Consideration is the technical requirement that turns a handshake into a contract. Each side has to give something of value; otherwise the deal is just a gift, and courts can refuse to enforce it. In employment, the issue rarely comes up at hire because the job and the paycheck are obvious consideration on both sides. It's everything after that gets interesting. Post-hire noncompetes, updated severance terms, and mid-employment arbitration agreements all run into the question: what did the employer give in exchange? Getting this wrong is how enforceable contracts turn into unenforceable ones, usually in the middle of a lawsuit.
What Counts as Consideration in Employment Contracts At hire, consideration is usually easy to identify: the employer agrees to employ and pay; the employee agrees to work and follow the company's policies. If the offer letter also includes noncompete, nondisclosure, and IP assignment terms, the job itself is the consideration that supports them. That clean structure is why most courts enforce hire-date agreements without much trouble.
Things change after the start date. If an employer asks an existing employee to sign a new restrictive agreement, the employee is already working and already being paid, so the original consideration is spent. Something new has to change hands for the new terms to stick.
The Post-Hire Consideration Problem Courts in most states require fresh consideration when an employer introduces a new noncompete, arbitration agreement, or other restrictive covenant mid-employment. What counts as fresh consideration varies. A promotion with higher compensation usually works. A signing bonus or equity grant usually works. Continued employment alone works in some states (like Illinois for agreements signed with at least two years of continued employment) but not in others (like Pennsylvania and Massachusetts, where courts require more).
The safest approach is to pair new agreements with something meaningful: a raise, bonus, equity, or expanded benefits. Document the exchange in writing so the consideration is clear on the face of the agreement.
Does a Noncompete Need More Consideration Than a Confidentiality Agreement? Often yes. Courts scrutinize noncompetes more heavily than confidentiality provisions because they restrict future earnings. A noncompete that relies on thin consideration (like $50 or a one-time $1,000 payment) gets struck down regularly. Confidentiality agreements tend to survive lighter consideration because they protect existing company property rather than restricting the employee's future livelihood.
What Happens When Consideration Is Inadequate The contract becomes unenforceable in whole or in part. An employer trying to enforce a noncompete without fresh consideration typically loses on summary judgment. A separation agreement signed without additional consideration beyond what the employee was already owed can be unwound. Worse, if the employee already performed under the agreement (returned company property, waived a claim), the employer may have given up something while getting nothing legally enforceable in return.
Building Employment Agreements With Solid Consideration Three rules. First, pair every new restrictive agreement with something meaningful the employee didn't already have: raise, promotion, bonus, equity, or enhanced benefits. Second, document the consideration on the face of the agreement. Don't rely on the reader to infer it from context. Third, review consideration standards by state since the rules vary widely and 2026 brought new legislation in several states tightening noncompete requirements. Tie the review into your broader onboarding and performance review processes so agreement updates happen at natural trigger points.
The FTC's 2024 noncompete rule continues to face legal challenges and is not in effect as of early 2026; the current status is tracked at ftc.gov/legal-library/browse/rules/noncompete-rule . The Department of Labor's overview of enforceable employment contracts is at dol.gov/general/topic/wages , and state-specific noncompete guidance is maintained by each state attorney general's office.
.svg)
.svg)
