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.
A liquidated damage clause in an employment contract is a provision that outlines the predetermined amount of money an employee agrees to pay the employer in case of a breach of contract. This clause addresses situations where an employee fails to fulfill their obligations or violates the terms of their employment agreement. In New York, various types of liquidated damage clauses can be included in employment contracts: 1. General Liquidated Damage Clause: This type of clause specifies a fixed amount of money that the employee must pay as liquidated damages for breaching the contract. It serves as a pre-estimate of the damages the employer may suffer due to the breach. The agreed-upon amount should be reasonable and in line with the anticipated harm caused by the breach. 2. Repayment of Training Costs: Some employment contracts in New York may incorporate a liquidated damage clause that requires the employee to reimburse the employer for any training costs incurred. This clause ensures that if the employee terminates the employment prematurely or breaches the contract, they must repay the expenses invested in their training. 3. Non-Compete Agreement: In certain cases, an employment contract may contain a liquidated damage clause within a non-compete provision. This clause imposes a financial penalty on the employee if they engage in competition with the employer during or after the employment period. The predetermined amount should reasonably reflect the potential harm caused by the employee's competitive activities. 4. Confidentiality and Non-Disclosure Agreement: A liquidated damage clause may also be included in a confidentiality or non-disclosure agreement. This provision outlines the amount an employee must pay if they improperly disclose or use the employer's confidential information. The agreed-upon sum should correspond to the potential damages suffered by the employer as a result of the breach. It's important to note that while liquidated damages can provide a simplified method of quantifying potential harm, New York courts will carefully review such provisions to ensure they are not excessive or intended to penalize the breaching party. The agreed-upon amount of liquidated damages should be based on a genuine pre-estimate of potential damages rather than serving as a penalty.
