78/100
Do not sign as written
Do not sign as written - clauses 3, 4, 6, 7 and 8 must be rewritten and the equity terms documented.
This is a very short (10-line) employment agreement for a Senior Engineer role at Acme Robotics starting 1 March 2026, paying $95,000 base plus a $12,000 signing bonus and 40,000 stock options vesting over four years with a one-year cliff. It is governed by California law, which is genuinely helpful to the Employee because several of the most aggressive terms in the document are unenforceable there. Three things need attention before signing: (1) clause 8 lets the Company unilaterally rewrite any term of the agreement at its sole discretion on written notice — that is the single worst clause in the document and it swallows every other protection; (2) clause 6's 24-month worldwide non-compete is void under California Business & Professions Code §16600 and, since §16600.5 took effect, it is unlawful for an employer even to include or attempt to enforce such a clause against a California employee — it should be struck rather than argued about; (3) clause 3 requires repayment of the full $12,000 gross signing bonus if employment ends 'for any reason' within 24 months, with no pro-rata and no carve-out for layoff, so the Company could fire you at month 23 on one week's notice under clause 4 and still invoice you for $12,000 you only ever received about $7,000-8,000 of after tax. The IP clause (7) also purports to take inventions made on your own time and unrelated to the business, which conflicts with California Labor Code §2870 and is missing the §2872 written notice. The document is also silent on almost everything an employee needs: severance, a definition of cause, benefits, PTO, expense reimbursement, indemnification, bonus eligibility, work location, and the option strike price.
Employment agreement (individual contributor, US/California) · reviewed for J. Smith (the Employee) ·
governing law: State of California
Read the contract that was analyzed
EMPLOYMENT AGREEMENT
This Agreement is made between Acme Robotics Inc. ("the Company") and J. Smith ("the Employee").
1. POSITION. The Employee is engaged as Senior Engineer, commencing 1 March 2026.
2. COMPENSATION. Base salary of $95,000 per annum, payable monthly.
3. SIGNING BONUS. The Company shall pay a signing bonus of $12,000. The Employee shall repay
the gross amount of the Signing Bonus if employment ends for any reason within 24 months of
the Commencement Date.
4. NOTICE. The Employee shall give three (3) months written notice of resignation. The Company
may terminate on one (1) week notice.
5. EQUITY. The Employee is granted 40,000 options vesting over four years with a twelve month
cliff. Vested options must be exercised within 90 days of termination or are forfeited.
6. NON-COMPETITION. For twenty-four (24) months following termination, the Employee shall not,
anywhere in the world, engage in any business which competes with the Company.
7. INTELLECTUAL PROPERTY. All intellectual property created by the Employee during the term,
whether or not during working hours and whether or not related to the Company's business,
shall vest absolutely in the Company.
8. VARIATION. The Company may vary the terms of this Agreement at its sole discretion on
written notice to the Employee.
9. GOVERNING LAW. This Agreement is governed by the laws of the State of California.
A deliberately flawed employment agreement
written for this demonstration. Any resemblance to a real company is coincidental.
Key numbers
- Base salary: $95,000 per annum, payable monthly (clause 2)
- Signing bonus: $12,000, repayable in full (gross) if employment ends for any reason within 24 months of 1 March 2026 (clause 3)
- Effective clawback exposure at month 23: $12,000 gross against roughly $7,000-8,000 actually received net of withholding
- Equity: 40,000 options, 4-year vest, 12-month cliff; strike price, plan, share class and total outstanding shares not stated (clause 5)
- Post-termination option exercise window: 90 days or forfeiture (clause 5)
- Employee resignation notice: 3 months (clause 4)
- Company termination notice: 1 week (clause 4) — a 12:1 asymmetry
- Non-compete: 24 months, worldwide, all competing business (clause 6)
- Commencement date: 1 March 2026 (clause 1)
- Severance: none stated
- Liquidated cap on any Employee liability: none stated
Findings (15)
Each one quotes the contract verbatim, so every claim can be checked against
the document in about ten seconds.
Critical
1. Company may unilaterally rewrite the contract
Clause 8 · line 9
“VARIATION. The Company may vary the terms of this Agreement at its sole discretion on written notice.”
The Company can change any term of this agreement — salary, title, duties, notice period, equity, the clawback — whenever it likes, just by sending you a notice. You get no say and no right to refuse.
Why it matters. Every other protection you negotiate is worthless if this stays in. The Company could cut the $95,000 base, extend the 24-month clawback, or lengthen your 3-month resignation notice unilaterally the day after you start. In practice a court may read an implied reasonableness limit or treat a material change as a repudiation, but you would be litigating that from a position of no income. There is also no floor here: the clause is not limited to non-material or administrative changes.
Market standard. Standard employment agreements require amendments to be in writing and signed by both parties. Where employers do reserve variation rights, they are normally limited to job duties, reporting line and work location, and explicitly exclude compensation, equity and termination terms. A blanket 'any term, sole discretion' variation right is well outside market and is the kind of clause that supports an argument the whole contract is illusory.
Suggested redline
8. VARIATION. No variation, amendment or waiver of any term of this Agreement shall be effective unless set out in writing and signed by both the Company and the Employee. The Company may, on reasonable written notice, make changes to the Employee's duties, reporting line and work location that are consistent with the Employee's position; no such change shall reduce the Employee's base salary, bonus opportunity, equity entitlements, notice period or other economic terms without the Employee's prior written consent.
Negotiation leverage: high
Critical
2. Worldwide 24-month non-compete
Clause 6 · line 7
“NON-COMPETITION. For twenty-four (24) months following termination, the Employee shall not, anywhere in the world, engage in any business which competes with the Company.”
For two years after you leave, you are barred from working in any competing business anywhere on earth. There is no geographic limit, no limit to the role you performed, and no compensation for the restricted period.
Why it matters. On its face this ends your career in robotics for two years with no pay. The saving grace is the governing law: California Business & Professions Code §16600 voids employee non-competes, and §16600.5 (effective 2024) makes such a clause void regardless of where or when it was signed and makes it unlawful for an employer to include it in a contract or to attempt to enforce it, with a private right of action and attorney's fees for the employee. So the clause is very likely unenforceable — but it stays dangerous because a future employer's counsel will see it and hesitate, and because if you ever relocate or the Company later tries to change governing law under clause 8, the analysis changes. Do not rely on unenforceability; get it deleted.
Market standard. Even in states that enforce non-competes, market for a non-executive Senior Engineer is 6-12 months, limited to a defined geography and to directly competitive products the employee actually worked on, and increasingly with garden-leave pay. Twenty-four months, worldwide, all competing business, unpaid, is far outside market anywhere and is flatly void in California.
Suggested redline
6. PROTECTION OF CONFIDENTIAL INFORMATION. The Employee shall not at any time use or disclose the Company's trade secrets otherwise than in the proper performance of the Employee's duties. The parties acknowledge that, consistent with California Business and Professions Code sections 16600 and 16600.5, the Employee is subject to no restriction on engaging in any lawful profession, trade or business of any kind following the termination of employment, and any provision purporting to impose such a restriction is void and shall not be enforced by the Company.
Negotiation leverage: high
Critical
3. IP assignment ignores Labor Code section 2870
Clause 7 · line 8
“INTELLECTUAL PROPERTY. All intellectual property created by the Employee during the term, whether or not during working hours and whether or not related to the Company's business, shall vest absolutely in the Company.”
The Company claims ownership of everything you create while employed — weekend projects, an unrelated app, a novel, open-source contributions — regardless of whether it has anything to do with robotics or was made on Company time or equipment.
Why it matters. California Labor Code §2870 provides that an assignment provision does not apply to an invention the employee develops entirely on their own time without using the employer's equipment, supplies, facilities or trade secret information, unless it relates to the employer's business or actual or demonstrably anticipated R&D, or results from work performed for the employer. §2872 requires the employer to give written notice of that limitation, and this contract gives none. There is also no schedule of your pre-existing inventions, so anything you already own and later touch at work is exposed. Practical consequence: a side project you build in 2027 could be claimed by Acme, and you would have to litigate §2870 to keep it.
Market standard. California employers routinely include the §2870 carve-out verbatim plus a required §2872 notice, and attach an Exhibit A for prior inventions. A clause that expressly reaches non-working-hours, unrelated IP with no carve-out is both non-market and non-compliant.
Suggested redline
7. INTELLECTUAL PROPERTY. The Employee assigns to the Company all intellectual property created by the Employee in the course of employment that relates to the Company's business or actual or demonstrably anticipated research and development, or that results from work performed by the Employee for the Company. NOTICE: This assignment does not apply to any invention which qualifies fully under California Labor Code section 2870, namely an invention that the Employee developed entirely on the Employee's own time without using the Company's equipment, supplies, facilities or trade secret information, except for inventions that either (a) relate at the time of conception or reduction to practice to the Company's business or to its actual or demonstrably anticipated research or development, or (b) result from any work performed by the Employee for the Company. Inventions owned by the Employee prior to the Commencement Date are listed in Schedule 1 and are excluded from this Agreement.
Negotiation leverage: high
High
4. Full gross signing bonus clawback, any reason
Clause 3 · line 4
“The Company shall pay a signing bonus of $12,000. The Employee shall repay the gross amount of the Signing Bonus if employment ends for any reason within 24 months of the Commencement Date.”
If you leave — or are fired, or made redundant, or become disabled — at any point in the first 24 months, you owe back the entire $12,000 pre-tax, even if you leave on day 700 of 730.
Why it matters. Three separate problems. (1) 'For any reason' includes termination by the Company, so Acme can dismiss you on one week's notice under clause 4 at month 23 and still bill you $12,000. (2) 'Gross amount' means you repay $12,000 when you only ever received roughly $7,000-$8,000 after federal, California and payroll withholding; the tax recovery mechanics are yours to sort out. (3) There is no pro-rata, so the obligation is a cliff — month 23 costs the same as month 1. It also functions as a $12,000 exit toll that suppresses your ability to leave a bad situation. Note that under California Labor Code §221 the Company generally cannot simply deduct the repayment from your final wages; it would have to sue you, which is leverage in your favour but not a defence to the debt.
Market standard. Market is a pro-rata clawback that amortises monthly over 12 months (sometimes 24), is limited to the net after-tax amount received, and expressly does not apply where the employer terminates without cause, on a reduction in force, or on death/disability. A non-amortising 24-month gross clawback triggered by employer-side termination is aggressive and outside market.
Suggested redline
3. SIGNING BONUS. The Company shall pay a signing bonus of $12,000 within thirty (30) days of the Commencement Date. If the Employee resigns without Good Reason or is terminated by the Company for Cause within twelve (12) months of the Commencement Date, the Employee shall repay a pro-rata portion of the net after-tax amount of the Signing Bonus actually received, reduced by one twelfth (1/12) for each complete month of employment. No repayment shall be due where employment ends by reason of termination by the Company without Cause, redundancy or reduction in force, resignation for Good Reason, death, or disability. Any amount repayable shall be paid within sixty (60) days and shall not be deducted from wages.
Negotiation leverage: high
High
5. Grossly asymmetric notice periods
Clause 4 · line 5
“NOTICE. The Employee shall give three (3) months written notice of resignation. The Company may terminate on one (1) week notice.”
You must give three months' notice to quit. The Company can end your employment with one week's notice.
Why it matters. A 12:1 imbalance. Practically: you have one week of income security, while a competing employer must wait a quarter for you to start — which most will not do, so this operates as a soft restraint on mobility on top of the void non-compete. Combined with clause 3, a dismissal at month 23 leaves you with one week's pay and a $12,000 repayment demand. There is also no pay-in-lieu-of-notice right for you, no garden leave provision, no definition of Cause, and no severance anywhere in the document.
Market standard. US market for this level is either mutual at-will with no notice, or symmetrical notice (commonly 2-4 weeks each way, or 30 days each way). Where notice is asymmetric it normally favours the employee. Three months out / one week in is well outside market for a non-executive.
Suggested redline
4. NOTICE. Either party may terminate this Agreement on thirty (30) days' written notice. The Company may elect to pay the Employee base salary in lieu of all or part of the notice period. If the Company terminates the Employee other than for Cause, the Company shall in addition pay the Employee severance equal to three (3) months' base salary, payable on the Company's ordinary payroll dates, subject to the Employee signing a general release. 'Cause' means the Employee's conviction of a felony, wilful misconduct materially injurious to the Company, or material breach of this Agreement that remains uncured thirty (30) days after written notice specifying the breach.
Negotiation leverage: medium
High
6. Equity terms are unspecified and unenforceable as written
Clause 5 · line 6
“EQUITY. 40,000 options vesting over four years with a twelve month cliff.”
You are promised 40,000 options but the contract does not say the exercise price, the share class, how many shares are outstanding, which equity plan governs, what happens after the cliff (monthly? annually?), or what happens on a sale of the Company.
Why it matters. 40,000 options is a meaningless number without the denominator. If Acme has 4 million shares outstanding this is 1%; if it has 100 million, it is 0.04%. Nothing here obligates the board to actually grant the options, and the grant will be made under a plan document and option agreement you have not seen, which will contain repurchase rights, transfer restrictions and possibly a company right to buy back vested shares on termination. There is also no acceleration on a change of control, so the Company could be sold in month 11 and you would vest nothing.
Market standard. Market is to state the number of shares, the approximate percentage on a fully diluted basis, the vesting commencement date, the post-cliff vesting frequency (typically monthly over the remaining 36 months), that the grant is subject to board approval within a stated period, and to attach or reference the plan. Double-trigger acceleration (change of control plus termination without cause within 12 months) is common at this level; single-trigger cliff acceleration is a reasonable ask.
Suggested redline
5. EQUITY. Subject to board approval, which the Company shall seek within thirty (30) days of the Commencement Date, the Company shall grant the Employee an option over 40,000 shares of common stock, representing not less than [__]% of the Company's fully diluted capitalisation as at the Commencement Date, at an exercise price equal to the fair market value on the grant date, under the Company's [__] Stock Plan, a copy of which has been provided to the Employee. The option shall vest as to 25% on the first anniversary of the Commencement Date and as to 1/48th of the total monthly thereafter. If a Change of Control occurs and the Employee is terminated without Cause or resigns for Good Reason within twelve (12) months thereafter, all unvested options shall vest in full immediately. In the event of any conflict between this Agreement and the plan or option agreement, this Agreement shall prevail.
Negotiation leverage: medium
High
7. 90-day option exercise window
Clause 5 · line 6
“Vested options must be exercised within 90 days of termination or are forfeited.”
When you leave, you have 90 days to pay cash for your vested options or you lose them entirely.
Why it matters. This is where most private-company equity dies. To exercise 40,000 options you must find the strike price in cash plus, in California, the tax bill on the spread between strike and fair market value at exercise (AMT for ISOs, ordinary income and withholding for NSOs) — on shares you cannot sell. If Acme's valuation has grown, the tax alone can be five figures within 90 days of losing your income. If you cannot pay, four years of vesting evaporates. Combined with clause 4's one-week termination right, the Company controls the timing of this squeeze.
Market standard. 90 days is the historic default (it is required to preserve ISO status), but a growing share of private companies now offer an extended post-termination exercise period of 5-10 years for good leavers, with the understanding that ISOs convert to NSOs after 90 days. Asking for 12 months minimum is entirely reasonable and frequently granted.
Suggested redline
Vested options shall remain exercisable until the earlier of (i) the tenth anniversary of the grant date and (ii) the closing of a Change of Control, save that where employment is terminated by the Company for Cause the exercise period shall be ninety (90) days from termination. The Employee acknowledges that incentive stock options exercised more than three months after termination will be treated as non-qualified stock options.
Negotiation leverage: medium
High
8. No severance or definition of Cause
Clause 4 · line 5
“The Company may terminate on one (1) week notice.”
The contract gives the Company an unconditional right to end your employment with a week's notice and says nothing about severance, and never defines what conduct counts as cause.
Why it matters. Your entire downside protection is one week of pay — roughly $1,827 gross at $95,000/year — plus a $12,000 clawback bill if it happens before 1 March 2028. Because 'Cause' is undefined, there is also nothing to stop the Company characterising a dismissal in whatever way best suits it for the purposes of any future carve-outs you negotiate into clauses 3 and 5. Every protective term you add depends on 'Cause' being defined tightly.
Market standard. For a Senior Engineer, market is either genuine at-will with no notice, or 30 days' notice with 2-3 months' severance on a without-cause termination, plus a tightly drafted Cause definition limited to felony conviction, fraud, wilful misconduct and uncured material breach with a 30-day cure right.
Suggested redline
See redline to clause 4 above, which adds three (3) months' base salary severance on termination without Cause and a defined, cure-protected meaning of 'Cause'.
Negotiation leverage: medium
Medium
9. Monthly pay may breach Labor Code section 204
Clause 2 · line 3
“COMPENSATION. Base salary of $95,000 per annum, payable monthly.”
You are paid once a month. California generally requires wages to be paid at least twice a month, with a narrow exception for exempt executive, administrative and professional employees who may be paid monthly on or before the 26th of the month.
Why it matters. If your role is not properly classified as exempt, monthly payment is unlawful under Labor Code §204 and exposes the Company to penalties — but the immediate practical effect on you is cash-flow: a single monthly deposit of roughly $7,917 gross with no stated pay date. The contract also never states whether you are exempt or non-exempt, which determines whether you are owed overtime. At $95,000 you are above the general California exempt salary floor, but exemption also depends on duties, and 'Senior Engineer' can fall under either the professional or the computer software employee exemption depending on the work.
Market standard. Market is semi-monthly or bi-weekly payroll with a stated pay date, and an express statement of exempt/non-exempt classification. Silence on classification is common but unhelpful to the employee.
Suggested redline
2. COMPENSATION. Base salary of $95,000 per annum, payable in equal semi-monthly instalments in accordance with the Company's normal payroll practices and in compliance with California Labor Code section 204, subject to lawful deductions. The Employee is classified as an exempt employee. Base salary shall be reviewed annually, with the first review on or before 1 March 2027.
Negotiation leverage: high
Medium
10. No salary review or increase mechanism
Clause 2 · line 3
“Base salary of $95,000 per annum, payable monthly.”
The contract fixes $95,000 with no commitment to review it, no bonus scheme, no cost-of-living adjustment and no promotion path.
Why it matters. $95,000 is at or below market for a Senior Engineer in California, particularly in the Bay Area, and the equity is undefined so it cannot be valued as offsetting cash. Because clause 8 lets the Company vary terms unilaterally, the only guaranteed direction of travel is downwards. Over a 24-month lock-in created by the clause 3 clawback, the absence of a review commitment matters.
Market standard. Market is an annual review commitment (not necessarily an increase) and a stated bonus target or an express statement that no bonus is offered. Silence is common in short-form agreements but disadvantages the employee.
Suggested redline
The Employee's base salary shall be reviewed by the Company no less frequently than annually, with the first review to take place on or before the first anniversary of the Commencement Date. The Employee shall be eligible to participate in any annual bonus scheme operated by the Company on terms no less favourable than those applying to other employees at the same level.
Negotiation leverage: medium
Medium
11. Position, duties and location undefined
Clause 1 · line 2
“POSITION. Senior Engineer, commencing 1 March 2026.”
The contract names a title and a start date and nothing else — no duties, no reporting line, no work location, no hours, no remote-work entitlement.
Why it matters. Combined with clause 8's unilateral variation right, the Company can redefine your job, move your work location, or change your reporting line at will, and you have nothing in writing to point to. If you are relying on remote or hybrid work, or on a specific office, it is not protected. A material change in duties would also be the trigger for any 'Good Reason' resignation right you negotiate into clauses 3 and 5, so duties need to be documented for those carve-outs to bite.
Market standard. Market includes a short duties clause, a named reporting line, a stated primary work location with a limit on relocation distance, and (post-2020) an express statement of remote/hybrid arrangements.
Suggested redline
1. POSITION. The Employee is employed as Senior Engineer, reporting to [__], commencing 1 March 2026. The Employee's primary work location shall be [__] / remote from [__]. The Company shall not require the Employee to relocate more than thirty-five (35) miles from that location without the Employee's written consent.
Negotiation leverage: high
Medium
12. Clawback trigger includes death and disability
Clause 3 · line 4
“The Employee shall repay the gross amount of the Signing Bonus if employment ends for any reason within 24 months of the Commencement Date.”
'For any reason' is unqualified, so the $12,000 repayment obligation is triggered even if employment ends because you die or become permanently disabled.
Why it matters. A repayment demand against your estate or against you while disabled is both a real financial exposure and, in the disability scenario, potentially a discrimination issue. Standard good-leaver carve-outs cost the Company nothing to give and should not be a point of contention.
Market standard. Universal market practice is to exclude death, disability, redundancy and termination without cause from bonus clawback triggers. Their absence here is a drafting omission at best.
Suggested redline
No repayment of the Signing Bonus shall be due where employment ends by reason of the Employee's death or disability, redundancy or reduction in force, termination by the Company without Cause, or resignation by the Employee for Good Reason.
Negotiation leverage: high
Favorable
13. California governing law
Clause 9 · line 10
“GOVERNING LAW. Governed by the laws of the State of California.”
California law applies to this contract.
Why it matters. This is the most valuable clause in the document for you. California law voids the clause 6 non-compete (Bus. & Prof. Code §16600, §16600.5), limits the clause 7 IP grab (Labor Code §2870, §2872), restricts deductions from wages for the clause 3 clawback (Labor Code §221), and regulates pay frequency (§204). It also means Labor Code §925 protects you against the Company later trying to move governing law or venue out of state without your independently-counselled consent. Protect this clause — and make sure clause 8 cannot be used to change it.
Market standard. Employee-side favourable. Many employers of California workers try to designate Delaware or their home state; §925 largely prevents that for California-resident employees, and this contract does not even attempt it.
Negotiation leverage: high
Favorable
14. No arbitration or jury waiver clause
Clause 9 · line 10
“GOVERNING LAW. Governed by the laws of the State of California.”
The agreement contains no mandatory arbitration clause, no class-action waiver and no jury-trial waiver.
Why it matters. You retain the right to bring any employment claim in California state or federal court, before a jury, and to participate in class or representative actions. That is a meaningful advantage — the overwhelming majority of US tech employment agreements force disputes into confidential single-arbitrator arbitration. Watch for the Company trying to add arbitration later; clause 8 as drafted would arguably let it, which is another reason to fix clause 8.
Market standard. Well above market in the employee's favour. Note the Company may present a separate arbitration agreement at onboarding — read it before signing.
Negotiation leverage: high
Favorable
15. No confidentiality or non-solicit obligation
· line 8
“INTELLECTUAL PROPERTY. All intellectual property created by the Employee during the term, whether or not during working hours and whether or not related to the Company's business, shall vest absolutely in the Company.”
The document contains an IP clause but no confidentiality clause and no restriction on soliciting the Company's employees or customers after you leave.
Why it matters. You are not contractually barred from hiring former colleagues or approaching former customers after departure, which is unusual and useful. You remain bound by trade secret law (California Uniform Trade Secrets Act and the federal Defend Trade Secrets Act) regardless, so the absence does not give you licence to take information — but it does remove a common post-employment restraint. Expect the Company to try to add a confidentiality and invention assignment agreement at onboarding; that is normal and you should review it as carefully as this document, particularly for a non-solicit smuggled into the confidentiality definitions.
Market standard. Essentially every employer has a confidentiality/PIIA. Its absence here is more likely an oversight in a thin document than a deliberate concession, so do not draw attention to it, but do not sign an onboarding PIIA without reading it against these terms.
Negotiation leverage: high
What this contract is missing
Absent clauses cause more damage than bad ones, because the default rule
fills the gap and it rarely favours you.
- No severance entitlement on termination without cause — the entire downside is one week's pay
- No definition of 'Cause' and no notice-and-cure period before termination for misconduct
- No 'Good Reason' resignation right (material reduction in salary or duties, relocation, change of reporting line)
- No benefits provision — health, dental, vision, life or disability insurance are not mentioned
- No paid time off, sick leave, holidays or parental leave provision (California statutory sick leave applies regardless)
- No expense reimbursement clause (California Labor Code §2802 requires reimbursement of necessary business expenses regardless, including home-office costs for remote work)
- No indemnification of the Employee for acts within the scope of employment and no D&O insurance coverage commitment
- No statement of exempt vs non-exempt classification, so overtime entitlement is ambiguous
- No option strike price, plan document, vesting commencement date, post-cliff vesting frequency, fully diluted percentage, or acceleration on change of control
- No protection against company repurchase rights or transfer restrictions in the underlying option agreement
- No entire agreement clause — pre-contractual offer-letter promises and their status are undefined
- No severability clause, so the void clause 6 non-compete is not expressly cut out from the rest of the agreement
- No survival clause specifying which obligations continue after termination
- No assignment / change of control clause — the Company's rights can be transferred on a sale without your consent and with no protection for your equity or role
- No whistleblower / protected-activity carve-out (Defend Trade Secrets Act §1833(b) immunity notice, and the right to report to government agencies)
- No statement of pay date or payroll frequency compliant with Labor Code §204
- No annual salary review or bonus eligibility
- No work location, remote-work or relocation-limit provision
- No cap or limit on the Employee's liability to the Company
Dates and deadlines
Negotiation playbook
In priority order, with the words to use and what to accept if they refuse.
#1
Clause 8 has to go. I can't sign an agreement where the other side can change any term at any time — that makes everything else we agree today provisional. Let's make it 'no variation except in writing signed by both parties', with the Company free to adjust duties, reporting line and location.
Say this: A unilateral variation right over compensation and termination terms is not enforceable in any reliable way and it undermines the Company's own certainty as much as mine. Employers standardly keep flexibility over duties and location, not over pay and equity.
If they refuse: Accept a variation right expressly limited to duties, reporting line and work location, with an express carve-out that base salary, equity, notice, severance and governing law cannot be varied without written consent.
#2
Strike clause 6 entirely. California Business and Professions Code section 16600.5 makes it void and makes including it unlawful, so it does nothing for the Company and creates exposure for both of us. I'm happy to sign a proper trade secret and confidentiality obligation instead.
Say this: It is not a concession — the clause is unenforceable in California and §16600.5 gives the employee a private right of action with attorney's fees against an employer that includes or attempts to enforce it. Removing it protects the Company.
If they refuse: If they insist on keeping something, limit it to a 12-month non-solicit of the specific customers you personally serviced, and add an express clause stating the restriction does not apply to the extent prohibited by California law.
#3
The signing bonus clawback needs three fixes: pro-rate it monthly over 12 months, base it on the net amount I actually receive rather than the gross, and switch it off if the Company terminates me without cause or makes the role redundant.
Say this: A clawback is meant to protect the Company's investment against me walking away early. It shouldn't apply when the Company is the one ending the relationship, and repaying $12,000 gross when I received about $7,500 net turns a retention tool into a penalty.
If they refuse: Keep 24 months if they insist, but with straight-line monthly amortisation, net-of-tax basis, and carve-outs for termination without cause, redundancy, death and disability.
#4
Make the notice mutual at 30 days each way, and add three months' base salary severance if the Company terminates me without cause, with 'Cause' properly defined.
Say this: Three months out against one week in is a twelve-to-one imbalance. If the Company wants a long runway when I leave, it should offer symmetrical security when it's the one ending things.
If they refuse: Mutual 30-day notice with no severance, plus a defined Cause standard with a 30-day cure right; or keep the 3-month employee notice but with a matching 3-month company notice or pay in lieu.
#5
Please attach the stock plan and the option agreement, state the strike price basis and the fully diluted percentage in clause 5, confirm monthly vesting after the cliff, add double-trigger acceleration on a change of control, and extend the post-termination exercise window to ten years for anything other than a for-cause exit.
Say this: 40,000 options is not a number I can value without the denominator, and a 90-day cash-and-tax window on illiquid private shares means most departing employees simply lose what they earned. Extended exercise windows are now common practice at venture-backed companies.
If they refuse: Minimum: the fully diluted percentage stated in the contract, a 12-month post-termination exercise window, and single-trigger acceleration of the 12-month cliff if the Company is sold before 1 March 2027.
#6
Clause 7 needs the California Labor Code section 2870 carve-out and the section 2872 written notice, plus a Schedule 1 where I can list inventions I already own.
Say this: Section 2872 requires the employer to give this notice, so adding it brings the Company into compliance. The carve-out only covers work done entirely on my own time, on my own equipment, unrelated to Acme's business — nothing the Company actually needs.
If they refuse: Accept the broad assignment but insist on the §2870 notice language and a prior-inventions schedule listing your existing personal projects.
#7
Add the standard housekeeping: benefits, PTO, expense reimbursement under Labor Code 2802, employee indemnification and D&O cover, severability, survival, entire agreement, and an annual salary review with the first review at 1 March 2027.
Say this: These are administrative terms every employer of California staff already has in its handbook; putting them in the contract just makes the document complete.
If they refuse: Cross-reference the employee handbook and confirm in writing that the benefits, PTO and reimbursement policies apply to you from day one, and add severability and entire-agreement clauses at minimum.
Questions to put to the other side
- How many shares are outstanding on a fully diluted basis, and what percentage do 40,000 options represent? What was the most recent 409A valuation and preferred round price?
- Will the options be ISOs or NSOs, what is the expected strike price, and can I see the stock plan and form of option agreement before I sign?
- After the 12-month cliff, does the remaining 75% vest monthly, quarterly or annually?
- Does the option agreement contain any company repurchase right over vested shares on termination, and if so at what price?
- Am I classified as exempt or non-exempt, and under which California exemption?
- What benefits, PTO, sick leave and parental leave apply, and from what date? Please provide the handbook.
- On what date each month is salary paid?
- Will I be asked to sign a separate confidentiality/invention assignment agreement or an arbitration agreement at onboarding? If so, please send them now so both documents can be reviewed together.
- What is my work location, and is remote or hybrid work agreed? Who will I report to?
- Given that the clause 6 non-compete is void under Business and Professions Code sections 16600 and 16600.5, is the Company willing to confirm in writing that it will not seek to enforce it?
- If the Company is acquired before my cliff date, what happens to the unvested options?
- Does the Company indemnify employees for acts within the scope of employment, and does its D&O or E&O policy cover my role?
This report is automated contract analysis, not legal advice, and no attorney-client relationship is created by using it. Have a qualified lawyer in the relevant jurisdiction review anything you are about to sign.