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  1. #1
    Join Date
    Sep 2008
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    14

    Default Can an Employer Impose a Financial Penalty if an Employee Resigns During Agreed Term

    My question involves labor and employment law for the state of: New Jersey
    An employer makes employees sign a 2 year contract every two years. In the contract it states that if the employee leaves during those two years they need to pay a $10K penalty. The employer is not investing anything in the employee (such as education or training). Is this legal in New Jersey? Thanks

  2. #2
    Join Date
    Jun 2006
    Location
    Massachusetts
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    24,521

    Default Re: Can an Employer Impose a Financial Penalty if an Employee Resigns During Agreed T

    I'm going to ask you the same question I asked you in the other forum where you asked this.

    When you showed this document to a contract attorney in New Jersey, what did he say?

    I can't speak for the rest of the folks here but I'm not willing to try to interpret the legality or enforceability of a document I have not read.

  3. #3
    Join Date
    Sep 2005
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    Behind a Desk
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    98,846

    Default Re: Can an Employer Impose a Financial Penalty if an Employee Resigns During Agreed T

    Such a demand makes little sense, as it's likely to inspire employees to start searching for jobs in earnest toward the end of any given contract term. Are we talking about one of the dubious employers that brings H1B workers to the United States as subcontractors, and is trying to intimidate them such that they don't look for better work elsewhere?

    The clause as described sounds problematic for a couple of reasons. First, as a liquidated damages clause, the amount needs to be reasonably related to damages the employer might suffer if the employee resigns. If there is no actual investment in training or education, it is difficult to see how the $10,000 figure could be justified. Further, it's not described as being prorated. It would make no sense that the damages to the employer would be the same if the employee resigned on day one of the contract as opposed to the day before the contract term expired. But as cbg points out, it's important to have the contract reviewed by a lawyer who can actually read it, and who is aware of the full factual context.

  4. #4
    Join Date
    Jun 2015
    Posts
    988

    Default Re: Can an Employer Impose a Financial Penalty if an Employee Resigns During Agreed T

    As others post...you want the entire contract reviewed by a lawyer in NJ familiar with such employment law issues. ....and if you are an H1B or other visa status person.

    It may stink but that does not mean it's unenforceable

  5. #5
    Join Date
    Mar 2012
    Posts
    1,360

    Default Re: Can an Employer Impose a Financial Penalty if an Employee Resigns During Agreed T

    Quote Quoting Mr. Knowitall
    View Post
    First, as a liquidated damages clause, the amount needs to be reasonably related to damages the employer might suffer if the employee resigns. If there is no actual investment in training or education, it is difficult to see how the $10,000 figure could be justified. Further, it's not described as being prorated. It would make no sense that the damages to the employer would be the same if the employee resigned on day one of the contract as opposed to the day before the contract term expired.
    What about recruitment costs? Do those count? Depending on the type of work, I'm thinking of headhunters in particular.

  6. #6
    Join Date
    Jul 2010
    Posts
    8,006

    Default Re: Can an Employer Impose a Financial Penalty if an Employee Resigns During Agreed T

    Quote Quoting chyvan
    View Post
    What about recruitment costs? Do those count? Depending on the type of work, I'm thinking of headhunters in particular.
    While they can try that argument for the initial contract, and I wouldn't buy that much, it wouldn't fly with subsequent contracts which OP appears to indicate contain the same provision.

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