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.
Wisconsin Liquidated Damage Clause in Employment Contract Addressing Breach by Employer In Wisconsin, a liquidated damage clause in an employment contract is designed to address situations where an employer breaches the terms of the agreement. This clause serves as a pre-determined amount of compensation that the employer must pay to the employee in the event of a breach, reducing the need for litigation and providing certainty for both parties. Here, we will explore the details of the Wisconsin liquidated damage clause and highlight its types. One type of Wisconsin liquidated damage clause in an employment contract is the Fixed Amount Clause. Under this provision, a specific amount of damages is predetermined by both the employer and the employee. The fixed amount serves as compensation for the employee's losses resulting from the employer's breach. This type of clause ensures that the employee receives a predetermined sum without the need to prove actual damages in court. Another type is the Formula-Based Clause. Instead of a fixed amount, this provision calculates the damages based on a predetermined formula. The formula may consider various factors, such as the employee's salary, length of employment, or specific financial harm caused by the employer's breach. The advantage of a formula-based clause is that it provides a more customized approach to calculating damages, considering the unique circumstances of the breach. It is important to note that Wisconsin courts closely scrutinize liquidated damages clauses to ensure they are reasonable and do not function as penalties. The court may compare the amount agreed upon to the actual harm suffered by the employee, and if it determines that the amount is excessive, it may be deemed unenforceable. In cases where the liquidated damages are deemed unreasonable or unenforceable, Wisconsin courts may apply the Doctrine of Penalties. This doctrine allows the court to award an amount that reflects the actual damages suffered by the employee due to the employer's breach, rather than the predetermined amount stated in the employment contract. The court has the authority to evaluate the circumstances and consider evidence to determine the appropriate compensation. In summary, a Wisconsin liquidated damage clause in an employment contract addressing breach by the employer is a provision that pre-determines the compensation an employee will receive if the employer fails to honor the terms of the agreement. These clauses can be either fixed amount or formula-based. However, it is important for both employers and employees to ensure that the agreed-upon amount is reasonable to avoid potential challenges in court.
