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 is a common provision in employment contracts that addresses the potential breach of duties by an employee in the state of Wisconsin. This clause specifies the amount of compensation the employee would be liable to pay if they fail to fulfill their obligations, providing a predetermined measure of damages. In Wisconsin, there are two types of liquidated damage clause commonly seen in employment contracts addressing breach by employees: general liquidated damage clauses and confidentiality and non-compete liquidated damage clauses. 1. General Liquidated Damage Clause: A general liquidated damage clause establishes a fixed amount of damages that an employee will be responsible for paying should they breach the terms of their employment contract. It aims to provide certainty and save both parties from potentially costly litigation. The specific amount mentioned in the clause varies depending on various factors, including the nature of the employment, position, responsibilities, and the potential harm or loss suffered by the employer as a result of the breach. 2. Confidentiality and Non-Compete Liquidated Damage Clause: Confidentiality and non-compete liquidated damage clauses are more specific in nature and address breaches related to the employee's confidentiality obligations or non-competition agreements. These clauses aim to protect the employer's trade secrets, confidential information, and their competitive advantage. The liquidated damages mentioned in these clauses are usually higher as the potential harm to the employer's business can be substantial if such information is disclosed or used by the breaching employee. It is important to note that Wisconsin law considers liquidated damage clauses enforceable only if they meet certain criteria. The liquidated damages must be reasonably proportionate to the potential harm anticipated at the time of contract formation. They must be difficult to ascertain at the time of the breach and not function as a penalty to unduly punish the employee. Courts may consider factors such as the actual harm suffered, the foreseeability of the breach, and the reasonableness of the damages mentioned in the clause while evaluating its enforceability. In summary, Wisconsin liquidated damage clauses in employment contracts addressing breach by employees serve as a predetermined measure of compensation to protect employers from potential financial harm caused by a breach. Including specific clauses related to general breaches, confidentiality, and non-compete obligations aims to establish clear expectations and consequences for non-compliance. It is advisable to seek legal counsel while drafting or interpreting such clauses to ensure their enforceability and compliance with Wisconsin employment laws.
