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 North Dakota liquidated damage clause in an employment contract addressing breach by an employee is a contractual provision that establishes a predetermined amount of compensation the employee must pay to the employer in the event of a breach of contract. This clause serves to ensure that the employer is adequately compensated for any losses incurred due to the employee's actions or failure to comply with certain contractual obligations. In North Dakota, there are two primary types of liquidated damage clauses that employers commonly include in employment contracts to address breaches by employees: 1. General Liquidated Damage Clause: This type of clause establishes a specific monetary amount, agreed upon by both parties at the time of contract formation, that the employee must pay the employer as liquidated damages in case of breach. The predetermined amount represents a reasonable estimate of the damages the employer may suffer as a result of the employee's breach. By including this clause, employers can avoid the need for costly and time-consuming litigation to determine actual damages caused by the breach. 2. Continuing Liquidated Damage Clause: Unlike the general liquidated damage clause, the continuing liquidated damage clause imposes a continuing obligation on the employee to pay a specified amount as liquidated damages for each day or period of non-compliance with the terms of the employment contract. This type of clause is particularly useful when the breach involves ongoing obligations that can result in further losses to the employer if not promptly rectified. In both types of liquidated damage clauses, it's essential to ensure that the predetermined amount is considered reasonable and not seen as a punitive measure. North Dakota courts scrutinize such clauses to prevent the imposition of penalties disguised as liquidated damages. When addressing breach by an employee in an employment contract, employers in North Dakota should consult with legal professionals to craft a liquidated damage clause that adheres to state laws and has a reasonable basis.
