Employment Contract Checklist: 10 Items

You got the offer. The salary looks right, the team seems solid, and you want to sign before they change their mind. That urgency is exactly what leads people to skip the fine print -- and then spend the next two years bound by terms they never actually read.

An employment contract is a legal document, not a formality. Here are 10 clauses worth slowing down for.

1. At-Will vs. Fixed-Term Employment

Most U.S. job offers are at-will, which means either side can end the relationship at any time, for any reason that isn't illegal. No notice required. No severance guaranteed. The offer letter might not even use the phrase "at-will" explicitly -- it'll just omit any mention of a fixed duration.

A fixed-term contract (common in executive roles, academic positions, and international jobs) locks in a specific employment period -- say, two years. Ending it early usually triggers penalties or buyout clauses for the employer.

What's normal: At-will for most salaried roles in the U.S. Fixed-term for senior hires, contractor-to-perm conversions, and roles outside the U.S.

Red flag: An at-will clause buried inside a contract that otherwise reads like it's promising long-term commitment. If the contract talks about "expected tenure" or "anticipated growth path" but still includes at-will language, the at-will clause wins.

2. Compensation and Equity

Salary is the easy part. Equity is where people get burned.

If you're getting stock options or RSUs, look for the vesting schedule. The industry standard is a four-year vest with a one-year cliff -- meaning you get nothing if you leave before 12 months, then 25% vests at the one-year mark, with the rest vesting monthly or quarterly over the remaining three years.

What matters more than the grant size is what happens to unvested shares if you're terminated. Some agreements let the company buy back vested shares at the original strike price (effectively wiping out your gains). Others have acceleration clauses that vest some or all shares on termination or acquisition.

What's normal: 4-year vest, 1-year cliff, no acceleration except on change of control.

Red flag: A clawback clause on vested shares, or an exercise window shorter than 90 days after departure. If you have ISOs and only 30 days to exercise after leaving, you could owe a massive tax bill on a tight deadline.

3. Non-Compete Scope

Non-competes restrict where you can work after you leave. They vary wildly in enforceability -- California basically won't enforce them at all, while Florida courts regularly uphold them.

Three dimensions matter: duration, geography, and industry scope. A non-compete that says "12 months, within 50 miles, in the same product category" is narrow enough to be reasonable. One that says "24 months, worldwide, in any technology business" is a career freeze.

What's normal: 6-12 months, limited to direct competitors, within a reasonable geographic area.

Red flag: A non-compete longer than 12 months, covering a vaguely defined industry like "software" or "technology," with no geographic limit. Also watch for non-competes that kick in even if you're laid off -- you shouldn't be locked out of your industry because they eliminated your role.

4. IP assignment and the Inventions Clause

This is the one that costs people their side projects.

Most employment contracts include an invention assignment clause that gives the company ownership of any intellectual property you create during your employment. The aggressive version claims ownership of anything you build "using company resources or related to the company's business" -- and "related to the company's business" can be interpreted very broadly if your employer is a large tech company.

Look for a carve-out section (sometimes called "prior inventions" or "excluded inventions"). This is where you list any existing projects, side businesses, or open-source contributions that predate your employment. If the contract doesn't have this section, ask for it.

California Labor Code Section 2870 protects employees by limiting assignment clauses to work done on company time or with company equipment. But not every state has this protection, and not every contract acknowledges it even in California.

What's normal: Company owns work product created on company time, with company resources, related to company business. A schedule for listing pre-existing IP.

Red flag: A blanket assignment with no carve-out, especially if you're an active open-source contributor or run a side project. If the contract says "all inventions conceived during the term of employment," that's claiming your weekend projects too.

5. Termination and Severance Terms

The termination section defines how the relationship ends and what you walk away with. Key terms: notice period, severance amount, and the distinction between "for cause" and "without cause."

"For cause" termination means you did something wrong -- fraud, gross misconduct, material breach of the agreement. You typically get nothing beyond your last paycheck. "Without cause" means the company is letting you go for business reasons, and this is where severance kicks in.

A standard severance package is two weeks of base salary per year of service, though this varies. Some contracts guarantee severance; others say the company "may" provide it at its discretion. "May" means "probably won't."

What's normal: 30-60 days notice for senior roles (less for junior), 2 weeks per year of service as severance for without-cause termination, clear definition of what constitutes "cause."

Red flag: A vague "cause" definition that includes things like "failure to meet performance expectations" -- that's broad enough to convert any termination into a for-cause firing with zero severance.

6. Benefits: Get the Specifics

"Competitive benefits" is marketing copy, not a contractual guarantee. Before you sign, get the actual benefits summary -- the one with numbers.

PTO: Is it accrued or granted upfront? What's the annual cap? Does unused PTO get paid out when you leave? (This varies by state law, but many companies set their own more restrictive policies where the law allows it.)

Healthcare: What tier of plan are you on? What's the monthly employee contribution? Is it an HMO, PPO, or HDHP? If you have a family, what's the dependent coverage cost?

Retirement: Does the company offer a 401(k) match? The standard match is 50% of contributions up to 6% of salary, but some companies match dollar-for-dollar up to 4-6%. And check the vesting schedule on the match -- some companies require 3-4 years before you fully own their contributions.

What's normal: 15-20 days PTO, employer-subsidized health insurance, 401(k) with some level of match.

Red flag: "Unlimited PTO" with no written minimum. In practice, people at unlimited-PTO companies often take less time off, and there's no payout when you leave because there's no accrued balance. Also: benefits that don't start until 90 days after your start date with no interim coverage.

7. Mandatory Arbitration

If your contract includes a mandatory arbitration clause, you're agreeing to resolve any employment dispute through a private arbitrator instead of a court. No jury. No public record. Limited discovery. Limited appeal rights.

Arbitration isn't inherently bad -- it's faster and cheaper than litigation. But the employer usually picks the arbitration provider, and studies consistently show that repeat-player employers fare better in arbitration than individual employees do.

What's normal: arbitration clause are increasingly standard, especially at larger companies.

Red flag: A clause that makes you pay half the arbitration costs (which can run $10,000-$50,000), or one that includes a class action waiver preventing you from joining other employees in a collective dispute.

8. Confidentiality Scope

Every contract has a confidentiality clause. Reasonable ones protect trade secrets, proprietary code, client lists, and financial data. Overreaching ones try to prevent you from discussing your salary, working conditions, or the fact that you even work there.

For the record: under the National Labor Relations Act, employees have the right to discuss wages and working conditions with each other, regardless of what the contract says. A confidentiality clause that prohibits this is unenforceable -- but its presence signals how the company thinks about employee rights.

What's normal: Protection of genuine trade secrets and proprietary business information, with a reasonable duration (2-5 years after departure).

Red flag: A confidentiality clause with no expiration date, or one that defines "confidential information" so broadly it covers publicly available information.

9. Moonlighting Restrictions

Some contracts require you to devote your "full professional effort" to the company and prohibit outside employment entirely. Others only restrict work for direct competitors. The difference matters if you freelance, consult, teach, or run any kind of side business.

Even if moonlighting isn't explicitly banned, check how it interacts with the IP assignment clause from item 4. You might be allowed to do outside work, but the company might still claim ownership of what you produce.

What's normal: Disclosure requirement for outside work, restriction on working for direct competitors, no restriction on unrelated side work done on your own time.

Red flag: A blanket ban on all outside employment, including unrelated freelance work, volunteering in a professional capacity, or serving on an advisory board.

10. Garden Leave Provisions

Garden leave is the practice of paying you during your non-compete period. If a company wants to keep you out of the market for 12 months after you leave, garden leave means they pay your salary for those 12 months. You're technically still employed -- just not working.

This is standard in finance and becoming more common in tech, especially in states that are tightening non-compete enforcement. Several states now require that non-competes be backed by garden leave or other consideration to be enforceable.

What's normal: Garden leave at full or partial salary for the duration of the non-compete, or a lump-sum payment at departure.

Red flag: A non-compete with no garden leave provision. If the company wants to restrict your ability to earn a living, they should be compensating you for that restriction. A non-compete without garden leave is the company getting something for nothing.

Before You Sign

Reading a contract carefully doesn't make you difficult -- it makes you someone who takes agreements seriously. Most employers expect negotiation on at least some of these terms, especially IP assignment carve-outs, non-compete scope, and severance.

If you want a faster way to catch problematic clauses, tools like Inkvex can parse the full agreement and surface the sections that need attention. But whether you use a tool or go line by line, the important thing is that you actually read it before you sign.

Frequently Asked Questions

What should I check in an employment contract before signing? The 10 most critical items to review are: base salary and bonus structure (including performance triggers), equity terms if applicable (cliff, vesting schedule, acceleration), IP assignment scope (especially whether it covers your personal projects), non-compete restrictions (duration, geography, and whether it's enforceable in your state), severance package, at-will vs. for-cause termination language, benefits start date and coverage details, PTO policy (accrual rate and what happens to unused days at departure), moonlighting restrictions, and garden leave provisions tied to any non-compete.

Can you negotiate an employment contract? Yes, and most employers expect it. The most negotiable terms are: start date, base salary (typically 5–15% above initial offer at the negotiation stage), signing bonus, remote work flexibility, equity cliff and vesting schedule, non-compete scope, IP assignment carve-outs for personal projects, and severance amount. Benefits like health insurance and 401k match are usually fixed by company policy. The best time to negotiate is after the verbal offer and before signing, not after you've started.

What is an IP assignment clause in an employment contract? An IP assignment clause transfers ownership of everything you create during your employment to the company. The risk is how broadly "create" is defined. Some contracts claim ownership of any work done on company equipment or during company time, including side projects, personal apps, or creative work unrelated to your job. California, Washington, Illinois, and several other states limit these clauses and cannot require you to assign IP you developed on your own time without company resources, but you need the carve-out language in the contract to be safe.

What is garden leave in an employment contract? Garden leave means your employer pays your full salary during any non-compete restriction period after you leave. If a company wants to keep you out of the market for 12 months, garden leave requires them to pay your salary for those 12 months. It's standard in finance and increasingly common in tech. Several states now require compensation (garden leave or equivalent) to make non-competes enforceable. If your contract has a non-compete but no garden leave, that's a negotiation point.

What is at-will employment and how does it affect your contract? At-will employment means either party can terminate the relationship at any time, for any reason, without notice or cause, unless a contract says otherwise. Most US employees are at-will by default. A contract that specifies "for cause" termination is stronger protection, it means the company must have a documented reason to fire you. If your contract says at-will, the "for cause" column in the checklist table is academic unless your state has specific protections.

Print this checklist. Go through each item. Mark anything that's missing, vague, or outside the norms listed above. Then have a conversation with the employer before ink hits paper. The best time to negotiate is when they want you -- not after you've already signed.

Not sure which tool to use? See how Inkvex compares to Justee, Aline, and other AI contract tools in our best AI contract review tools guide. Or try a free demo to see a real NDA scored and analyzed.