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 Minnesota Liquidated Damage Clause in Employment Contract Addressing Breach by Employer is a significant component that ensures both parties involved in an employment agreement are protected in case of employer breach. This clause outlines the predefined damages a breaching employer must pay to the employee as compensation for their breach. In Minnesota, there are two primary types of liquidated damage clauses commonly used in employment contracts addressing breach by the employer: 1. Compensation-Based Liquidated Damage Clause: This type of clause determines the damages the breaching employer must pay based on the employee's compensation. For example, if the employee's annual salary is $100,000, the liquidated damage clause may stipulate that the employer must pay the employee 25% of their annual salary, totaling $25,000, as compensation for the breach. 2. Time-Based Liquidated Damage Clause: In this clause, the damages are calculated based on the amount of time the employee is deprived of employment due to the employer's breach. For instance, if the employee remains unemployed for three months as a result of the breach, and their monthly salary is $5,000, the liquidated damage clause may specify that the employer must pay the employee $15,000 as compensation. It is important to note that the purpose of the Minnesota liquidated damage clause is to estimate the actual damages suffered by the employee as a result of the employer's breach. However, the amount stated in the liquidated damage clause must not be excessive or unconscionable. If the damages specified in the clause are unreasonably high compared to the anticipated harm, the court may deem the clause unenforceable or reduce the amount of damages to a reasonable level. By including a specific liquidated damage clause in an employment contract, both the employee and the employer can have a clear understanding of the consequences of a breach. The clause serves as a safeguard, providing the employee with monetary compensation aligned with their anticipated losses and allowing the employer to comprehend the potential costs of breaching the employment agreement. Employers should ensure their liquidated damage clauses are well-drafted, reasonable, and comply with Minnesota employment laws. It is recommended to consult with legal professionals who specialize in employment law to create customized clauses tailored to the specific circumstances of the employment relationship.
