Problem
1. The evidence
of the $50,000 earnings is relevant on the issue of the validity of the damages
clause insofar as it shows that (1) it is not difficult to prove loss in the case
of breach, and (2) the fixed damages may be disproportionate to the actual harm
suffered in the case where the dismissed employee takes another job, i.e. the
losses here are $25,000 but three times as much would be awarded if the clause
is enforced.
2. I believe that
one way or another the employee will only recover
$25,000 from the employer because either the clause will be found to be
unenforceable, or that the $50,000 earnings will mitigate the employee’s loss.
3. If the second
employer had paid out $150,000, there would have been no actual losses, so
whether or not the clause is enforceable, I believe the employee would recover only
nominal damages.
Back to Contractual Controls on
Damages