Signing a job contract is often an automated process, but it's important to be cautious. Many people trust their prior conversations with their employer and sign without thoroughly reviewing the agreement, only to face legal and financial trouble later on. Labor and employment attorneys advise at least skimming the contract to identify any concerning clauses and keeping a copy for reference.
One common red flag is a non-compete agreement, which limits your ability to work for competing firms after leaving your current job. The enforceability of non-compete agreements varies depending on the state you're in. For example, California and Massachusetts have strict limitations on non-competes, while New York falls somewhere in the middle. The Federal Trade Commission (FTC) has also proposed a ban on most non-compete clauses, which is expected to be voted on by April 2024.
Pay attention to language in the contract like "the company may" or "in the company's sole discretion." These phrases usually accompany requirements regarding work hours and pay. While it's acceptable for bonuses to be at the company's discretion, other aspects should be clearly defined if you have expectations from your employer. Contracts that appear one-sided, with minimal commitments from the company, should raise concerns.
Severance provisions and arbitration clauses are also worth examining. Typically, severance is provided unless termination is due to unlawful or objectively wrong acts. If the contract includes subjective performance expectations for not receiving severance, that's a red flag. Moreover, be cautious of arbitration clauses tied to severance, as signing a waiver of claims in return for severance may limit your ability to sue the employer.
Some contracts may include repayment clauses, requiring employees to reimburse the company for expenses incurred on their behalf. For instance, if relocation expenses are covered, ensure you won't be obligated to repay them upon termination. One particularly notorious type of repayment clause is a training repayment agreement (TRA), where employees must work for a specified period after receiving training or pay back the training costs. TRAs can be restrictive and financially coercive, trapping employees in unsatisfactory jobs. Federal agencies are cracking down on TRAs, with the proposed FTC ban including TRAs.
If you find yourself in a TRA you wish to exit, consider hiring an employment lawyer or filing a complaint with the National Labor Relations Board for assistance.