What to Know Before Signing Your Next Employment Contract

Starting a new job can be exciting, but before you sign on the dotted line, it's essential to understand what you're agreeing to. An employment contract outlines your responsibilities, compensation, benefits, and more. It can also include clauses that affect your rights during and after your employment. 

From non-compete and confidentiality agreements to termination conditions and dispute resolution policies, each detail matters.

Understanding the terms of your contract not only protects you legally but also empowers you to make informed decisions about your career. Before committing to a new role, take time to carefully review the employment contract. If necessary, seek legal guidance to ensure it aligns with your goals, expectations, and rights as an employee.

This article explores the key elements to watch for before signing your next employment contract.

Compensation and Benefits Clauses

A well-drafted employment contract will thoroughly outline your base salary, how and when you'll be paid, and the structure for performance-related bonuses. It's crucial to clarify whether bonuses are guaranteed, what conditions trigger them, and how overtime and commission are calculated. 

Your benefits package should also be transparent, detailing health insurance, retirement contributions, paid leave, allowances, and any additional company perks. Recent developments, such as the "Big Beautiful Bill" signed by President Donald Trump, also impact compensation. 

According to USA Today, the bill temporarily allows workers to deduct up to $25,000 in tips and $12,500 in overtime pay. This could enhance your take-home pay if you're eligible for tips or significant overtime. 

Remember, nothing in your contract should be assumed non-negotiable; experienced professionals can often negotiate improved salary, benefits, or bonus terms.

Non-Compete and Restrictive Covenants

Employment contracts often contain non-compete clauses, which can restrict your post-employment work. These provisions define the duration (e.g., six months to one year), geographic area, and specific activities deemed "competition." While designed to protect employer interests, overly broad restrictions can severely limit your career prospects. It's crucial to clarify these details and, if necessary, negotiate narrower terms.

Notably, the legal landscape for non-competes is evolving. For instance, Texas's Senate Bill 1318, effective September 1, 2025, significantly narrows permissible non-compete scope for healthcare workers. 

According to JD Supra, the legislation broadens coverage to more healthcare workers and limits duration, scope, and buyout terms. It also prohibits enforcement if a physician is terminated without "good cause." Understanding such evolving state laws is vital to safeguarding your future employment.

The Confidentiality Trap 

A silent but increasingly common feature in employment contracts is the non-disparagement agreement. These clauses prohibit employees from making negative public or private statements about the company, its products, or leadership, even after employment. Once primarily in severance deals, they now frequently appear in initial contracts.

Violating these non-disparagement agreements can lead to legal repercussions, even if your statements are truthful or intended to expose misconduct. This is particularly problematic if you later wish to discuss workplace abuse or discrimination, potentially conflicting with whistleblower protections. 

According to the Law Offices of Jeremy Pasternak, while such terms often appear in severance agreements, both state and federal laws limit what employers can demand. Carefully review any non-disparagement provision. If it seems overly broad or ambiguous, consult an employment attorney before signing to ensure your future ability to speak out.

Dispute Resolution and Arbitration

Before signing, check if your employment contract includes a mandatory arbitration clause. This means any disputes between you and your employer must be resolved outside the courtroom, typically by a private arbitrator. While arbitration is often faster, less formal, and more cost-effective than traditional litigation, it comes with important trade-offs.

Most notably, you’ll likely be waiving your right to a public jury trial. Arbitration decisions are usually final, with limited rights to appeal, and the process is less transparent than court proceedings. While some employees appreciate the efficiency, others may feel it restricts their ability to hold employers publicly accountable.

Given the long-term implications, it's crucial to weigh the pros and cons carefully. If you're unsure how arbitration could affect your rights, consulting an employment attorney before agreeing to such terms is a smart move.

Termination and Severance Terms

Understanding termination and severance clauses in your employment contract is crucial. Look for “at-will” language, which means either party can end employment at any time, often without cause. Review the required notice period, potential reasons for immediate dismissal, and what happens if you resign or are laid off.

Clarify your severance entitlements, whether you’re guaranteed compensation, how long your benefits will continue, and if you’ll be paid for unused vacation. These terms can protect you from sudden financial hardship during job transitions.

According to The New York Times Magazine, “stay-or-pay” clauses, once limited to high-skilled roles, have spread to many industries, including sales, nursing, and teaching. These clauses obligate employees to reimburse training expenses if they resign before a specified period. 

Critics argue they're being misused as penalties, discouraging workers from quitting. With such terms becoming more common, reviewing termination conditions is more important than ever.

Frequently Asked Questions

1. Are employment contract terms always negotiable?

Employment contract terms are often negotiable, especially for skilled or in-demand roles. While some companies have standard agreements, many are open to discussions on salary, benefits, non-compete clauses, and termination terms. It's important to review the contract carefully and negotiate to ensure it aligns with your needs and goals.

2. Should a non-disparagement clause be mutual?

Yes, a non-disparagement clause should ideally be mutual, protecting both the employee and the employer from negative statements. Mutual clauses promote fairness and accountability. If the clause only restricts the employee, it may be unbalanced. It's wise to negotiate for mutual terms or seek legal advice before signing.

3. What if an employer breaks a contract?

If an employer breaks a contract, it may be considered a breach of contract. You could be entitled to legal remedies such as compensation or reinstatement. Document the issue and consult an employment attorney to understand your rights and the best course of action based on your specific situation.

Employment contracts set the groundwork for your relationship with your employer; sometimes long after you leave the role. Don't let excitement or urgency cloud your judgment. Read every clause, even the fine print. 

Raise questions, propose amendments, and don’t hesitate to seek expert legal advice, especially if your freedom, finances, or professional reputation could be affected. Approaching your contract with informed caution is the best way to safeguard your career, rights, and peace of mind.