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.
The Colorado Liquidated Damage Clause in an Employment Contract Addressing Breach by Employee serves as a preemptive measure to protect employers in the case of breach of contract by an employee. This clause entails a predetermined amount of money that the employee agrees to pay as compensation to the employer for any potential damages caused by their failure to adhere to the terms and conditions of their employment contract. In Colorado, there are two main types of Liquidated Damage Clauses commonly found in employment contracts: 1. Specific Performance Clause: This type of clause requires the employee to fulfill their contractual obligations as agreed upon. If the employee breaches the contract, they are obligated to pay a predetermined sum of money as compensation for the damages caused. This clause aims to ensure that the employee follows through with their contractual duties rather than simply providing monetary compensation. 2. Monetary Compensation Clause: This type of clause establishes a fixed dollar amount for the damages caused by the employee's breach of contract. It serves as a straightforward provision, allowing the employer to seek compensation without the need to prove the exact amount of damages suffered. This type of clause provides a clear and defined remedy, making it easier for both parties to understand and abide by the terms of the contract. By including a Liquidated Damage Clause in an employment contract, employers can safeguard their business interests, investments, and intellectual property in the event of an employee's breach of contract. It helps dissuade employees from engaging in actions that may harm the employer and provides a clear and upfront consequence for breaching the agreed terms. Ultimately, this clause provides a sense of security and assurance for both parties involved in the employment agreement.
