Contract Red Flag Scanner — Methodology
The Contract Red Flag Scanner uses AI to analyze contract text and identify clauses that commonly create problems for employees and freelancers. This page documents how it works, what it looks for, how it assigns severity, how your data is handled, and where its limitations lie.
How the analysis works — data flow
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You paste contract text into the browser and select contract type and jurisdiction.
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Your browser sends the text to SalaryParity's serverless API endpoint (api/scan.js hosted on Vercel).
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The API constructs a structured prompt and sends it to Anthropic's Claude API (model: claude-haiku-4-5-20251001) with your contract text and a detailed analysis instruction.
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Claude returns a structured JSON response containing flags, a score, a summary, and suggested questions.
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The API returns the analysis to your browser, which renders the results. The contract text is not stored at any point.
What the scanner looks for
The AI is instructed to identify and evaluate clauses in these categories:
Non-compete clausesDuration, geography, scope, and whether restricted activity is proportionate to the role.
Intellectual property assignmentWhether the clause extends to work done outside employment on personal equipment.
Arbitration and jury trial waiversMandatory arbitration, class action waivers, who bears arbitration costs.
Termination conditionsAt-will with no severance, for-cause definitions, notice requirements.
Confidentiality durationIndefinite vs time-limited confidentiality obligations post-employment.
Non-solicitation scopeCoverage of colleagues, clients, and how long after departure.
Payment terms (freelance)Net-90+ terms, late payment provisions, right to stop work for non-payment.
Work for hire clausesWho owns deliverables; portfolio rights; modification rights.
Signing bonus clawbacksRepayment conditions, proration, whether triggered by company-initiated termination.
Unilateral modification rightsWhether the company can change terms without employee consent.
How severity levels are assigned
🚨 Red flag: A clause that is clearly harmful, legally risky, or substantially one-sided in ways that could significantly affect the signing party's career, finances, or legal rights. Examples: non-compete covering an entire industry for 3 years nationwide; IP assignment covering all personal work; mandatory arbitration with company-chosen arbitrators.
⚠️ Yellow flag: A clause that is common and not inherently unreasonable, but where negotiation or clarification is advisable. Examples: net-60 payment terms; 12-month non-compete limited to the immediate market; at-will termination with no severance in a senior role.
✅ Green flag: A clause that is explicitly favorable to the signing party. Examples: severance equal to 3+ months; no non-compete; IP assignment clearly limited to work done during employment using company resources.
The overall score (0–100)
The score reflects the AI's holistic assessment of the contract's overall quality from the signing party's perspective. A score of 70+ indicates a relatively clean contract with few or no serious concerns. A score below 40 indicates significant red flags that warrant careful attention before signing. The score is generated by Claude based on the pattern and severity of flags identified — it is not calculated mechanically from the number of flags.
Data handling and privacy
- Contract text is transmitted over HTTPS to our Vercel API endpoint
- The API does not log or store contract text — it is passed directly to Anthropic's API and discarded after the response is returned
- Anthropic's data handling for API calls is governed by Anthropic's privacy policy at anthropic.com/privacy
- We recommend redacting sensitive personal identifiers (SSN, bank details, personal health information) before pasting contract text
- The tool is not suitable for processing contracts containing trade secrets where any third-party transmission is prohibited
Known limitations
Not legal advice: AI analysis can misinterpret complex or unusual contract language, miss jurisdiction-specific nuances, or flag standard clauses as unusual based on phrasing. The scanner is a first-pass screening tool. For high-stakes contracts — executive employment, equity agreements, non-competes in competitive industries — consult a qualified employment attorney.
- The scanner evaluates language it can read — it cannot evaluate what is missing from a contract (e.g., the absence of any IP assignment clause is not flagged as unusual)
- Jurisdiction-specific enforceability is addressed at a general level — the scanner knows California doesn't enforce non-competes, for example, but detailed state-by-state analysis is beyond its scope
- Highly technical contracts (software licensing, patent assignment, complex equity agreements) may be analyzed less accurately than standard employment agreements
- The scanner processes up to 8,000 characters of contract text per analysis — very long contracts should have their most important clauses pasted in separately
- Results vary between analyses of the same text due to the probabilistic nature of language models
Use the tool
Paste any contract or job offer to get an instant flag breakdown in plain English.
Open Contract Scanner →