“Employment Contract Broken by Employer; New Job Found Right Away: What am I Entitled to?”

Question: In your newsletter entitled “Mitigation of Damages,” you say that the employee does not have a duty to mitigate damages if the employment agreement does not say it is required.

Here’s my question: An employment contract says the employment is supposed to last for two years. Even so, the employer fires the employee after only one year. The employee than gets a new job right away. Is the employee entitled to sue the employer for breach of contract, and then collect for the “lost” one year on the contract?

Oneonta, New York

Answer: The general rule in any breach-of-contract case is this: If you don’t suffer damages from the breach, then you cannot collect. In employment contracts it is the same: If it has been your good fortune not to have lost any money by the early contract termination, then it is your previous employer’s good fortune, too, and you have no right to collect.

The one exception to this general rule is if a contract calls for what lawyers call “liquidated damages,” which are pre-agreed damages that the contract says one side can collect, even if no damages took place. A common example: contracts to sell and purchase a house. Often these contracts say something like this: “If the Purchaser does not close on the deal, the Seller can keep the down payment – no matter what, even if the house is sold the next day for the same amount – as and for “liquidated damages.” I have seen such “liquidated damages” clauses in many employment contracts, more often than not inserted by employers’ counsel.

In our firm we often say to clients, “If your life goes badly, your lawsuit gets better; if your life goes well, your lawsuit gets weaker.” We hope your life goes well.

Hope that helps.

Best, Al Sklover

© 2009 Alan L. Sklover, All Rights Reserved.