Remember: A Severance Agreement Might Not Be Enforceable Without Consideration (Updated 2026)
What is severance agreement consideration?
Consideration is something of value that your employer gives you that you weren’t already entitled to as part of your job.
It could be a lump-sum severance payment, extended salary, or benefits.
You get it in exchange for:
- Signing the severance agreement, and
- Giving up your right to sue your company for things that happened when you worked there. This is called a release of claims.
Guidance from a severance agreement attorney in San Francisco
If your severance agreement doesn’t have consideration, it might not be legally enforceable. This means the agreement may not hold up in court, and you could still have the legal right to sue your company down the line.
So you don’t have to sign your severance agreement if you don’t want to.
What Severance Agreement Consideration Is
A severance agreement is a contract. To be enforceable, it should generally include consideration.
What California law says: A contract without consideration is generally void unless exceptions apply (California Civil Code § 1605).
A legally valid severance agreement typically includes:
- An offer: The severance package the company is offering you, which might include unpaid vacation, accrued PTO, etc.
- Consideration: What your company is giving you that’s new or extra — things you won’t get unless you sign the agreement
Consideration might be:
- A lump-sum severance payment: A payment you get after leaving your company, usually based on how long you worked there — for example, $10,000 in one lump sum
- Extended salary: Payments you get over a set number of weeks or months after leaving the company
- Extended benefits: Benefits you got in your job that continue for a set period — for example, continuation of your health insurance for 6 months
- Extra benefits: Benefits that are new, such as COBRA health insurance or outplacement services
Important: Mutual Release of Claims
Your severance agreement might include a mutual release of claims. This means:
- You give up your legal right to sue your employer, and
- Your employer gives up their legal right to sue you.
Even if your employer doesn’t have any legal reason to sue you, a mutual release can sometimes still count as valid consideration, depending on the circumstances. However, if mutual release is the only thing offered to you, it might not provide enough value on its own.
Talk to a severance agreement attorney in San Francisco to learn more.
Important: Release of Age Discrimination Claims
Older employees (those aged 40 or over) have 21 days to review a severance agreement that includes a release of age discrimination claims, and 7 days to revoke it if they sign it. This is required by the Age Discrimination in Employment Act (ADEA).
What Severance Agreement Consideration Isn’t
Just because your employer includes money or benefits in your severance agreement, it doesn’t always mean the agreement has consideration.
Consideration is typically not things you’re already entitled to, such as:
- Your final paycheck (required under California law)
- Bonuses or commissions you already earned under your employment agreement
- Stock options you already earned or that your employer promised you
- 401(k) contributions that were part of your job
Basically, anything that’s not new or extra may not count as severance agreement consideration under California law.
Why You Need a Severance Agreement Negotiation Attorney in San Francisco
Don’t sign away legal protections you may need later. There might come a time when you want to sue your employer for something that happened in your job. A severance agreement could take that legal right away from you.
What we recommend: Get a Bay Area severance agreement attorney to go over the document before signing anything. Stoll & Haynes, which specializes in California employment law, will:
- Investigate every clause
- Confirm whether your agreement is legally valid
- Spot terms you might want to negotiate, such as extra pay or benefits
- Make sure you don’t leave money or rights on the table
Severance Benefits Claims Attorney San Francisco FAQs
Consideration is something of value that your employer gives you that you weren’t already entitled to, such as a lump-sum severance payment or extended salary. You get it in exchange for signing a severance agreement and agreeing not to sue your employer in the future.
Under California law, a severance agreement generally isn’t enforceable unless both sides exchange something of value. If your employer doesn’t offer you something of value, there might not be valid consideration, so your agreement may not hold up in court.
Consideration might include a lump-sum severance payment, salary continuation, extended or COBRA health insurance, or other perks.
A release of claims means you give up your legal right to sue your employer for anything that happened during your employment. You might rely on this protection in the future, so contact a severance agreement negotiation attorney in San Francisco before signing.
Your employer will usually give you time to review it. Federal law gives older employees (aged 40 and above) 21 days to look over a severance agreement that includes a release of age discrimination claims.
Yes, many terms may be negotiable, such as extra pay or extended benefits. An experienced severance negotiation attorney can negotiate on your behalf to get better terms.
Additional Resources From Stoll & Haynes
- Severance Agreement Attorney in San Francisco
- Leaving Your Job? Don’t Sign a Severance Agreement Just Yet
- What To Do if You Receive a Severance Agreement
Disclaimer: This article is for general information purposes only and does not constitute legal advice. Reading it does not create an attorney-client relationship. If you need advice about your specific situation, please contact Stoll & Haynes directly.