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 provision commonly found in employment contracts that addresses potential breaches by an employee and serves to quantify the damages suffered by the employer as a result of such breaches. In West Virginia, there are various types of liquidated damage clauses that can be included in employment contracts to address breaches by employees, namely: specific performance clauses, penalty clauses, and genuine pre-estimation clauses. 1. Specific Performance Clauses: A specific performance clause in a West Virginia employment contract outlines the specific actions an employee must undertake to rectify a breach. It may require the employee to complete certain tasks, meet performance standards, or fulfill contractual obligations within a prescribed timeframe. Failure to comply with these requirements can result in financial penalties set forth in the liquidated damage clause. 2. Penalty Clauses: Penalty clauses are another type of liquidated damage clause that addresses breaches by employees in West Virginia. These clauses impose fixed monetary penalties on an employee who fails to fulfill contractual obligations or engages in certain prohibited activities. The purpose of such penalties is both punitive, as a deterrent against breaches, and compensatory, to cover the employer's damages resulting from the breach. 3. Genuine Pre-estimation Clauses: In West Virginia, genuine pre-estimation clauses are permissible under certain conditions. These clauses stipulate a predetermined amount of damages that the employer and employee agree upon as an estimate of the actual harm that would result from a breach. The agreed-upon amount in the clause should reasonably approximate the employer's anticipated losses, and not be deemed excessive or as a penalty. This type of liquidated damage clause provides both certainty and fairness to parties involved, as they explicitly state the consequences of a breach and ensure predictability in the event of contract violations. It is important to note that liquidated damage clauses must be reasonable and must not violate West Virginia laws. Courts in West Virginia retain the authority to review these clauses and may refuse to enforce them if they are seen as punitive or unconscionable. Employers and employees in West Virginia should consult legal professionals to ensure that the liquidated damage clauses in their employment contracts adhere to the specific requirements set forth by the state's laws.
