An offer letter isn't a formality — it's a contract that governs your employment for years. The salary is visible. The clauses that restrict your IP, limit your exit, or cap your equity payout are buried in the fine print. Here's what to look for.
1. Invention assignment — does it capture your side projects?
The invention assignment clause requires you to assign ownership of inventions to your employer. The red flag is overbroad language — 'all inventions, whether or not related to Company's business' — which can legally capture side projects you build on your own time, on your own equipment. California, Delaware, and a few other states have statutory limits on this. Most states don't. The fix: ask for a prior inventions carve-out listing your existing projects before you sign. Scrutr flags this automatically.
2. Non-compete scope — is it enforceable where you live?
Non-compete enforceability varies dramatically by state. California largely prohibits them. Minnesota, North Dakota, and Oklahoma have strong restrictions. Most other states enforce 'reasonable' non-competes. The red flags in non-compete language are: industry scope that covers more than your actual role, geographic scope that's broader than where you work, duration longer than 12 months. Even if unenforceable, the threat of litigation creates a chilling effect on your next job search.
3. Signing bonus clawback — what if you leave in year one?
A signing bonus clawback requires you to repay the signing bonus if you leave before a specified period. This is common and often enforceable. The red flags: clawback that applies even if the company terminates you (not just if you resign), all-or-nothing clawback rather than pro-rated, clawback period longer than 12 months. Ask specifically: does the clawback apply if I'm laid off?
4. Equity vesting — cliff length and acceleration
Standard equity vesting is a 4-year schedule with a 1-year cliff. Red flags: cliff longer than one year, no acceleration on acquisition (single-trigger vs. double-trigger matters), vesting schedule that resets if you're promoted. Double-trigger acceleration requires both an acquisition AND your termination — which is significantly less employee-friendly than single-trigger. This is often the difference between tens of thousands of dollars.
5. At-will vs. termination for cause
Most US employment is at-will — either party can end the relationship at any time. The red flag is when a contract appears to offer protections but includes broad 'cause' definitions that effectively give the employer unlimited termination rights anyway. If the offer includes 'for cause' protections, read the definition of 'cause' carefully. If it includes anything like 'failure to meet performance expectations at company's sole discretion,' the protection is largely illusory.
6. Non-solicitation — can you hire your former colleagues?
Non-solicitation clauses restrict your ability to hire former colleagues at a new employer. These are more commonly enforced than non-competes. Red flags: duration longer than 12 months, scope that includes anyone you've ever worked with rather than just direct reports, language that covers clients you haven't personally worked with.
7. Arbitration clause — where disputes go
Most offer letters include mandatory arbitration clauses that require employment disputes to be resolved through private arbitration rather than court. Red flags: class action waiver (prevents you from joining a group lawsuit), arbitrator selected solely by the employer, you pay arbitration fees. California has specific restrictions on arbitration clauses in employment contracts.