Employment Contract Red Flags: 10 Clauses That Could Cost You

Landing a new job is exciting, but signing a bad employment contract can haunt you for years. Unlike freelance agreements where the scope is limited, employment contracts govern your entire working life — and often what happens after you leave. Here are ten clauses that regularly catch employees off guard, along with what to look for and how to push back.

1. Overly Broad Non-Compete Clauses

A non-compete clause restricts you from working for a competitor after you leave. Reasonable non-competes limit the restriction to a specific geography, a narrow industry definition, and a short duration (6-12 months). The red flag is a clause that defines "competitor" so broadly that it covers any company in your field, anywhere in the country, for two years or more. In the UK, courts often refuse to enforce unreasonable non-competes, but fighting them in court is expensive and stressful. Negotiate the scope before you sign rather than hoping a court will strike it out later.

2. Blanket IP Assignment

Many employment contracts include an IP assignment clause that transfers ownership of everything you create to your employer. The problem arises when the clause covers work done outside office hours, using your own equipment, and unrelated to your job. If you build a side project on weekends, an overly broad IP clause could mean your employer owns it. Look for language that limits assignment to inventions "made in the course of employment" or "using company resources." If you have existing side projects, list them in a schedule attached to the contract so they are explicitly excluded.

3. Garden Leave Without Pay Clarity

Garden leave requires you to stay at home during your notice period rather than working for a new employer. In principle, you still receive your salary. The red flag is when the contract states you are on garden leave but is vague about pay — some clauses allow the employer to put you on garden leave at "basic salary only," stripping away bonuses, commission, and benefits that form a large part of your compensation. Make sure the contract specifies full pay during garden leave, including all variable components.

4. Excessively Long Notice Periods

While a notice period protects both sides, some contracts require three to six months' notice from the employee while giving the employer only one month. Long notice periods limit your ability to move quickly when a better opportunity appears, and a new employer may not be willing to wait half a year for you to start. Aim for symmetrical notice periods — whatever the employer requires from you, they should give in return.

5. Restrictive Covenants Stacked Together

On their own, a non-compete, a non-solicitation, and a non-dealing clause might each seem manageable. Stacked together, they can lock you out of your industry entirely. A non-compete stops you joining a competitor. A non-solicitation clause stops you approaching former clients or colleagues. A non-dealing clause stops you from working with them even if they approach you. When all three apply for 12 months or more, you may have no viable career options. Negotiate each covenant individually and push to shorten durations or narrow definitions.

6. Bonus Clawback Provisions

Some contracts include clawback clauses that require you to repay signing bonuses, relocation expenses, or training costs if you leave within a certain period. A reasonable clawback might cover the first 12 months. A problematic one requires full repayment even if you leave after two or three years, or if the company makes you redundant. Check whether the clawback applies only to voluntary resignation, and whether the repayment amount reduces over time on a pro-rata basis.

7. Unilateral Variation Clauses

A variation clause gives the employer the right to change your contract terms — your role, location, working hours, or even pay — without your consent. While employers do need some flexibility, an unchecked variation clause means your contract is only as good as their goodwill. Look for language that requires "reasonable notice" and limits changes to operational necessities rather than allowing blanket modifications to any term.

8. Vague Duties and Responsibilities

A contract that describes your role as "such duties as the company may assign from time to time" gives management unconstrained power to change your job. This can lead to constructive dismissal situations where your role changes so much that it bears no resemblance to what you were hired for. Insist on a clear job description, either in the contract itself or in a referenced schedule, with any material changes requiring written agreement.

9. Weak or Missing Termination Protections

Check what happens when the employment ends. Does the contract specify what constitutes "cause" for termination? Is there a right to appeal? Are you entitled to accrued but unpaid bonuses, commissions, or holiday pay? Some contracts include "payment in lieu of notice" (PILON) clauses that let the employer terminate you immediately without pay for the full notice period. Ensure the termination provisions are clear, fair, and protect your financial interests during the transition.

10. Confidentiality Clauses Without Limits

Confidentiality is reasonable, but problems arise when the clause defines "confidential information" so broadly that it encompasses general industry knowledge and skills you have developed over your career. A good confidentiality clause should exclude information that is publicly available, information you already knew before joining, and your general professional skills and experience. Without these carve-outs, the clause could theoretically prevent you from using anything you learned on the job in future roles.

How to Protect Yourself

The best time to negotiate is before you sign. Once you have accepted an offer in writing, your leverage drops significantly. Read every clause, ask for explanations of anything unclear, and push back on terms that feel one-sided. If a company refuses to negotiate reasonable changes, that tells you something important about how they treat their employees.

Tools like ShieldSign can help you spot these red flags quickly. Upload your employment contract and get a clause-by-clause breakdown with a Fairness Score, plain-English explanations, and suggested counter-language — all in under a minute. It is not a replacement for legal advice on complex issues, but it gives you a clear starting point for negotiations.

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