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 Washington liquidated damage clause in an employment contract is a contractual provision that outlines the amount of damages a party will pay if they breach the terms of the agreement. Specifically addressing breaches by the employer, this clause ensures that the employee can receive compensation for any losses incurred as a result of the employer's failure to fulfill their obligations. One type of liquidated damage clause in a Washington employment contract is the "fixed-sum liquidated damages' clause." This type specifies a specific dollar amount that the employer must pay if they breach the contract. For example, if the employer fails to provide the agreed-upon salary or terminates the employee without cause, they may be required to pay a predetermined sum as liquidated damages. Another type of liquidated damage clause is the "percentage-based liquidated damages' clause." Instead of specifying a fixed sum, this clause determines damages as a percentage of specific monetary outcomes. For instance, the employer may be required to pay the employee 25% of their annual salary if they breach the contract, or a percentage of the company's anticipated profits. Furthermore, the "equitable liquidated damages clause" is a Washington-specific type that allows for damages beyond monetary compensation. This clause considers non-monetary losses suffered by the employee due to the employer's breach, such as damage to reputation or emotional distress. In such cases, the clause may entitle the employee to seek specific performance of the contract or equitable remedies. It is important to note that when drafting or interpreting a liquidated damages' clause in a Washington employment contract, the clause must meet certain legal requirements. The damages specified must be a reasonable estimate of the actual harm that would result from a breach, and they should not serve as a penalty or serve to punish the breaching party. Otherwise, the clause may be deemed unenforceable by a court. In summary, the Washington liquidated damage clause in an employment contract addressing breaches by the employer is a crucial provision that protects employees from the negative consequences of breach. Understanding the different types of liquidated damage clauses, including the fixed-sum, percentage-based, and equitable ones, ensures that both parties can have clarity and protection in the event of a contractual breach.
