Employment Contracts

5 Red Flags in Employment Contracts You Should Never Ignore

Most people sign employment contracts without reading them properly. Here's what a law student wishes everyone knew before they signed.

By James McMahon January 2025 8 min read

You've just been offered a job. You're excited. The offer letter looks great. Then HR sends over a 30-page contract and asks you to sign it by Friday.

Most people skim it, sign it, and only discover the problematic clauses when it's too late — when they want to leave, start a side business, or work for a competitor. Don't be most people.

Here are the five clauses I see causing the most problems, explained in plain English.

1

The overbroad non-compete clause

"The Employee shall not, for a period of 12 months following termination, engage in any business that competes with the Company in any capacity, whether as an employee, consultant, director, or otherwise."

This is the clause that ends careers. A non-compete restricts where you can work after you leave. The problem is many are drafted so broadly they'd effectively prevent you from working in your industry at all.

Under UK common law, non-competes are only enforceable if they are reasonable in scope, duration, and geographic reach. "Any competing business" with no geographic limit for 12 months is often too broad to enforce — but employers count on the fact that most employees don't know this and won't take the risk of testing it.

What to do: Push back on the duration (6 months is more standard), the geographic scope (your actual working area, not "worldwide"), and the definition of "competing." If it covers your entire professional field, it may be unenforceable.

2

The IP assignment clause that takes everything

"All intellectual property created by the Employee, whether during or outside working hours, whether using Company equipment or not, shall be the property of the Company."

This is extremely common and extremely dangerous if you do any creative, technical, or entrepreneurial work outside your job. If you build an app on weekends, write a book, or develop a side project — this clause could mean your employer legally owns it.

Under the Patents Act 1977 and Copyright, Designs and Patents Act 1988, your employer already owns work created in the course of your employment. This clause tries to extend that to everything you ever make.

What to do: Request a carve-out for work created outside working hours, without using company resources, and unrelated to the company's business. A reasonable employer will agree to this.

3

Garden leave with no pay guarantee

"The Company may, at its discretion, require the Employee to serve any period of notice at home without attending the workplace."

Garden leave isn't inherently bad — it means you get paid to stay at home during your notice period. The problem is when the clause is paired with a long notice period, preventing you from starting a new job while also making you economically dependent on your current employer's goodwill.

Check: Is the garden leave period separate from your notice period, or the same? Can you be required to take garden leave without your consent? Is full pay guaranteed in writing during this period?

What to do: Make sure the clause explicitly states you'll receive full salary and benefits during any garden leave period. Without this, you're relying on trust.

4

The discretionary bonus clause

"Any bonus payment is entirely at the Company's discretion and shall not form part of the Employee's contractual remuneration."

If you're accepting a lower base salary in exchange for a bonus, this clause is catastrophic. "Discretionary" means the company can simply decide not to pay it — and you have no legal recourse.

The Employment Rights Act 1996 requires your contract to specify your remuneration. But it doesn't require bonuses to be contractual. Many employers exploit this.

What to do: If your bonus is a significant part of your expected compensation, push for a clause that specifies the criteria for earning it and establishes at least a minimum payment if those criteria are met. A purely discretionary bonus is legally worthless.

5

The variation clause

"The Company reserves the right to vary the terms of this agreement on reasonable notice."

This is the most underappreciated dangerous clause in employment contracts. It means your employer can change the terms of your employment — your hours, your location, your responsibilities — without your consent, as long as they give "reasonable notice."

Under the Employment Rights Act 1996, employers cannot unilaterally change fundamental contract terms. But this clause is often used to justify changes that employees then accept without realising they had a right to object.

What to do: Push for this to read "with the Employee's written consent" rather than "on reasonable notice." If they won't remove it, at least understand that it doesn't give them unlimited power to change your contract.

⚠️ Important

This article is for informational purposes only and does not constitute legal advice. If you have a specific concern about your employment contract, consult a qualified employment solicitor. Many offer a free initial consultation.

What to actually do before you sign

Most people don't negotiate employment contracts because they're afraid it will damage the relationship before it starts. This is rarely true. Employers respect candidates who understand their contracts — it shows professionalism.

The key is to frame your requests reasonably: "I noticed the non-compete clause covers my entire industry — would you be open to limiting it to direct competitors?" is a lot better than "I'm not signing this."

💡 Quick tip

Before negotiating, identify the two or three clauses that matter most to you and focus on those. Trying to change everything signals bad faith. Targeting the two clauses that could genuinely harm you signals that you've read it carefully and know what you're doing.

You can also use ContractChecker to get an instant AI analysis of your employment contract — it'll flag the high-risk clauses, explain them in plain English, and tell you exactly what to push back on. The first check is free.

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Paste your contract and get a clause-by-clause risk breakdown in seconds. Free to try — no account needed.

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The bottom line

Employment contracts are almost always drafted by the employer's lawyers in the employer's interest. That doesn't make them evil — it just means you need to read them with that in mind.

The five clauses above — non-competes, IP assignments, garden leave, discretionary bonuses, and variation clauses — are where employees most frequently get caught out. Know what they mean before you sign.

And remember: the contract you sign on day one is the one you'll be held to on the day you leave. It's always worth the 30 minutes to understand it.