10 Red Flags To Look For In Any Employment Contract (Before You Sign)
You got the job. The offer letter looks great. The salary is right.
Then they send the employment contract — 18 pages of dense legal language — and suddenly you're expected to sign by Friday.
Most people do one of two things: they skim it and sign, or they spend $300 hiring a lawyer to read it for them.
There is a better way. This guide walks you through the 10 most dangerous clauses hiding in employment contracts, what they actually mean, and exactly what to watch out for before you put your name on the dotted line.
1. The Non-Compete Clause
What it says: Something like "Employee agrees not to work for any competitor within the industry for a period of 12 months following termination."
What it actually means: After you leave this job — voluntarily or not — you could be legally prevented from working in your own industry for up to a year or more.
The red flags to watch for:
- A geographic scope that covers entire countries rather than a specific region
- A duration longer than 12 months
- A definition of "competitor" so broad it includes almost any company in your field
- No compensation offered during the non-compete period
What to do: In many countries and US states, overly broad non-compete clauses are unenforceable. But fighting one in court is expensive and stressful. Ask for the scope to be narrowed before you sign.
2. The Intellectual Property Assignment Clause
What it says: "All work product, inventions, and ideas created by Employee during the term of employment — or related to the company's business — are the sole property of the Employer."
What it actually means: Anything you create — even in your own time, on your own computer — could belong to your employer if it is even loosely related to their business.
The red flags to watch for:
- Language that extends ownership to work done outside working hours
- No carve-out for personal projects or side businesses
- Vague definitions of what counts as "related to the company's business"
What to do: Ask for an explicit carve-out for any existing side projects before signing. Get it in writing. Some jurisdictions (like California) automatically limit employer IP claims to work done on company time, but many do not.
3. The At-Will Employment Clause
What it says: "Employment is at-will and may be terminated by either party at any time, with or without cause or notice."
What it actually means: Your employer can let you go tomorrow — for any reason or no reason at all — with zero notice and zero explanation.
The red flags to watch for:
- No minimum notice period on either side
- No severance provisions
- Combined with a long non-compete clause — you can be fired instantly and still be locked out of your industry
What to do: Push for a mutual notice period of at least two to four weeks, or a severance clause that kicks in for terminations without cause.
4. The Mandatory Arbitration Clause
What it says: "Any disputes arising from this employment relationship shall be resolved through binding arbitration rather than through the court system."
What it actually means: If your employer does something wrong — discriminates against you, refuses to pay you, terminates you unlawfully — you cannot sue them in court. You must go to a private arbitration process that heavily favours employers.
The red flags to watch for:
- "Binding arbitration" with no option to opt out
- Language that waives your right to join a class action lawsuit
- Clauses requiring you to pay arbitration fees
What to do: This is one of the hardest clauses to negotiate away because employers insert them specifically to limit their liability. At minimum, ensure the arbitration process uses a neutral third party and that you are not responsible for fees.
5. The Garden Leave Clause
What it says: "The Employer reserves the right to place the Employee on garden leave during any notice period, during which time the Employee will be required to remain available but not attend the workplace."
What it actually means: If you resign, your employer can tell you to stay home — and away from any new employer — for the entire duration of your notice period. A six-month notice period becomes a six-month delay before you can actually start your new job.
The red flags to watch for:
- Garden leave provisions combined with long notice periods (anything over three months)
- No clear limit on how long garden leave can last
- Vague conditions about what "remaining available" requires you to do
What to do: Negotiate the notice period down, or negotiate a cap on how long garden leave can actually last in practice.
6. The Clawback Clause
What it says: "In the event of voluntary resignation within 24 months, Employee agrees to repay signing bonuses, relocation costs, and training expenses incurred by the Employer."
What it actually means: That generous signing bonus or relocation package can be taken back — sometimes in full — if you leave before a certain date.
The red flags to watch for:
- Repayment clauses that do not pro-rate — meaning you owe the full amount even if you leave on day 23 of month 24
- Clawbacks on ordinary training rather than specialist external courses
- Interest or penalties added to the repayment amount
What to do: Ensure any clawback is pro-rated proportionally to the time you have worked. A 24-month clawback should mean you owe 50% if you leave at month 12, not 100%.
7. The Variation Clause
What it says: "The Employer reserves the right to vary the terms and conditions of this agreement at any time, subject to reasonable notice."
What it actually means: Your employer can change your salary, role, location, or working hours without needing to issue a new contract or get your consent.
The red flags to watch for:
- No definition of what "reasonable notice" means in practice
- No limitation on what can be varied
- No requirement for your written agreement before major changes take effect
What to do: Push for this clause to require your written consent for any material changes, particularly those affecting compensation, location, or role scope.
8. The Entire Agreement Clause
What it says: "This contract constitutes the entire agreement between the parties and supersedes all prior representations, negotiations, and understandings."
What it actually means: Everything your recruiter or hiring manager promised you verbally — the flexible working arrangement, the promotion timeline, the bonus structure — is legally meaningless unless it is written into this contract.
The red flags to watch for:
- This clause appearing in a contract that does not reflect commitments made during the hiring process
- Verbal promises about compensation or role that are absent from the written document
What to do: Before signing, go through every verbal commitment made during the hiring process and ensure it is reflected in writing — either in the contract itself or in a written addendum.
9. The Confidentiality Clause With No Expiry
What it says: "Employee agrees to maintain the confidentiality of all proprietary information indefinitely, including following the termination of employment."
What it actually means: You are bound by a confidentiality obligation forever — potentially preventing you from discussing your own work experience in future job interviews or using general knowledge gained on the job.
The red flags to watch for:
- No time limit on the confidentiality obligation post-employment
- An overly broad definition of "confidential information" that could cover general industry knowledge
- Penalties that are disproportionate to any realistic harm
What to do: Confidentiality for genuinely sensitive information (trade secrets, client lists) is reasonable and standard. Push back on indefinite confidentiality clauses and ensure there is a carve-out for general skills and knowledge you develop on the job.
10. The Probation Period Trap
What it says: "The first six months of employment constitute a probationary period during which either party may terminate the agreement with one week's notice and without cause."
What it actually means: For the first six months, your employment protections are significantly weaker. You can be let go with minimal notice and little recourse, often before legal protections like unfair dismissal claims apply to you.
The red flags to watch for:
- A probation period longer than three to six months
- Automatic extension clauses that allow the employer to extend probation indefinitely
- No clear criteria for what "passing" probation requires
What to do: Ask for written confirmation of what is expected during the probation period and what criteria will be used to assess your performance. Put it in the contract or get it in a separate written document.
The Bottom Line
Most people sign employment contracts without fully understanding what they are agreeing to. The clauses above are not rare — they appear in the majority of employment contracts issued by companies of all sizes.
You do not need to be a lawyer to protect yourself. You need to know what to look for.
Before you sign your next employment contract, upload it to GetPlainDoc. Our AI analyzes your document in minutes — identifying red flags, explaining key terms in plain language, and flagging missing clauses — in your preferred language.
For $7, you will know exactly what you are signing.
GetPlainDoc is not a law firm and does not provide legal advice. This article is for informational purposes only. If you have specific legal concerns about your employment contract, consult a qualified employment lawyer in your jurisdiction.
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This article is for informational purposes only and does not constitute legal advice.