Why You Need to Review Your Employment Contract

So you’ve just been offered a job. YAY!

You COULD just sign your employment contract, then head out to upgrade your collection of business-casual khakis.

Or, you could actually READ it.

Ick, you say. Why ruin a new-job buzz with all that boring legalese?

After all the job hunting, resumes, and interviews, why rock the boat now?

Here’s why:

  • You might not be getting the deal you thought you were getting.
  • You might be able to get a better deal.
  • You might even be signing away your future.

Did you get it in writing?

In general, if it’s not in writing, it’s not part of your contract.

For example, maybe a recruiter SAID you’d be getting stock options or six weeks of vacation, but if it’s not in the written contract you probably won’t be able to hold your employer to it.

So check to make sure the following terms are what you agreed to verbally, or that they match what’s in your offer letter:

  • Position Description (including your title and maybe your duties)
  • Salary
  • Benefits (These may be in a separate employee handbook; ask to see it before signing.)
  • Additional Compensation (such as bonuses, equity, stock options, or commissions)

Negotiate Your Employment Using Data

If you want a better deal, this is the time to ask for it – before you sign.

Whenever you’re negotiating, it helps to come armed with hard data. For example, you could check a site like Glassdoor to see how your proposed salary stacks up. (Of course it’s better to have this information before you verbally agree on anything.)

Bringing real numbers to the negotiation table can give you significant negotiating power. After you receive your employment agreement you can upload it to LawGeex to see if your contract includes non-standard clauses that can hurt you later. Knowing how “standard” particular clauses really are also gives you some ammunition when the HR manager says “everyone” has them.

The Non-Compete Example

A non-compete provision is a less-common clause, appearing in only 58% of employment contracts analyzed by Lawgeex.

However, not all non-competes are enforceable and some are better or worse than others.

Some states such as California severely limit non-competes to protect employees. Other states are friendlier to employers. Even then, courts that do allow non-compete clauses in employment contracts may only enforce them if they’re “reasonable.”

If your new employer won’t agree to delete a non-compete clause, you can try to limit the scope. For example;

  • If you can’t work for a competing business in your state, you may have to move in order to get a job. If you’re only restricted from working for a competitor in your city, you may be able to work in a nearby city without packing up and moving.
  • If you can’t work for a competing business for three years, that’s worse than if it’s only six months.

If a competing business is defined as being in “the food service industry,” that’s a lot broader (and thus more limiting for your future employment) than if it’s defined as “fajita food trucks in Fresno.”

Does Your Boss Own Your Brain?

It’s not terribly uncommon for an employment agreement to have some kind of “IP Assignment” clause. We see these clauses in about 38% of the employment contracts analyzed by the LawGeex tool. Some companies make this a separate agreement.

As we discussed in another blog post, an IP Assignment clause might give your employer ownership of all your business ideas, prospects, proposals, inventions, ideas, processes, programs, designs, etc.

It might be hard for your boss to determine exactly when an idea flickered through your brain, but it can be a lot easier to determine whether you invented something using company equipment.

For example, in season 2 of Silicon Valley, it came out that Richard (the startup CEO) briefly used a computer belonging to his former employer, Hooli, to develop his killer compression algorithm when his own computer was being fixed.

An arbitrator initially ruled that because Richard used a Hooli computer, Hooli owned the algorithm.

Richard only avoided losing his company because the employment agreement also included an unlawful non-compete clause, as discussed above.

Prevention is Better Than Cure

Risking friction with a new job by negotiating your contract may seem like a bad option. However, you also have to keep in mind your future interests. Prevention is always better than cure.  When you consider that the majority of Americans – 52.3% – are unhappy at work, it’s better starting out a new job with peace of mind and some protection of your long-term interests.

The availability of online legal services has made the task of reviewing legal contracts quick, easy, and affordable for everyone. You can get fast feedback on what’s standard (and not so standard) in your employment contract – and better protect yourself as a result.

Leave a Reply

Your email address will not be published. Required fields are marked *