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In CA, is an agreement by the employer not to contest an unemployment claim valid consideration for a severance agreement?

Anaheim, CA |

As an employer, we had an employee relapse, admit to drug use, and as a result was absent/tardy excessively. We terminated the employee. We hear from regular customers that the employee is threatening to bring bogus claims to hurt our business -- We believe the employee's goal is to get unemployment insurance.

Our questions are as follows: (1) in CA, is an agreement by the employer not to contest an unemployment claim valid consideration for a severance agreement; (2) if not, is drafting a letter of recommendation for her valid consideration; (3) if not, what is the lowest amount of money that is valid consideration; (4) how much does it cost to draft a severance agreement.

We would rather just make this employee "go away" and not risk having to defend against a desperate drug abuser.

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Attorney answers 3


As the employer, you are required by law to provide truthful statements regarding unemployment claims. This must be separate from any agreement in which you enter with your employee to protect the company from even bogus claims.

Here, you have a few options. One is to let the employee know in no uncertain terms that you will take legal action against him/her if the conduct continues. If you feel that only money will stop this employee, then, yes, a severance agreement is the right tool. Under such an agreement, the employee will waive most all possible employment claims against your company. You can choose any amount in the severance agreement so long as it is accepted by the employee. You should be able to have the agreement drafted for less than five hundred dollars. Let me know if I can help further. Good luck.

Disclaimer: none of the information contained above is intended as legal advice and, accordingly, should not be relied upon as such. No attorney-client relationship is formed by this communication. Attorney is licensed in California only.


Your company would benefit from legal advice obtained in a confidential setting upon review of all relevant facts.

That said, Civil Code section 1605 defines “good consideration” as follows:

“Any benefit conferred, or agreed to be conferred, upon the promisor, by any other person, to which the promisor is not lawfully entitled, or any prejudice suffered, or agreed to be suffered, by such person, other than such as he is at the time of consent lawfully bound to suffer, as an inducement to the promisor is a good consideration for a promise.”

An agreement not to contest a UI claim would not constitute good consideration because the EDD can deny UI claims without any objection by the employer and all parties have an obligation to provide truthful statements. Thus agreeing not to contest a UI claim is not a "benefit conferred."

Drafting a letter of recommendation may constitute valid consideration, but consider whether in so doing you would be making misrepresentations to prospective employers. I can foresee some unlikely ways in which that may pose legal problems for you down the road.

The cost to draft a severance agreement depends on the complexity of the circumstances. Call a local employment law attorney to discuss.

Good luck.

This answer is a general interpretation of the law and is not fact specific to your case. Likewise it does not create an attorney-client relationship. You should seek an attorney for a review of your specific facts and documents.


CA law does not require that employers pay severance pay UNLESS there is a contract with the employee requiring severance pay or if the employer has a policy or practice of doing paying severance pay to fired employees. I strongly urge you to call an employment law attorney to discuss and have her/him draft the severance agreement to protect you from the "bogus" claims you address in your question. I believe you can retain counsel to draft a solid agreement for approx. $300-400 and it is a business tax write-off. Your are wise in asking about valid consideration for a contract, but your question also infers that you may be confused about what "valid consideration" is. Instead, you should focus on having a severance agreement that is inclusive of all potential claims by your former employee. There are many, many claims that should be addressed in a rock solid severance agreement, but more facts need to be known. Call an employment law attorney to discuss.