Georgia Court Upholds Liquidated Damages Clause

Posted: Monday, October 27, 2008

By: David M. Kight

Topic: Liquidated Damages Provisions

A Georgia Court of Appeals has upheld a liquidated damages clause in a physician's employment contract.  Antonios v. Gweinnett Clinic, LTD, --S.E.2d --, 2008 WL 4603608  (Ga. App. 2008).  On Friday, October 17, 2008, the Georgia Court of Appeal affirmed a trial court judgment in favor of a clinic which had sued a former physician for breach of his employment agreement. 

The physician, Antonios, had signed an employment agreement with his employer in which he agreed to a) provide 180 days written notice before he could terminate his employment; and b) provide proof of post-employment insurance coverage ("tail coverage") before he would be paid his final paycheck.   The parties agreed that for each day in which notice of termination was less than 180 days, the terminating party would pay the other party $355 representing one days wages for Antonios over one year.  Attorneys fees would be awarded to the prevailing party.

The physician resigned and provided only 90 days of notice whereupon the employer provided him notice that in keeping with his agreement, he owed the clinic $31,950.  Antonios stopped working before his notice period and was notified that he owed the clinic $51,120.  Antonios was also reminded of his requirement to provide proof of tail coverage.  Antonios did not respond and the company sued.

The trial court found in favor of the clinic and awarded it $69,373 in damages and $28,676.33 in attorney's fees.  Antonios appealed arguing that the liquidated damages clause was uneforceable because there was no effort made to estimate the probable loss resulting from a breaching party.  The Court of Appeals affirmed arguing that the burden was on the defaulting party to prove unenforceability.   Here, the Court evaluated the clause and relied upon testimony from the clinic that the liquidated damage amount was designed to compensate the employee if there was an early termination.  The Court also noted that the testimony established that the clinic's damages exceeded the liquidated damages amount actually sought.    Given that the sum for the liquidated damages amount was arrived at as a reasonable estimate on one party's loss, and was less than the anticipated loss for the other party, the liquidated damages clause was enforceable, the Court held.

Key:  A liquidated damages clause, for the right employment agreements, can be a key method for a party to seek relief without having to prove what can be difficult to prove.  Employers who desire liquidated damages clauses in their contracts should look at this case for guidance on setting the amount in an amount that will be enforceable.