7 Red Flags to Watch for in Your Employment Contract

You got the job offer. The salary looks good, the benefits seem reasonable, and you're excited to start. But before you sign that employment contract, take a moment to read the fine print. What seems like standard boilerplate could contain clauses that cost you thousands of dollars or severely limit your future career options.

Non-Compete Clauses That Go Too Far

Non-compete agreements are designed to protect a company's legitimate business interests—their trade secrets, client relationships, and competitive advantages. But some employers use overly broad non-competes to trap employees.

Watch out for:

• Geographic restrictions that cover entire states or countries
• Time periods longer than 12-18 months
• Vague definitions of "competing business" that could include almost any employer in your field
• Clauses that apply even if you're fired without cause

A reasonable non-compete should be limited in scope, geography, and duration. If your employer is a small regional business but the non-compete prevents you from working anywhere in the country, that's a red flag.

Intellectual Property Ownership Traps

Many contracts include clauses granting the company ownership over any intellectual property you create during employment. This can be reasonable for work done on company time with company resources. But some contracts go further.

Red flags include:

• Clauses claiming ownership of all ideas, inventions, or creations—even those developed on your own time
• Language that includes work "related to" the company's business, which could be interpreted very broadly
• No exceptions for personal projects clearly unrelated to your job

If you're a software developer with side projects or an inventor with hobbies, make sure the contract doesn't claim ownership of your personal work.

Training Repayment Agreements (TRAPs)

Training Repayment Agreement Provisions—aptly nicknamed TRAPs—require employees who receive training to stay with the company for a specified period, usually two to three years. Leave early, and you owe the company the "cost" of your training.

The problems:

• Training costs are often inflated far beyond actual expenses
• The "training" may just be standard onboarding that any employer provides
• Repayment amounts can reach $10,000 to $30,000 or more
• These clauses are designed to make you feel trapped in an unfulfilling job

Before signing, ask exactly what training you'll receive, what it actually costs, and whether the repayment amount decreases over time.

Vague or One-Sided Termination Clauses

Pay close attention to how the contract addresses termination. A fair contract should clearly define:

• What constitutes "cause" for termination
• Notice periods for both you and the employer
• Severance terms, if any
• What happens to unvested benefits

Watch for:

• Clauses allowing the employer to terminate "at will" with no notice while requiring you to give weeks of notice
• Extremely broad definitions of "cause" that could include minor issues
• No severance provisions even for termination without cause
• Language that lets the employer change terms unilaterally

Pressure to Sign Immediately

If your prospective employer pushes you to sign the contract immediately—before you've had time to read it carefully or consult with anyone—that's a significant warning sign.

Standard practice:

• You should have at least a few days to review the contract
• Asking questions about specific clauses is normal and expected
• Requesting minor changes is reasonable

An employer who won't give you time to review what you're signing may not be an employer you want to work for.

Arbitration Clauses and Class Action Waivers

Many employment contracts now include mandatory arbitration clauses that require you to resolve any disputes through private arbitration rather than the court system.

Why this matters:

• Arbitration often favors employers who are repeat customers of arbitration services
• You may waive your right to participate in class action lawsuits
• Arbitration proceedings are typically private, protecting the employer's reputation
• Discovery rules are usually more limited than in court

While arbitration isn't always bad, understand what rights you're giving up before you sign.

What You Can Do

Before signing any employment contract:

1. Take your time. Read every clause carefully, not just the salary and benefits sections.
2. Ask questions. If something is unclear, ask for clarification in writing.
3. Negotiate. Many clauses can be modified or removed if you ask.
4. Get a second opinion. Consider having an attorney review the contract, especially for senior positions.
5. Use AI tools. Analyze your contract to identify concerning clauses and understand what you're agreeing to.

Remember: once you sign, you're bound by those terms. A few hours spent reviewing now could save you years of regret later.