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.
In Illinois, an employment contract may include a liquidated damage clause to address potential breaches committed by the employer. This clause specifies the predetermined amount of damages that the employer must pay in case of a breach. The purpose is to provide certainty and protect the employee from potential losses due to the employer's wrongdoing. The Illinois state law does not explicitly restrict the use of liquidated damage clauses in employment contracts. However, to be enforceable, the clause must satisfy certain criteria. Firstly, the damages must be difficult to determine precisely at the time of contract creation. Secondly, the amount of liquidated damages specified should be a reasonable estimate of the potential harm caused by a breach. Lastly, the enforcement of the clause should not be disproportionate or unfair considering the actual harm suffered by the employee. Different types of liquidated damage clauses in employment contracts may include: 1. Non-Competition Liquidated Damages: This type of clause is common when an employee agrees not to compete with the employer after termination of employment. It may specify a certain amount of damages for each violation of the non-competition agreement. 2. Confidentiality Liquidated Damages: In contracts where an employee is required to maintain the confidentiality of trade secrets or sensitive information, a liquidated damage clause can be included. This clause may stipulate the monetary compensation the employer is entitled to if the employee breaches the confidentiality obligation. 3. Termination Notice Liquidated Damages: In some cases, an employer may require a specific notice period before termination. If an employee fails to provide the required notice, a liquidated damage clause can establish the amount the employer will be compensated for the lack of notice. 4. Training or Education Reimbursement Liquidated Damages: In situations where the employer invests in employee training or education and wishes to protect that investment, a liquidated damage clause can be used. Such a clause may outline the amount the employee must reimburse the employer if they terminate employment shortly after acquiring new skills or knowledge. It is important to note that the specific contents and enforceability of liquidated damage clauses can vary based on the circumstances and agreement between the parties involved. Consulting with an attorney familiar with Illinois employment laws is advisable for both employers and employees to ensure the fairness and legality of such clauses in their contracts.
