An employment contract may state the amount of liquidated damages to be paid if the contract is breached. Upon a party's breach, the other party will recover this amount of damages whether actual damages are more or less than the liquidated amount.
If the agreed-upon liquidated damage amount is unreasonable, the Court will hold the liquidated damage clause to be void as a penalty. If the Court declares the clause to be void, the employer would have to prove the actual damages.
Arkansas Liquidated Damage Clause in Employment Contract Addressing Breach by Employee: Explained The Arkansas liquidated damage clause in employment contracts provides a means of addressing potential breaches committed by employees. This clause stipulates the amount of compensation the employee agrees to pay the employer in the event of a breach of contract. By including this provision, employers can protect their business interests and ensure that employees adhere to the terms and conditions specified in their employment agreements. The primary purpose of a liquidated damage clause is to establish a predetermined amount of damages in case of a breach, negating the need for extensive litigation processes to determine the actual damages suffered. The provision allows employers to quantify the potential harm resulting from a breach and promotes efficient resolution of disputes. Arkansas recognizes the enforceability of liquidated damage clauses, provided they meet certain criteria. The agreed-upon amount in the clause must reasonably approximate the actual damages the employer is likely to face as a result of the employee's breach. It should not impose a penalty or amount that is clearly disproportionate to the injury suffered. Different Types of Arkansas Liquidated Damage Clauses in Employment Contracts Addressing Breach by Employee: 1. Non-Compete Clause: This type of liquidated damage clause restricts employees from engaging in competitive activities or working for competing businesses within a specified geographical area and timeframe after their employment ends. In case of a breach, the employer might be entitled to seek damages to compensate for potential loss of business, customer relationships, trade secrets, or other harm caused by the employee's competition. 2. Confidentiality Clause: This clause addresses breaches of confidentiality obligations, where an employee discloses or misuses confidential information during or after their employment. The liquidated damages may compensate the employer for potential loss of business opportunities, loss of trade secrets, or other damages caused by the breach of confidentiality. 3. Non-Solicitation Clause: This provision prevents employees from directly or indirectly soliciting the employer's clients, customers, or employees for a defined time period after the termination of their employment. A breached non-solicitation clause might trigger liquidated damages to account for the potential loss of business opportunities, damage to client relationships, or the cost of hiring and training new employees. It is crucial to note that the enforceability of liquidated damage clauses in Arkansas is subject to judicial scrutiny. Courts in Arkansas examine the reasonableness and proportionality of the agreed-upon damages outlined in the clause. If the damages appear excessive or unrelated to the actual harm suffered by the employer, the court might view them as a penalty rather than legitimate compensation, rendering them unenforceable. In conclusion, the Arkansas liquidated damage clause in employment contracts addressing breach by employees serves to protect employers' interests. By specifying the potential compensation amount in case of a breach, employers can mitigate the need for extensive litigation and efficiently resolve disputes. Different types of liquidated damage clauses, such as non-compete, confidentiality, or non-solicitation clauses, further tailor the remedies available to employers, depending on the nature of the breach.
