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 employee would have to prove the actual damages.
The Arkansas Liquidated Damage Clause in an Employment Contract is a provision that addresses breaches committed by an employer and specifies the compensatory damages that will be awarded to the employee in case of such a breach. This clause outlines the predetermined amount of compensation agreed upon by both parties at the time of contract formation, or alternatively, a method to calculate damages based on specific criteria. Under Arkansas law, there are two main types of liquidated damage clauses that can be included in an employment contract to address breaches by the employer: 1. Fixed Amount Liquidated Damage Clause: This type of clause stipulates a pre-determined fixed compensation amount that the employer will be liable to pay in case of a breach. The agreed-upon damages are typically based on factors such as the employee's salary, position, potential loss of benefits, or any specific harm caused by the breach. This approach provides certainty to both parties regarding the damages to be awarded. 2. Formula-Based Liquidated Damage Clause: Alternatively, the employment contract may establish a formula or a method to calculate the damages in case of a breach. This method requires the employer to pay damages based on criteria such as the number of years of service, the employee's average salary, or any other relevant factors considered important by both parties. This approach is flexible and allows for a more customized assessment of damages based on the specific circumstances of the breach. It is important to note that the enforceability of liquidated damage clauses in Arkansas is subject to certain legal requirements. The courts will typically scrutinize such clauses to ensure they are reasonable and not overly punitive. To be enforceable, the specified damages in the clause must be a reasonable estimate of the harm that may result from a breach by the employer. If the courts find that the liquidated damage clause is excessive or does not bear a reasonable relationship to the potential harm caused, it may be deemed unenforceable, and the damages will need to be determined in court based on actual losses suffered by the employee. In conclusion, the Arkansas Liquidated Damage Clause in an Employment Contract Addressing Breach by Employer provides a mechanism for both parties to establish a predetermined compensation amount or a formula to calculate damages in case of an employer's breach. This provision should be carefully drafted to ensure its reasonableness and enforceability under Arkansas law.
