Articles Posted in Employment Contracts

Paige Melendez

Dallas Employment Lawyer Paige Melendez

For employers and employees alike it is becoming apparent that there is a trend of employees leaving their workplaces. In Texas, the at-will doctrine allows an employee to leave for any reason or no reason, but sometimes resignations can be a bit more complicated. For employees it is complicated because resignations can be and should be used strategically rather than a simple decision to leave a job. To use a resignation strategically, there are a few things to consider and think about before pulling the plug. 

First and foremost, leaving a job can evoke questions about eligibility for unemployment benefits. In Texas, resignations, except for narrow exceptions related to “good cause connected with the work,” can be fatal to an application for unemployment benefits. While every case is different, resignations likely spell the end for unemployment benefit eligibility. Yet, it ultimately comes down to the Texas Workforce Commission’s decision. Therefore, if unemployment benefits are part of the financial planning underpinning a resignation, it is important to keep this in mind.

Austin CampbellIncreasingly, employers in Texas have been inserting what might be called “liquidated damages” clauses into employment agreements like non-competes or severance agreements. At a basic level, a liquidated damages clause is an agreement that a party to a contract will pay a specific amount if they breach some part of the contract.

There is such thing as a proper liquidated damages clause, and there are situations (especially in commercial contracts) where clauses like that are appropriate. However, when used in the employment context often they can be wildly inappropriate, and may even cross the line into being penalty clauses that you might then have to fight to overturn. Employers may even try to demand that you agree that these damages are reasonable and not a penalty, even when that is not true. The purpose of this article is to give employees a basic idea of the things they should look out for—at least, when it comes to “liquidated damages”—before signing a contract with their employer

Generally, in a lawsuit over breach of a contract the party that breached the agreement does not have to pay any more than the amount of harm they actually caused the other side. Usually the parties would need to fight over exactly what that number would be as part of the lawsuit. But in Texas, if that number would be difficult or impossible to estimate, parties to a contract are allowed to agree to a “reasonable forecast” of those damages, just in case one party does breach the agreement. To put it another way, in situations where it would probably be prohibitively expensive or flat out impossible to put an exact dollar value on how much a party would be harmed by a breach of contract, the parties can negotiate “just compensation” ahead of time. A proper liquidated damages clause should make it so the parties do not need to argue over their actual damages at all, rather than piling on top of actual damages.

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