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.
Washington Liquidated Damage Clause in Employment Contract Addressing Breach by Employee: Understanding the Key Elements In the realm of employment contracts, a Liquidated Damage Clause plays a crucial role in addressing potential breaches by employees and outlining the consequences of such actions. Specifically in Washington state, the Liquidated Damage Clause provides employers with a legal mechanism to seek compensation for financial losses incurred as a result of an employee's breach of contract. A Liquidated Damage Clause essentially sets a predetermined amount of money that an employee must pay in the event of a breach, rather than going through the burdensome process of calculating the actual damages suffered by the employer. It aims to provide certainty and efficiency in settling contract disputes, while also acting as a deterrent against breach of employment agreements. Key Elements of Washington Liquidated Damage Clause: 1. Purpose and Validity: The Liquidated Damage Clause in an employment contract must serve a legitimate purpose and must be reasonable, fair, and proportionate to protect the employer's legitimate business interests. It cannot be an unlawful penalty or an attempt to circumvent minimum wage laws or discourage employee rights. 2. Predetermined Amount: The clause should clearly state the specific amount or formula that determines the liquidated damages. This amount must be a genuine pre-estimate of the potential damages that the employer could suffer due to the employee's breach. Types of Washington Liquidated Damage Clauses in Employment Contracts: 1. Non-Compete Agreement: This clause is designed to prevent employees from engaging in competitive activities with the employer, either during employment or after termination. If an employee breaches this clause, they may be obligated to pay liquidated damages that can vary depending on the nature of competition and the potential financial harm caused. 2. Confidentiality Agreement: This clause ensures that employees do not disclose confidential information or trade secrets of the employer to third parties, both during and after employment. A breach of this clause could result in liquidated damages, which may consider the potential harm caused to the employer's reputation, competitive advantage, or financial losses. 3. Non-Solicitation Agreement: This clause prohibits employees from soliciting clients, customers, or other employees of the employer for a specified period after termination. If an employee violates this clause, liquidated damages may be awarded, taking into account the potential loss of business opportunities, clients, or workforce caused by the employee's actions. 4. Material Breach Clause: This type of clause covers a wide range of breaches by an employee, such as unauthorized disclosure of proprietary information, embezzlement, or intentional damage to company property. The liquidated damages associated with material breach can vary depending on the severity and financial impact of the breach. It is essential for both employers and employees to carefully review and negotiate the terms of the Liquidated Damage Clause in an employment contract. Seeking legal advice is highly recommended ensuring compliance with Washington state laws and to protect the rights and interests of both parties involved.
