After submitting countless applications, sitting for multiple rounds of interviews, and successfully navigating the job-hunting process, you’ve landed a position with everything you were hoping for. After weeks of stress and uncertainty, it’s tempting to sign whatever paperwork is put in front of you. But before you do, it’s important to pause and review, as the employment agreement you’re about to sign is more than a formality or routine paperwork.
The provisions in your employment agreement may have long-lasting legal and financial consequences, both during your employment and long after it ends. With that in mind, here are a few common provisions, and potential red flags, for which every employee should keep an eye out before signing.
The first, and most well-known red flag, is an overly broad non-compete provision. But what exactly does this look like? On one hand, Pennsylvania courts recognize and want to protect employers’ legitimate business interests, such as manufacturing processes, techniques, pricing structures, confidential information, and customer relationships. At the same time, courts are careful not to enforce restrictions which prevent employees from continuing their livelihood or advancing their careers.
Three key factors to focus on are the scope of restricted activities, the geographic area of the restrictions, and their duration. In determining whether a non-compete is overly broad, the answer will depend on the specific circumstances of the employee and the offered position. Clarity and specificity are especially important when defining “restricted activities.” Vague language, such as prohibiting Employee from engaging in “services similar to those provided to the Employer during the term of this Agreement,” should raise concern. A provision like this could, for example, effectively prevent a marketing professional from working in advertising altogether, even for a business in completely unrelated industries. Restrictions like this often go beyond what is necessary to protect legitimate business interests and, therefore, may become unenforceable.
It is also important to be aware of statutory protections, such as the Fair Contracting for Health Care Practitioners Act, which took effect on January 1, 2025. This recent law represents a significant shift in non-competition practices for health care professionals, limiting the non-compete term to one (1) year or less for medical doctors, physician assistants, nurse practitioners, and other health care professionals.
Another red flag involves “clawback” and “vesting” provisions. Employers may offer signing bonuses or strong benefits, but those often come with strings attached, requiring repayment if your employment ends within a set period. These provisions can be especially problematic when paired with vague termination language that does not clearly distinguish between “for cause” and “without cause” termination. As a result, even if you are laid off and have done nothing wrong, you could still be required to repay the bonus or forfeit unvested benefits. Most clawback provisions will only apply in the event of voluntary resignation, which is why having clear definitions of “for-cause,” “without-cause,” and voluntary resignation events are so important. To reduce these risks, consider requesting carveouts for “without cause” termination or a prorated repayment structure based on your length of employment. Similarly, vague “for cause” definitions, such as “failure to meet expectations” or “inadequate performance,” can give employers broad discretion and trigger similar consequences.
Especially in science, technology, engineering, and similar fields, keep an eye out for assignment of inventions and work-made-for-hire clauses. These provisions typically require that anything you create during your employment, such as processes, inventions, software, code, templates, workflows, or prototypes, automatically belong to the employer. While these provisions are reasonable for work created within the scope of your job, some agreements go further and attempt to claim ownership over ideas, side projects, or developments created on your own time using your own resources. It is important to look closely at how broadly these clauses are written. Ideally, these clauses should be limited to work created within the scope of your role and with the employer’s resources. If the language goes beyond that, consider asking for carveouts that clearly exclude independent projects, prior inventions, and your passion projects.
Another provision worth noting, while not necessarily a red flag given how common it is, relates to the stated term of the employment agreement. At first glance, the agreement may look like a multi-year commitment, but the language that follows often tells a different story. For example, an agreement might state that the term of employment is four (4) years but also includes a provision permitting either party to terminate the relationship, at any time, upon ninety (90) days’ notice. In practice, this means your employment is not truly a four-year commitment, but more akin to a ninety (90) day arrangement. For some, this may not be a concern if the termination rights are mutual. However, this dynamic becomes more important because though your employment may be short-lived, your obligations, such as non-compete, non-solicitation, clawback provisions, and assignment of invention clauses could remain in effect for years.
Now what about agreements without a clear end date? You’ll often see language such as “this agreement will continue for an indefinite period” or “the term will automatically renew unless terminated by either party.” These provisions are common and not necessarily a problem on their own. The bigger issue is what may be missing. Make sure you have a mechanism to revisit key terms, such as compensation, benefits, title, responsibilities, bonuses, or performance reviews. What made sense when you first started the position may not reflect your role a few years down the line. As your experience grows and your responsibilities change, your compensation and benefits should evolve as well.
While the above are among the more common red flags to watch for, they are by no means the only ones. Other terms, such as loosely defined bonus opportunities, restrictions on outside activities, responsibility for tail insurance, unrealistic or shifting performance metrics, and provisions allowing the employer to unilaterally modify key terms, can all have a meaningful impact on your role and future opportunities. Additional considerations may include overly broad confidentiality language, repayment obligations for training or certifications, liquidated damages provisions, one sided attorney fee or indemnification clauses, and the absence of clearly defined severance terms.
The bottom line is that employment agreements are rarely as straightforward as they appear at first glance. Taking the time to read closely, ask questions, and fully understand the terms before signing can make a significant difference down the road.