Startup Job Offers and Employment Contracts
An offer letter gets the yes. The employment contract protects the company for years. For startups, three clauses matter most: IP assignment, confidentiality and termination.
What should a startup employment contract include?
Job title and duties, start date, pay and benefits, any stock options (referring to the plan), hours and location, probation, vacation, confidentiality, assignment of intellectual property, non-solicitation where enforceable, and termination terms. Sign it before the start date; changing terms after someone starts is harder.
| Term | Offer |
|---|---|
| Salary | $145,000 a year |
| Options | 12,000 options, 4-year vesting, 1-year cliff |
| Start | November 3, 2026 |
| Probation | 3 months |
| Location | Remote, Ontario |
| Signs with | Employment agreement incl. IP and confidentiality |
Why does IP assignment matter so much?
Investors and acquirers check that the company owns its code, designs and content. Every founder, employee and contractor should sign an assignment of inventions and IP, with confidentiality. Contractors are not covered by default, which is one more reason to get the employee-or-contractor call right (CRA employment status tests). Fix gaps before a financing; see the data room checklist.
Why write termination terms into the contract?
In most Canadian provinces, an employee without a valid termination clause can claim reasonable notice under common law, which can be much longer than the statutory minimum. A clear, enforceable clause limits notice to the employment standards minimum or a set formula. Courts strike down clauses that fall below the minimums, so have a lawyer draft it. The minimums are covered in terminating an employee.
| Canada | United States | |
|---|---|---|
| Default rule | Notice or pay in lieu required; common law reasonable notice if no valid clause | At-will in most states: either side can end it, subject to discrimination and contract law |
| Probation | Common, with shorter notice where the contract and law allow | Common, but at-will applies anyway |
| Non-competes | Ontario bans most non-competes for employees | Varies by state; some ban them |
How should offers handle stock options?
State the number of options, the vesting schedule and cliff, and that the grant is subject to the option plan and board approval. Don’t promise a percentage of the company or a value. Explain how options work in employee stock options, and how they fit total pay in compensation and benefits.
No signature, no start date.
Signing after someone starts weakens the contract. Make the signed agreement a condition of the first day.
What should you do now?
- Have a lawyer draft one standard employment agreement per country.
- Use a separate IP and confidentiality agreement for contractors.
- Check every current team member has signed one.
- Keep offers to options counts, not percentages or values.
- Store signed copies in one place.
Run the hiring process first: startup hiring process.
Frequently asked questions
What should be in a startup employment contract?
Duties, pay, options, location, probation, vacation, confidentiality, IP assignment and termination terms.
Do contractors need an IP assignment?
Yes. Without one, a contractor may own what they create.
Are non-competes enforceable in Canada?
Ontario bans most employee non-competes, and courts elsewhere enforce them rarely. Non-solicitation clauses are more common.
What is at-will employment?
The US default in most states: employer or employee can end employment at any time, subject to discrimination and contract law.
Should an offer letter promise a percentage of the company?
No. State the number of options and refer to the option plan.
When should the contract be signed?
Before the start date, ideally with the offer.
Sources & further reading
Employment and tax rules change. These government sources let you check the current requirements directly.