitration costs are split or employer-paid.
Review the governing law clause to know which state's laws apply
The contract may specify a different state's laws than where you work, which affects your rights. California laws are generally more employee-friendly than Texas or Delaware. This clause matters if disputes arise.
Have an employment attorney review the contract before signing
A contract review typically costs $300-800 depending on complexity. This is a small investment compared to the financial impact of unfavorable terms over years of employment. Most attorneys can review and advise within 3-5 business days.
Frequently Asked Questions
Do I need a lawyer to review an employment contract?
For standard employment agreements at mid-level roles, self-review with a checklist covers most issues. For executive contracts, roles involving equity/stock options, or contracts with non-compete clauses, an employment attorney review ($300-$800 for a single contract) can identify provisions worth thousands in negotiation. Many attorneys offer flat-fee contract reviews rather than hourly billing for this service.
Are non-compete agreements enforceable?
Enforceability varies dramatically by state: California, North Dakota, Oklahoma, and Minnesota ban most non-competes entirely, while states like Florida and Texas enforce them regularly. The FTC proposed a nationwide ban in 2024, but its status remains in litigation. Courts generally refuse to enforce non-competes exceeding 12 months or covering geographic areas where the company does not operate.
What is a clawback clause in an employment contract?
Clawback clauses require you to repay signing bonuses, relocation expenses, or tuition reimbursements if you leave before a specified date — typically 12-24 months. Repayment amounts usually decrease monthly on a pro-rata basis (e.g., leaving after 6 months of a 12-month clawback means repaying 50%). Negotiate the clawback timeline down and ensure it includes exceptions for involuntary termination and layoffs.
What does 'at-will employment' mean in a contract?
At-will employment means either party can terminate the relationship at any time for any legal reason without advance notice. About 74% of US private-sector workers are at-will employees. Exceptions include termination based on protected characteristics (discrimination), retaliation for whistleblowing, and breach of an implied contract. Even at-will, employers must follow their own termination procedures outlined in employee handbooks.
Should I negotiate my employment contract before signing?
Yes — 68% of employers expect candidates to negotiate at least one contract term beyond salary. The most negotiable provisions are start date, signing bonus, equity vesting schedule, non-compete scope, remote work flexibility, and severance terms. Request changes in writing via email and ask for a revised contract reflecting the agreed terms before signing. Verbal promises not documented in the contract are nearly impossible to enforce.