Top 5 Legal Clauses That Can Hurt Early Employees

Early employee offers often come with long documents full of legal terms. It's easy to focus on salary and title and skim the rest—but a few types of clauses can have a big impact on your future. They can limit where you work next, what you can say about your experience, what you own from side projects, and even how much you might owe the company if something goes wrong. Here are five types of clauses that often disadvantage early hires, what they usually mean, and what to look for (or push back on) before you sign.

1. Overbroad non-compete agreements

What it is

You agree not to work for a competitor or in a similar role for a period (e.g. 1–2 years) after leaving. The contract may define "competitor" broadly (e.g. "any company that competes with us in any product or market") or limit it to a specific industry or geography. It may also restrict you from doing "similar" work—for example, any software role, or any role in "business development."

Why it hurts

If the non-compete is too broad—any "competitive" role, any geography, or a very long period—it can block you from your next job. You might want to join a startup in the same space, or move to a larger company that has a competing product; the clause may say you can't. In some places non-competes are limited or unenforceable (e.g. in California for most employees, or in certain jurisdictions in the EU). The contract may still contain the clause and can create uncertainty or discourage you from leaving. Even if a court would narrow or strike it down, you may not want to litigate. So the practical effect can still be to limit your options.

What to look for

• Duration: How long does it last? One year is common; two years or more is long. Shorter is better for you.
• Geographic scope: Is it worldwide, nationwide, or limited to a region? Narrower is better.
• Definition of "competitor": Is it limited to companies that directly compete in the same product or market? Or is it "any company that could compete"? The narrower, the better.
• What you can't do: Are you barred from any role at a competitor, or only from certain roles (e.g. sales, product)? Broader restrictions are harder to live with.

BeforeYouSign can surface non-compete language in your offer so you can ask questions and negotiate where appropriate.

2. IP and invention assignment

What it is

The company gets rights to inventions, ideas, and sometimes "all work" you do during employment. The clause may say that everything you create—including on your own time—belongs to the company if it's "related to" the business or "within the scope of" your job. Some agreements also claim a license to or ownership of pre-existing work you use or incorporate. That can include open-source code, side projects, or ideas you had before joining.

Why it hurts

"Everything you create" can include side projects or ideas unrelated to the job if the clause is broad. For example, if you build an app on weekends that has nothing to do with your employer's product, the company might still claim it if the clause says "all inventions and works of authorship." Some agreements say that only work done "within the scope of employment" or "using company resources" is assigned—that's better. Without carve-outs for pre-existing IP and for inventions developed on your own time without company resources, you could lose rights to your own projects.

What to look for

• Carve-out for pre-existing IP: You should disclose any pre-existing work (e.g. code, designs) that you'll use, and the contract should say the company doesn't get rights to it. If you don't disclose, you may lose it.
• Carve-out for inventions unrelated to the business: Work that is (1) not related to the company's business, (2) developed entirely on your own time, and (3) without company resources, equipment, or confidential information should remain yours. Many companies accept this; if they don't, push back or get advice.
• No claim to "background IP": Some contracts say the company gets a license to "background IP" you use in your work—which can mean tools, libraries, or methods you already had. Try to limit this to what's necessary for the job, or exclude your pre-existing IP.

BeforeYouSign can highlight IP and invention assignment language so you know what you're giving up and what to negotiate.

3. Broad confidentiality

What it is

You can't disclose "confidential information." The contract may define it narrowly (e.g. customer data, trade secrets, financials) or broadly ("any information you learn," "all business information"). It may last for a fixed term (e.g. 2 years) after you leave or "indefinitely."

Why it hurts

If "confidential" is defined too broadly, you may feel you can't discuss your role, your projects, or even that you worked there. That can hurt your ability to get the next job—interviews require you to describe what you did—or to build a portfolio. In some places, overly broad confidentiality clauses are limited or unenforceable; the contract may still be there and can make you nervous. You need to be able to describe your experience in a normal way. The clause shouldn't prevent that where the law allows.

What to look for

• Clear definition of what's confidential. Prefer a list or categories over "any information."
• Fixed duration (e.g. 2–3 years after leaving). Avoid "indefinite" if you can.
• Exclusions for public information, prior knowledge, and independent development.
• Confirmation that you can still describe your role and skills when job-hunting (without disclosing specific secrets). Ask HR or legal to confirm; if they won't put it in writing, note the conversation.

BeforeYouSign can flag broad confidentiality language so you know what to clarify before you sign.

4. Indemnification (you indemnify the company)

What it is

You agree to reimburse the company for certain losses—for example, if you breach the agreement (e.g. disclose confidential information), infringe someone's IP, or do something wrong that causes the company harm. The clause may say you will "indemnify and hold harmless" the company for claims, damages, or costs arising from your breach or misconduct.

Why it hurts

If the indemnity is uncapped and broad, you could be personally liable for large amounts—even more than you were paid. Employees are rarely in a position to bear that risk. For example, if you accidentally disclose confidential information and the company is sued, the clause might say you must reimburse the company for all damages and legal fees. That could be millions. Indemnity for your own breach of confidentiality or IP may be reasonable in scope—but it should be capped (e.g. to your salary for the last 12 months, or a fixed amount) and limited to what you control.

What to look for

• Narrow scope: Indemnity should be limited to your breach of the agreement (e.g. confidentiality, IP) or your wrongful conduct—not the company's negligence or the company's breach.
• Cap: Push for a cap (e.g. 12 months' salary, or the amount you were paid in the last year). Uncap indemnity is a red flag.
• Control: You should not have to indemnify for things outside your control (e.g. the company's decisions, the company's breach of a third-party agreement). If the clause is broad, push back or get advice.

BeforeYouSign can surface indemnification language so you know what you might owe and what to negotiate.

5. At-will and termination

What it is

Employment is "at will": either side can end the relationship at any time, for any reason or no reason (subject to law). The contract might add extra conditions—for example, that you must give 3 months' notice but the company can let you go with 1 month (or less during probation). There may also be post-termination obligations: non-compete, confidentiality, return of property, and sometimes non-solicitation (you can't recruit the company's employees or customers for a period).

Why it matters

At-will is standard in the US, but the contract can still create asymmetry: long notice for you, short notice for them, or heavy post-termination restrictions. When you leave, you need to know: How much notice do you have to give? Do you get pay in lieu of notice if they want you to leave immediately? What happens to your equity (vested and unvested)? What are your ongoing obligations (non-compete, confidentiality)? Make sure you understand what happens when you leave—notice, pay, equity, and restrictions—before you sign.

What to look for

• Notice period: Same for both sides, or different? If you must give 3 months and they give 1 month, you're less protected.
• Probation: How long? What's the notice during probation? Does it change after?
• Pay and benefits on termination: Final salary, accrued leave, bonus, equity—when and how much?
• Post-termination obligations: Non-compete, confidentiality, non-solicitation—duration and scope. Read these with the rest of the contract so you understand the full picture.

BeforeYouSign can surface these clauses in your offer or employment agreement so you can ask questions and negotiate where appropriate.