Offer Letter Red Flags: Six Things to Check Before You Sign
This page is general information, not legal advice.
An offer letter is usually shorter than a full employment contract. It may only list your title, start date, pay and a few conditions, and leave the details to policies, plans and separate agreements you see later. That short length can make it look harmless. What the letter leaves out, or sends to other documents, can matter as much as what it says. This page covers six things to check before you sign. For each one you get an illustrative example, why it matters, and wording you can propose. Employers often won't rewrite their template, but many will confirm key points in writing if you ask before you accept.
The example clauses below are illustrative. They are not taken from any real company's offer letter.
1. Bonus or commission described as "discretionary"
A typical clause might read: "You will be eligible for an annual bonus of up to 20% of base salary. Bonus awards, if any, are at the Company's sole discretion and require active employment on the payment date."
Why it works against you
"Eligible for" and "up to" are not promises. If the bonus is entirely discretionary, the company can pay nothing even when you hit every target. The active-employment condition means that if you leave or are let go shortly before the payment date, you may lose a bonus you spent the year earning. If the bonus was a big part of why you accepted, this matters.
What to ask for instead
Sample wording to propose: "Your annual bonus target is 20% of base salary, based on the written criteria in the bonus plan provided to you before your start date. If your employment ends without cause after the end of the bonus year, you will receive the bonus earned for that year."
2. Equity mentioned without the details
A typical clause might read: "Subject to approval by the Board, you will be granted an option to purchase shares of the Company's common stock, on terms set by the Company's equity plan."
Why it works against you
"Subject to approval" means the grant may never happen, or may happen later at a higher price. The letter may not say how many shares, what percentage of the company that is, the vesting schedule, or what happens to unvested equity if the company is sold or you are let go. Everything that matters sits in a plan you may not have read.
What to ask for instead
Sample wording to propose: "The Company will recommend that the Board grant you an option for [number] shares at its next regular meeting. The option will vest on the schedule stated in the attached grant summary. The Company will provide a copy of the equity plan before you accept this offer."
3. Sign-on bonus or relocation repayment
A typical clause might read: "If your employment ends for any reason within twenty-four (24) months of your start date, you agree to repay the full sign-on bonus and all relocation expenses paid on your behalf."
Why it works against you
"For any reason" can include being laid off or let go through no fault of your own. Full repayment, rather than a reduced amount over time, means leaving one day early costs the same as leaving on day one. The bonus may also have been taxed already, so you could be repaying more than you actually received. Rules on deductions and repayment vary by jurisdiction.
What to ask for instead
Sample wording to propose: "If you resign voluntarily or are terminated for cause within 12 months of your start date, you will repay a pro-rated share of the sign-on bonus, reduced for each full month worked. No repayment is due if the Company ends your employment without cause."
4. Contingencies that let the employer pull the offer
A typical clause might read: "This offer is contingent on satisfactory completion of background and reference checks, and on any other conditions the Company deems appropriate. The Company may modify or withdraw this offer at any time."
Why it works against you
Background checks are common, but "any other conditions the Company deems appropriate" has no limit, and "modify or withdraw at any time" can apply even after you accept. If you resign from your current job before the contingencies are cleared, you could end up with neither job. See job offer red flags for warning signs earlier in the process.
What to ask for instead
Sample wording to propose: "This offer is contingent only on the background check described above. The Company will confirm in writing when all contingencies are satisfied, and will not change the terms of this offer after you accept without your written agreement."
5. Agreements you only see on your first day
A typical clause might read: "As a condition of employment, you will be required to sign the Company's standard Confidentiality and Invention Assignment Agreement and to comply with all Company policies, as amended from time to time."
Why it works against you
The offer letter may be short because the hard terms are in documents you haven't seen. These first-day agreements often include an IP assignment that may reach side projects, a non-compete, or a mandatory arbitration clause that waives your right to go to court. By the time you see them, you may have already resigned from your old job. Whether these restrictions can be enforced depends on where you work.
What to ask for instead
Sample wording to propose: "Before I accept, please send copies of every agreement and policy I will be asked to sign as a condition of employment, including any confidentiality, invention assignment, non-competition or arbitration agreement."
6. An "entire agreement" clause that erases verbal promises
A typical clause might read: "This letter constitutes the entire agreement between you and the Company and supersedes all prior discussions, representations or promises, whether written or oral."
Why it works against you
During hiring, recruiters and managers often promise things like remote work, a review after six months, a title change or extra leave. If those promises aren't in the letter, this clause can mean they don't count. Combined with at-will language, which in some places lets either side end the job at any time, a verbal promise may give you very little to rely on.
What to ask for instead
Sample wording to propose: "In addition to the terms above, the Company confirms: [remote work arrangement / review date / other agreed terms]. These terms form part of this agreement."
Also worth a look
Check whether the company can change your title, duties, location or schedule "as business needs require," and whether pay is described as annual or hourly and exempt or non-exempt. Look at how long confidentiality obligations survive after you leave. If the letter mentions severance, read what you would have to give up to receive it. See severance agreement red flags. Employment rules vary a lot by country, state and province, so a term that is normal in one place may be restricted in another.
Scan your own offer letter free
Offer letters look simple, but one word like "discretionary" or "contingent" can change what you are actually promised. Paste your offer letter or employment contract into the ScanMyTerms employment contract review. In about a minute it flags clauses that work against you, with the exact wording and what to ask for instead. The free preview shows the risk count and the first two findings, and the full report is a one-time $5 per document.
This page is general information, not legal advice. For decisions about a specific offer, talk to a qualified employment lawyer where you live.
Sources
- All clause examples on this page are illustrative and written for this guide. They are not quoted from any real company's offer letter or employment agreement.