The $10 Mistake That Could Void Your Employment Agreement
I was sitting in a board meeting last week when it came up that an organization's employment agreements weren't enforceable. Not because they were poorly written. Not because anything sinister had happened. Because nobody had ever done consideration payments.
Turns out, it's more common than you'd think. Which is exactly why I'm writing this.
You did everything right. You prepared an employment agreement for a new hire or a role change, or maybe you run an annual process where everyone signs a refreshed agreement. It covers termination, confidentiality, the things you care about. You feel good about it.
Then something goes sideways, and you find out the agreement you were counting on? Not enforceable.
Why? No consideration.
It is one of the most common and most costly oversights in employment practice, and it happens to smart, well-intentioned employers all the time. So let's talk about what consideration actually is, when you need it, and what it looks like in practice.
Before we go further, a disclaimer …
I am not an employment lawyer. Nothing in this post is legal advice, and the details below are written with a Canadian (specifically BC) lens. If you are outside Canada, employment law looks different where you are, and you should be working with a qualified lawyer in your jurisdiction. Even if you are in BC, please consult with an employment lawyer before making changes to your agreements. This is foundational stuff, and getting it wrong is expensive.
So What Is Consideration?
In contract law, consideration is what each party gives in exchange for the other's commitment. For a contract to be binding, both sides need to receive something of value.
In an original employment agreement, this is straightforward. The employer offers a job, the employee accepts it. Both parties gave something. Done.
The problem arises when you ask an existing employee to sign a new or updated agreement and offer them nothing in return. They already have the job. What are they getting in exchange for agreeing to new or more restrictive terms? If the answer is nothing, a court may find that agreement unenforceable for lack of consideration.
When Does This Come Up?
More often than you might think. Here are the most common situations to be aware of:
Annual re-signing processes. Some organizations ask employees to sign updated employment agreements on a regular cycle. If employees are simply re-signing an updated document with no new benefit offered in exchange, those agreements may not hold up. This is exactly the scenario that came up in that board meeting, and it was a hard lesson learned.
Role changes. When an employee's responsibilities shift significantly, their title changes, or their reporting structure is reorganized and you are updating their agreement to reflect that, it is worth talking to your employment lawyer about whether a consideration payment is appropriate.
Promotions. Whether an existing compensation change, like a raise tied to a promotion, counts as consideration depends heavily on timing and how it is structured. This is genuinely fact-specific territory, and courts have seen it differently depending on the circumstances. Do not assume. Talk to your lawyer.
Changes to exempt vs. non-exempt classification. This one deserves its own mention. Under BC's Employment Standards Act, some employees qualify for overtime pay and others do not. Whether an employee is exempt depends on the nature of their role, not just their title or seniority. An employee can move from non-exempt to exempt status through a role change, a shift in job duties, or a move into a sector or classification that qualifies as exempt under the Act. This is a material change to their working conditions, and it is a clear trigger for revisiting the employment agreement with a consideration payment.
New restrictive clauses. Adding non-solicitation or non-competition language to an existing agreement, or any clause that meaningfully limits what an employee can do, requires genuine exchange. You are asking for something significant. A consideration payment helps demonstrate the agreement was entered into fairly.
How Much Does Consideration Need to Be?
This surprises a lot of people. Consideration does not need to be large. Courts have upheld employment agreements where the payment was as little as $10. The legal requirement is that something of value changed hands, not that it was substantial.
That said, the amount should be proportionate to what you are asking the employee to agree to. A nominal amount may be appropriate for a routine agreement update. It may feel less defensible if you are asking a senior leader to accept significant restrictions on their future career.
The right amount for your specific situation is something your employment lawyer can help you determine. And please, do not script your own language around consideration payments without that guidance.
Invest in Getting Your Agreement Right
If your employment agreements have not been reviewed by an employment lawyer, now is a good time to make that investment. A well-drafted, legally vetted employment agreement is typically a one-time cost, and it gives you a solid, defensible foundation to work from. At that same time, your lawyer can walk you through when consideration payments apply and how to handle them in your specific context.
It is a small investment relative to the cost of finding out your agreements do not hold up when you need them most.
The Bottom Line
Employment agreements are only as strong as the legal foundation they are built on. Consideration is part of that foundation. It is a detail that is easy to overlook and significant to miss.
If you have been running annual re-signing processes, navigating role changes, or updating classification status without thinking about consideration payments, you are in good company. Most employers find out the hard way. You do not have to.
Jody Bomhof is the Founder of Momentum Talent Solutions Inc., a boutique Canadian contract talent placement firm specializing in strategic placements for HR, Marketing, and AI professionals. When she is not writing about the HR details that keep employers up at night, she is out on the golf course or the mountain bike trails, probably thinking about them anyway.
Have questions about building stronger HR practices in your organization? Reach out at info@momentumtalent.ca. And for the legal stuff? Please call a lawyer. Truly.
