Don’t Sign That Employment Contract Without Checking These 8 Things
Think carefully before signing if you notice any of these red flags.
The job market is tough these days, and job hunting is stressful. There is nothing like the feeling of relief you get when you finally have a job offer after a long search. While you may be eager to get started, it is important to not sign an employment contract before thoroughly looking it over. Remember that verbal agreements are not generally legally binding, and it is essential to ensure that any agreements made are spelled out in writing in the actual contract.
To avoid signing a bad deal in your eagerness, don’t sign an employment contract without first checking these eight things.
1. Job Title
The job title in the contract should match what was in the job listing you applied for unless you have already agreed to accept a different position. This may seem minor, but that job title will potentially be on your resume for years, and it should be an actual reflection of your duties. It is also an indication of how you will be represented to colleagues and external vendors. An inaccurate job title can also affect your level of seniority, duties, and compensation. The contract should also correctly identify whether you will be considered an employee or a contractor.
2. Job Duties
In addition to your job title, it is important that the contract clearly and accurately spells out the job duties and responsibilities as stated in the job listing and interview. It is important to understand your role and how your performance will be evaluated before accepting the offer. This ensures that you will only be expected to perform the work you agreed to at the interview and that the duties align with your skills and work ethic.
3. Salary and Compensation
It is imperative that the compensation package is clearly defined and matches what was discussed in the job posting and interview. This includes the salary, commissions, health insurance, bonuses, stock options, 401K, expenses reimbursements, and paid time off. It should provide information on how and when you will be paid, and how often compensation is increased.
If some of your benefits don’t kick in after a probationary period, this should be included in the contract as well. While a probationary period of up to 90 days is not uncommon, anything longer than that should be cause for concern.
4. Working Hours
Make sure the contract clearly states your start date, your expected working days and hours, and how many hours a week you will be expected to work. If the role is temporary or contract, the end date should be specified as well. Ensure that the construct states whether you will be full or part-time, if overtime is expected, and whether overtime pay is offered. This can help prevent potential wage disputes with your new employer further down the line.
5. Paid Time Off
Some states require paid sick leave, so verify that the contract provides at least the minimum required by your state. Many employers offer additional paid time off in the form of vacation or holiday pay. Since this is part of your compensation package, make sure that what you see in the contract is what was agreed upon.
The contract should state how the time off is accrued, and how to use it. When does the “year” start in terms of accrual and holiday pay? How far in advance do you need to request vacation time, and how do you submit the request? Are there penalties for calling out sick, and do you need a doctor’s note to return to work? Will unused time off be paid out when you leave the company? Make sure you fully understand how to access your paid time off.
6. Arbitration Clauses and Class Action Waivers
Think carefully before you sign a contract with a mandatory arbitration clause. Many employers require this, and it waives your right to a jury trial in the event of a dispute. That means if you have a wage, discrimination, or other issue with your employer, you will be forced to used an arbitrator and will be unable to take legal action by other means.
The same is true for class action waivers. This prevents employees from joining together for a class action lawsuit and taking collective legal action if the rights of multiple workers are infringed upon. Instead, each employee will have to file their own individual suit, making it more difficult to resolve extensive labor violations.
7. Restrictive Covenants
Many other companies have other restrictive covenants in their employment contracts which can affect your future job opportunities. These include:
- Non-Compete Agreements: These prevent you from working for a competitor or launching a business that could compete with your employer for a specified time period after the end of your employment.
- Non-Solicitation, Non-Dealing, and Non-Poaching Agreements: These are intended to prevent former employees from “poaching” clients, suppliers, or employees for their new companies.
- Confidentiality Clauses or Non-Disclosure Agreements: These prevent former employees from sharing confidential information about the company or trade secrets.
- Ownership Clauses: If you are doing creative work for the company or creating intellectual property, the company will likely have a clause that specifies who owns the work you produce. In most cases, this will be the company.
Make sure the ones you are expected to agree with make sense for your position. While it makes sense for a high-level executive to agree to confidentiality or non-solicitation clauses, the same clauses may be overly restrictive for an entry-level employee that does not have access to trade secrets. While some courts may overrule such clauses in a dispute, it is better to avoid agreeing to overly restrictive clauses in the first place.
While leaving the job in the future is usually not something you want to consider when you are just starting out, it is important to be aware of the company’s termination policy. The contract should stipulate the process for either party dissolving the employment contract. This includes how and when to provide notice of termination, whether the employee is at-will, and if any severance package is provided.
What To Do If You Notice Discrepancies
If something in your employment contract is unclear, or does not match what was agreed upon, ask for clarification. In some cases, it may simply be a clerical error that is easily corrected. If you believe some aspect of the contract is unfair, you are free to negotiate. However, be advised that your potential new employer may not agree to change the contract. For instance, if there is a mandatory arbitration clause or class action waiver, they are unlikely to remove it. In instances where the employer will not budge, it is up to you to decide whether the terms of the contract are ones you can live with.
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