Employment Contract Guide: Offer Terms, Restrictions and Exits

At-will language, and what breaks it

An at-will clause states that either party may end employment at any time, for any lawful reason, with or without notice. Keep it clear and keep it consistent with the rest of the document.

The common mistake is contradicting it elsewhere: promising a fixed term, listing exclusive grounds for termination, or describing a mandatory progressive-discipline process. Any of those can convert at-will employment into something else. If you want a fixed term, say so deliberately rather than by accident.

Compensation, bonuses, and commission

• State base salary, pay frequency, and exempt or non-exempt classification under the FLSA.
• Bonus terms should say whether the bonus is discretionary or earned on defined metrics — the distinction decides whether it is owed on departure.
• Commission plans need a clear crediting rule: when is a commission earned, and what happens to commissions on deals that close after the employee leaves?
• Equity terms belong in the equity documents; the contract should reference rather than restate them, to avoid conflicts.
• Some states require written wage notices at hire, New York's Labor Law § 195 among them.

IP assignment has statutory limits

Employers generally require assignment of work-related inventions and copyrights. That is standard and reasonable.

Several states, including California, Washington, and Illinois, limit assignment clauses so they cannot capture inventions the employee developed entirely on their own time, without company resources, and unrelated to the business. California Labor Code § 2870 is the canonical version, and California also requires written notice of the limitation.

Include a schedule where the employee lists pre-existing inventions they are carving out. It takes two minutes at signing and prevents years of ambiguity.

Non-competes: the map has changed

• California, North Dakota, Oklahoma and Minnesota broadly bar employee non-competes.
• Washington, Colorado, Illinois, Virginia, Maine and others enforce them only above an income threshold.
• Massachusetts caps duration at one year and requires garden-leave pay or other agreed consideration.
• Where enforceable, courts still require reasonableness in duration, geography, and scope of restricted activity.
• Non-solicitation of customers and employees is generally more enforceable than a full non-compete, and often achieves the actual commercial goal.

Termination and severance

Define cause precisely if the contract uses the term — fraud, conviction, material breach, willful misconduct — because the definition determines whether severance is owed.

Severance is usually conditioned on signing a release. Note that releases from employees over 40 must meet the ADEA/OWBPA requirements, including specified consideration and revocation periods, to be effective.

Set out final-pay timing, return of property, and which clauses survive termination: confidentiality, IP assignment, and any enforceable restrictive covenants.