Provided by: Jennifer Kirschenbaum, Esq.
May 17, 2022
Question:
Hi Jennifer,
My employer gave me a contract that has a liquidated damages provision in it, where I will owe my salary back if I violate the non compete. Is this provision enforceable?
Thanks,
Dr. L
Answer:
Maybe. Courts will enforce a valid liquidated damages provision. Validity will rest in whether the language is properly drafted and the provision was included because damages would otherwise be difficult to ascertain and the stated damages are not disproportionate to actual damages. What does this mean? If you working 7.8 miles away for a different employer, when you have an 8 mile non compete, and you are not in a position to steer away patients from the prior practice, would 1 year salary be a reasonable amount of damages? Potentially, no. However, no one can guaranty how a judge will determine on review. When it comes to liquidated damages provisions, your best bet is to negotiate them out of the contract BEFORE you sign, not rely on the least effective strategy (HOPE), and hope the employer will not enforce if you breach later.
If you are an employer reading this and wondering the frequency we see liquidated damages in provider agreements, my answer would be about 10% of the time (not market to include, or accept...).
