Employers frequently face challenges in quantifying (and proving) the damages associated with enforcing violations of restrictive covenants by former employees. One strategy some employers have tried is the use of liquidated damages clauses. The advantage of using a liquidated damages clause is that employers have certitude in the damages amount they would be paid in the event of breach by the employee. Employers thus avoid the challenges of proving damages where damages may be in dispute or are inherently difficult to ascertain or quantify. Employers should, however, be aware of the consequences associated with using liquidated damages clauses.
For example, by including liquidated damages provisions, employers should consider whether they undermine their right to seek actual damages, such as lost profits due to loss of client revenue. Similarly, employers should consider whether the availability of a liquidated damages remedy adversely affects their right to obtain injunctive relief that would be needed to prevent irreparable harm to the employer. In this article we analyze how employers who opt to include liquidated damages clauses in restrictive covenant agreements might draft such provisions most effectively.
Background
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.
For questions call 1-877-256-2472 or contact us at [email protected]