Employment Contract Red Flags: A Global Reading Guide

Employment contracts look different in every jurisdiction — a US offer letter, a UK statement of employment particulars, an Australian employment agreement, a Canadian written employment contract — but the clauses that cause the most trouble tend to repeat. This article is a pattern-based guide to the red flags that travel across common-law systems: the clauses an employee in any of those jurisdictions should read carefully before signing.

This is a factual overview, not legal advice. Statutory employment rights in each jurisdiction — overtime rules, minimum notice periods, unfair-dismissal protections — sit on top of the contract and often override it. The US Department of Labor's wage-and-hour guidance, the UK's gov.uk employment-contracts guide, Australia's Fair Work Act 2009 (Cth), and Canada's Canada Labour Code are each the authoritative entry points for the respective jurisdiction.[¹][²][³][⁴]

Duties and scope

The duties clause tells you what job you're being hired to do. It usually starts specific — "Software Engineer, responsible for…" — and then widens with boilerplate:

• "And such other duties as the Company may reasonably require." Common and broadly enforceable, but "reasonably" is doing real work here. A clause that drops "reasonably" and says "and such other duties as the Company may require" is more permissive than most employees realise.
• "The Employee may be required to travel." Fine if the travel expectation is bounded. Concerning if the clause leaves scope wide open — "to any location the Company directs" — without any mention of notice, expense reimbursement, or reasonableness.
• "Full-time attention and energy." Sometimes extended to prohibit any outside work, including unpaid hobbies. Over-broad exclusivity clauses can conflict with the employee's right to pursue other interests; many jurisdictions narrow their enforceability.

Read the duties clause alongside the job title and the pay clause. If the title and pay match a senior role but the duties clause would allow assignment to a materially lower role, that gap matters — a subsequent "role change" might not amount to constructive dismissal if the contract already contemplated it.

Compensation

Base salary is rarely the problem. The red flags tend to be in the surrounding clauses:

• Overtime. Where the role is eligible for overtime, the clause should say so and point to the applicable rate. In the US, the Fair Labor Standards Act requires overtime for non-exempt workers; in Australia, modern awards and the National Employment Standards set baseline rules; in the UK, working time limits and overtime practices are less prescriptive but still subject to contract.[¹][³] A clause that says "this salary compensates all hours worked, including overtime" is ambiguous at best and potentially unenforceable against statutory overtime rights.
• Bonus described as "discretionary." A pure discretion gives the employer near-total freedom to withhold. Watch for "targets may be set annually and may be modified at the Company's discretion" — this often means bonus goals will shift mid-year in ways that make them unreachable. A better clause has measurable targets, a defined calculation method, and payment timing the contract fixes.
• Commission structures. Commissions earned but unpaid at termination are a recurring dispute. Read the clause that tells you when a commission is "earned" — on booking, on invoicing, on collection, on anniversary? A commission clause that makes termination-before-payment a forfeiture event is aggressive and often partially unenforceable.
• Expense reimbursement. Should be contractual, not discretionary. A clause that lets the employer refuse expense reimbursement "at its discretion" shifts business costs onto the employee.
• Equity and vesting. Read the vesting schedule carefully. Acceleration on termination-without-cause, change of control, or death is common and valuable; absence of these provisions, coupled with a long vesting cliff and narrow "good leaver" definition, materially changes the value of the offer.

Termination

Common red flags:

• Probationary periods with no statutory minimums respected. Most jurisdictions impose baseline notice periods and dismissal protections from the first day of employment, regardless of what the contract says about probation. A probation clause that states "the employer may terminate without notice during the probationary period" may still need to honour the statutory floor.
• "For cause" definitions that are open-ended. "Cause" typically includes serious misconduct, material breach, or conviction of a crime. A clause that extends "cause" to include "underperformance", "failure to meet company expectations", or "loss of confidence" shifts significant power to the employer and often reads as pretextual after the fact.
• Notice periods that are one-sided. The employee owes 90 days; the employer owes 2 weeks. Common, sometimes enforceable in the employer's favour, but worth pushing back on at the negotiation stage.
• Garden leave. A clause that lets the employer place the employee on paid leave for part of the notice period, with no work and restrictions on starting a new role. Read the length and what it pays — garden leave at base only, without accrual of bonus or vesting, is materially different from garden leave on full compensation.
• Return of property on termination. Standard. Watch for over-broad language that extends to personal devices, personal data, or anything created outside work hours.
• Post-termination clawbacks. Clauses that claw back bonuses, signing bonuses, or equity if the employee leaves voluntarily or is terminated "for cause" within a period. Check the trigger, the cap, and whether the clawback survives an unlawful dismissal.

Restrictive covenants

Non-compete, non-solicitation, non-dealing, and confidentiality clauses. Collectively, the part of the contract that most often produces post-employment litigation.

• Non-compete scope. Geographic scope, duration, and industry scope. A 12-month global non-compete against "any business competitive with the Company" is a common drafting starting point and an uncommon outcome in court. Most common-law jurisdictions enforce non-competes only to the extent they protect a legitimate business interest and go no further than necessary.
• Non-solicit scope. Customer non-solicits are generally more enforceable than general non-competes. Employee non-solicits — preventing the departing employee from hiring former colleagues — vary in enforceability. Read what's being prohibited: "soliciting" is narrower than "dealing with"; "dealing with" can capture even a former customer who approaches the ex-employee unprompted.
• Choice of law and forum. A non-compete governed by a jurisdiction friendlier to the employer than where the employee actually works is a signal. Courts in the employee's home jurisdiction may refuse to enforce covenants the local law would strike down, but the contractual choice-of-forum can still drag the employee into expensive litigation elsewhere.
• Consideration. Some jurisdictions require separate consideration for restrictive covenants signed after employment has begun. A post-hire restrictive covenant tacked onto an unrelated bonus or promotion deserves particular scrutiny. For the US state-level variation on non-compete enforceability, see our article on non-compete enforceability by state.

IP ownership

Employment contracts typically assign to the employer any intellectual property created in the course of employment. Red flags:

• Scope drift. "All intellectual property created by the Employee, whether during or outside working hours, and whether or not related to the Employer's business." Over-broad — many jurisdictions limit IP assignment to work-related creations. The UK, for example, has statutory carve-outs for employee inventions; Australia's and California's rules similarly protect outside-of-work creations unrelated to the employer's business.
• Background IP treatment. If the employee brings existing IP into the role — previously written software, a personal portfolio, a side project — the contract should either exclude it from assignment or require the employer to license it back. A clause that silently sweeps background IP into the employer's ownership is a problem.
• Moral rights waivers. Common in jurisdictions that recognise moral rights (most non-US common-law jurisdictions do). A waiver is often necessary for the employer to use and modify work freely, but read whether it extends beyond the employment relationship.

Confidentiality and non-disparagement

• Confidentiality that never ends. Confidentiality obligations typically survive termination. Indefinite confidentiality on genuinely confidential information is normal. Indefinite confidentiality on "any information relating to the Company" sweeps in information that the employee would reasonably discuss with future employers — a red flag.
• Non-disparagement. A mutual non-disparagement clause is reasonable. A one-sided non-disparagement clause that binds only the employee, combined with a "cooperation" clause that requires the employee to assist the employer in future legal matters without compensation, is a common drafting asymmetry.
• Whistleblower carve-outs. Most jurisdictions protect reporting of legal violations to regulators. A confidentiality or non-disparagement clause that doesn't carve out such reporting may be partially unenforceable, but its presence suggests the employer may pressure silence on matters the law protects.

Unilateral variation and change of control

• "The Employer may amend this agreement from time to time on reasonable notice." A clause that lets the employer unilaterally change material terms — pay, role, location — is disproportionate. Most common-law jurisdictions treat material unilateral variation as a breach that the employee can refuse and claim constructive dismissal on.
• Change of control and assignment. Some contracts let the employer assign the agreement to any successor, often with language that treats the employee as having consented to the transfer. Read whether the assignment is allowed only to entities in the same group or to any successor; an unrestricted assignment clause means the employee could end up working for a materially different employer than the one they signed with.
• "Entire agreement" and integration clauses. Standard, but read alongside the pre-signing promises: anything the recruiter or hiring manager promised verbally is usually wiped out by an entire-agreement clause. Get material promises in writing before signing.

Dispute resolution

• Arbitration. More common in US contracts than elsewhere. Binding arbitration can be faster and cheaper than litigation but typically limits appeal rights and may prohibit class or collective action. A clause that mandates arbitration AND waives class actions is a meaningful reduction of the employee's ability to pursue systemic issues (wage-and-hour, discrimination) collectively.
• Class-action waivers. See above — often bundled with arbitration. In some jurisdictions they are enforceable; in others, disputed. Their presence matters regardless.
• Fee-shifting. A clause that makes the losing party pay the winning party's legal fees sounds neutral but in practice deters plaintiff-side claims. A one-sided fee-shifting clause that favours only the employer is a clearer red flag.
• Choice of law and forum. Already covered under restrictive covenants, but worth reading in isolation. A contract whose governing law is not the law of the jurisdiction where the employee works should raise questions.

Next steps

If the contract is reasonable, sign it. If it isn't:

• Ask for amendments to specific clauses before signing. The clauses flagged in this article are commonly negotiated — employers expect push-back on the most aggressive boilerplate. A clean written counter-proposal is more effective than a verbal request.
• Check whether statutory protections in the relevant jurisdiction override the clause anyway. Many "employer-friendly" clauses are either unenforceable or partially unenforceable; the presence of such a clause is itself a signal about the employer's drafting philosophy, even when the clause can't legally be enforced as written. For the US offer-letter-versus-employment-contract distinction specifically, see our article on employment contract versus offer letter.
• For senior roles or anything with significant equity, restrictive covenants, or change-of-control mechanics, an hour with an employment lawyer in the relevant jurisdiction is almost always worth the cost before signing.

Reading an employment contract is pattern recognition. The clauses that cause problems recur across jurisdictions; the specific statutory backdrop varies, but the clauses to read carefully before signing are the same.