Employment Contracts: Key Clauses to Understand

Whether you're an employer drafting an offer or an employee reviewing one, understanding the key clauses in an employment contract prevents surprises down the road.

Compensation and Benefits Terms

Beyond base salary, contracts should clearly specify bonus structures and eligibility criteria, equity compensation vesting schedules, and how and when benefits begin, since ambiguity here is a frequent source of later disputes.

For commission-based or performance-based pay, the contract should spell out exactly how compensation is calculated and what happens to unpaid or pending commissions if employment ends.

Restrictive Covenants

Non-compete, non-solicitation, and confidentiality clauses restrict what an employee can do during and after employment — and, as discussed elsewhere, their enforceability varies significantly by state.

These clauses deserve particular scrutiny before signing, since they can meaningfully limit future career options even after the employment relationship ends.

Termination Provisions

Some contracts specify a defined term of employment or specific grounds required for termination, which is a meaningful departure from default at-will employment and can provide much greater job security.

Severance provisions, notice requirements, and how any unvested equity or unpaid bonus is treated upon termination are all details worth negotiating clearly before signing, not after a termination has already occurred.

Frequently Asked Questions

Can I negotiate the terms of an employment contract before signing?

Often yes, particularly for more senior or specialized roles — it's always worth asking, even if the initial offer is presented as standard.

Is a verbal promise from my employer as binding as what's in the written contract?

Generally no — most employment contracts include an "integration clause" stating that the written document represents the entire agreement, superseding prior verbal promises.

Employment contracts set the terms for one of the most important relationships in your professional life. An attorney can review a contract before you sign and help identify terms worth negotiating.