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.
The New Jersey Liquidated Damage Clause in Employment Contract Addressing Breach by Employer refers to a provision included in employment agreements to protect employees in case of a breach by the employer. It establishes predetermined compensation or damages that the employer agrees to pay the employee if they fail to fulfill their obligations as stated in the contract. There are three common types of liquidated damage clauses in New Jersey employment contracts addressing breach by the employer: 1. General Liquidated Damage Clause: This type sets a specific amount of money that the employer must pay the employee as damages in the event of a breach. The amount is predetermined and agreed upon by both parties during contract negotiation. It provides a clear and enforceable remedy for the employee, allowing them to seek compensation without having to prove the actual loss suffered. 2. Calculation-based Liquidated Damage Clause: In this type, the damages are determined based on a formula or calculation specified in the contract. For example, it may state that the employer shall pay the employee a certain percentage of their annual salary multiplied by the number of months remaining in the contract term. This type of clause provides a more flexible approach to determining damages, taking into consideration specific factors such as the employee's salary and remaining contract duration. 3. Restraint of Trade Liquidated Damage Clause: This type of clause is specific to employment contracts involving non-compete or non-solicitation agreements. It establishes damages that the employer is entitled to if the employee violates these provisions after termination. While it can also benefit the employee by providing clarity and setting limits on potential damages, New Jersey courts tend to scrutinize such clauses more closely to ensure they are not overly restrictive or unfair to the employee. It is important to note that the enforceability of liquidated damage clauses under New Jersey law is subject to certain legal requirements. The clause must be a reasonable estimation of the actual damages likely to be incurred, not intended to punish the breaching party but rather compensate the non-breaching party. Courts may deem a clause unenforceable if it is deemed excessive or unconscionable, or if it operates as a penalty rather than a genuine pre-estimate of loss. Overall, the purpose of the New Jersey Liquidated Damage Clause in Employment Contract Addressing Breach by Employer is to provide a fair and equitable remedy for employees in the event of a breach by their employers. It ensures that both parties are aware of the potential consequences of breaching the contract and helps protect the rights and interests of employees in the employment relationship.
