Posts tagged with "emploment contract"

The Enforceability of Liquidated Damages Provisions in Non-Compete Agreements

A non-compete clause, or restrictive covenant, is a standard feature of many employment contracts.  Employers seek to protect their trade secrets and proprietary information by ensuring that employees who leave their employ are unable to compete with them for a reasonable time and within a reasonable geographic distance.  Connecticut uses a five-prong test to determine the enforceability of a non-compete agreement, examining (i) the reasonableness of the time restriction, (ii) the reasonableness of the geographic restriction, (iii) the degree of protection afforded to the employer, (iv) whether it unnecessarily restricts the employee’s ability to pursue his career, and (v) the degree to which it interferes with the interests of the public.  The employment attorneys at Maya Murphy, P.C. have extensive experience in employment contracts and specifically, with non-compete agreements.  Before signing away your rights, you should consult with an advocate attorney who can make sure that you won’t be prevented from earning your professional livelihood.

Issues arise where a restrictive covenant contract provision provides for a fixed sum of damages, sometimes in the form of liquidated damages. Liquidated damages refers to a fixed sum of money agreed upon by the contracting parties during the formation of the contract.  Whether or not a liquidated damages provision will be enforced depends on whether any damage has actually been sustained.[1] Therefore, where a court finds that no damage has been sustained by a party, a liquidated damages clause will not be enforced.[2] Moreover, if the court determines that payment of the liquidated damages would represent a windfall provision, the clause will not be enforced.[3] In Connecticut, courts employ a three-pronged test to evaluate whether a liquidated damages provision is an unenforceable penalty, or windfall.  Such a provision will be deemed unenforceable if: (i) the damage which was to be expected as a result of a breach of the contract was uncertain in amount or difficult to prove; (ii) there was an intent on the part of the parties to liquidate damages in advance; and (iii) the amount stipulated was reasonable and not greatly disproportionate to the amount of damage caused by the loss.[4]

If you are faced with a liquidated damages provision in a non-compete agreement, look no further than the attorneys at Maya Murphy to guide you through the process and negotiate on your behalf.  Please contact the firm’s Westport office, at 202-221-3100.

[1] PRF, Inc. v. Gosselin, 1993 Conn. Super. LEXIS 3201 (Conn. Super. Ct. Dec. 1, 1993).

[2] Id.

[3] Id.

[4] Webster Fin. Corp. v. Levine, 2009 Conn. Super. LEXIS 841 (Conn. Super. Ct. Mar. 24, 2009).

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