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.
A liquidated damage clause in an employment contract in North Carolina addresses the potential breach of contract by the employer. This clause outlines the agreed-upon damages that the employer must pay to the employee in the event of a breach. It is designed to provide a measure of certainty and protection for both parties involved. North Carolina recognizes various types of liquidated damage clauses in employment contracts addressing breaches by the employer. These types may include: 1. Compensation Clause: This type of clause ensures that the employer compensates the employee for any losses suffered due to the breach. The damages are typically predetermined and can encompass various factors such as lost wages, benefits, bonuses, or even future earnings. 2. Non-Competition Clause: Another type of liquidated damage clause commonly used in employment contracts is the non-competition clause. This clause restricts the employee from engaging in similar business activities or working for a competitor for a specified period after termination. If the employer breaches this clause, they may be liable to pay a predetermined amount as damages. 3. Confidentiality Clause: A confidentiality clause, often included in employment contracts, requires the employer to protect any proprietary or sensitive information. In the event of a breach, the liquidated damages stated in the clause will prescribe the compensation for the employee if the employer fails to maintain confidentiality. 4. Termination Clause: A termination clause outlines the conditions under which either party can end the employment relationship. If the employer unlawfully terminates an employee in violation of the contract, a liquidated damage clause may provide compensation for the loss of income, benefits, and other potential damages resulting from the breach. It is important to note that the specific details and enforceability of liquidated damage clauses vary on a case-by-case basis. North Carolina courts carefully review these clauses to ensure they are reasonable, fair, and do not serve as a penalty or deterrent to an employee seeking legal recourse for a valid breach. Both parties should carefully negotiate and draft these clauses to ensure their enforceability and protect their respective interests. In conclusion, the North Carolina liquidated damage clause in employment contracts addressing breaches by the employer serves as a mechanism to provide compensation for damages incurred by the employee due to a breach. Different types of clauses, such as compensation, non-competition, confidentiality, and termination clauses, address various aspects of the employment relationship and potential breaches. Complying with North Carolina laws and ensuring fairness and reasonableness of these clauses is crucial for both the employer and the employee.
