Sample Liquidated Damages Clause Employment Contract

When it comes to drafting an employment contract, including a liquidated damages clause can protect both the employer and the employee. This clause specifies the amount of money that the employee will have to pay if they breach the contract.

A sample liquidated damages clause can look like this:

In the event of a breach of this employment contract by the employee, the employer shall be entitled to liquidated damages in the amount of [insert amount here]. This amount is a reasonable estimate of the damages that the employer is likely to suffer as a result of the breach, including but not limited to lost profits, expenses, and legal fees.

This clause can be further detailed to include specific scenarios in which the employee may be in breach of the contract. For example, if the employee quits before the end of their contract term, or if they violate a non-compete agreement.

One important thing to note is that the liquidated damages amount should be reasonable and not excessive. Courts may consider the clause unenforceable if the amount is seen as a penalty rather than a fair estimate of damages. In order to avoid disputes, it’s important to consult with legal counsel when drafting a liquidated damages clause.

Including a liquidated damages clause in an employment contract can provide peace of mind for both parties. It ensures that the employee will be held accountable for any breach, and it also provides a clear and specific amount for any damages incurred by the employer. By carefully drafting and reviewing the clause, it can be a beneficial addition to any employment contract.