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.
An Arizona liquidated damage clause in an employment contract addresses the potential breach by an employer and outlines the agreed-upon amount of compensation that will be paid to the employee as a result of the breach. This clause serves to protect employees from potential financial losses in the event that an employer fails to fulfill their contractual obligations. In Arizona, there are two types of liquidated damage clauses commonly used in employment contracts to address breaches by employers. The first type is known as a "specific damages" clause, which specifies a predetermined amount of money that will be awarded to the employee in case the breach occurs. This predetermined amount is agreed upon by both parties during the contract negotiation process and is usually based on the potential financial harm the employee may suffer as a result of the breach. The second type of liquidated damage clause in Arizona employment contracts is referred to as a "reasonable estimate" clause. Unlike the specific damages' clause, this type allows for a more flexible determination of the compensation amount. Instead of specifying a fixed amount, the clause requires the court to assess and determine the reasonable estimate of the damages suffered by the employee due to the employer's breach. This type of clause gives the court more discretion to consider various factors, such as the employee's lost wages, potential career damage, and additional costs incurred as a result of the breach. Employers typically include liquidated damage clauses in employment contracts to provide a clear framework for addressing and compensating employees in the event of a breach. These clauses also serve as a deterrent for employers to breach their contractual obligations, as they would be liable for paying the agreed-upon damages. It is important for both employers and employees to thoroughly review and understand the liquidated damage clause in an employment contract before signing. This ensures that both parties are aware of their rights and obligations and can adequately protect themselves in case of a breach. Seeking legal counsel in contract negotiations can provide further guidance and ensure that the clause is fair and enforceable under Arizona employment laws. In conclusion, an Arizona liquidated damage clause in an employment contract addressing breach by an employer offers employees protection in the event of a breach and specifies the compensation amount to be paid. The two types commonly used are specific damages clauses, which outline a predetermined amount, and reasonable estimate clauses, which allow for a more flexible assessment of damages. By understanding and including these clauses in employment contracts, both employers and employees can ensure clarity and fairness in case of breaches.
