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.
Connecticut provides legal provisions for a Liquidated Damage Clause in an Employment Contract to address breaches by an employer. This clause allows the aggrieved party, usually an employee, to seek compensation for damages resulting from a breach committed by the employer. In Connecticut, there are two main types of Liquidated Damage Clauses commonly found in Employment Contracts, namely General and Specific Liquidated Damage Clauses. 1. General Liquidated Damage Clause: This type of clause is more commonly included in employment contracts and allows the injured party to claim a predetermined amount as damages in case of a breach by the employer. The purpose of this clause is to estimate a reasonable amount of compensation for potential losses incurred due to a breach. 2. Specific Liquidated Damage Clause: This type of clause is more specific and aims to address particular types of breaches that may occur. It outlines the specific actions that might result in a breach and establishes a predetermined amount of damages in case of a violation. This clause provides more clarity and precision regarding the expected consequences of certain breaches. In either case, the Connecticut Liquidated Damage Clause in an Employment Contract must meet certain requirements to be enforceable. These requirements include: a. The damages resulting from the breach must be difficult to ascertain accurately at the time of contract formation. b. The predetermined liquidated damages must be a reasonable forecast of the actual damages that may occur. c. The clause should not operate as a penalty on the breaching party but rather reflect a genuine and fair estimate of potential losses. It is important for both parties, employer, and employee, to carefully review and negotiate the terms of the Liquidated Damage Clause in an Employment Contract to ensure fairness and avoid potential disputes in the future. In summary, Connecticut recognizes the importance of including a Liquidated Damage Clause in an Employment Contract to address breaches by the employer. By incorporating either a General or Specific Liquidated Damage Clause, parties can establish predetermined damages to compensate for potential losses caused by such breaches. However, it is crucial to ensure that the clause meets the legal requirements to be considered enforceable.
