Financial penalty for not giving 30 days notice

[keithm0802]

What is the name of your state (only U.S. law)? Virginia

I work for a company that has their employees sign an agreement stating that if you do not give 30 days notice, you are required to pay the company 50% of your hourly rate for 90 days; as a way to recover lost revenue. I have talked to many recruiters and they are amazed that a company can make employees sign this agreement. Is it enforceable?

 

[Zigner]

It's extremely doubtful that such a clause is enforceable. You may wish to speak with a local attorney about this if the matter ever comes up for you.

 

[adjusterjack]

What is the name of your state (only U.S. law)? Virginia

I work for a company that has their employees sign an agreement stating that if you do not give 30 days notice, you are required to pay the company 50% of your hourly rate for 90 days; as a way to recover lost revenue. I have talked to many recruiters and they are amazed that a company can make employees sign this agreement. Is it enforceable?

You signed it. Presumably you read it and understood it before signing it.

Depending on the terms and conditions of the ENTIRE contract, it might be enforceable.

The time to figure out whether a contract is enforceable is before you sign it.

Now, if push comes to shove and your employer withholds pay you either have to rely on a wage claim with the state or pay a lawyer an average of $300 per hour.

Why would you sign something like that in the first place? I know. "I needed the job."

 

[keithm0802]

You signed it. Presumably you read it and understood it before signing it.

Depending on the terms and conditions of the ENTIRE contract, it might be enforceable.

The time to figure out whether a contract is enforceable is before you sign it.

Now, if push comes to shove and your employer withholds pay you either have to rely on a wage claim with the state or pay a lawyer an average of $300 per hour.

Why would you sign something like that in the first place? I know. "I needed the job."

I did sign it and yes, I did need the job at the time. I was somewhat expecting this contract to not last as long as it is planning on lasting. It was going to be around a 6 month contract. There was no fixed end-date but then they assigned me to another customer and I may be on this contract until the end of next year. I am happy for the most part, so I am not planning on quitting anytime soon. The question is being asked primarily out of curiosity and because a ton of people have been perplexed at the legality of such a clause.

 

[NIV]

What is the name of your state (only U.S. law)? Virginia

I work for a company that has their employees sign an agreement stating that if you do not give 30 days notice, you are required to pay the company 50% of your hourly rate for 90 days; as a way to recover lost revenue. I have talked to many recruiters and they are amazed that a company can make employees sign this agreement. Is it enforceable?

When you say "sign an agreement", what do you mean? Did you have to sign before a job offer? Or, was it after employment/offer? What did the company give up for your signature?

 

[keithm0802]

When you say "sign an agreement", what do you mean? Did you have to sign before a job offer? Or, was it after employment/offer? What did the company give up for your signature?

They call it an "Independent Contractor Agreement" (even though I am not an independent contractor) and it was separate from my offer letter.

 

[adjusterjack]

I did sign it and yes, I did need the job at the time. I was somewhat expecting this contract to not last as long as it is planning on lasting. It was going to be around a 6 month contract. There was no fixed end-date but then they assigned me to another customer and I may be on this contract until the end of next year. I am happy for the most part, so I am not planning on quitting anytime soon. The question is being asked primarily out of curiosity and because a ton of people have been perplexed at the legality of such a clause.

There aren't too many things that are illegal for people to agree on in a contract.

I don't see anything illegal about the clause itself. It's the implementation of the clause that could be problematic.

For example, you walk into your boss' office and say "I quit today" and your boss says "Well, according to the contract you owe me $800, your final paycheck is $1200. I'm deducting the $800 and sending you $400. Withholding the money from your pay could violate wage laws and be illegal (unless the contract gave consent).

On the other hand if your boss says "Well, according to the contract you owe me $800, your final paycheck is $1200. I'm required by law to pay you the $1200 but expect a lawsuit for breach of contract to be served on you within the next couple of days." That would be perfectly legal.

There also arises from your last paragraph the question of whether you are an employee or an independent contractor.

So, you see, the question cannot be answered definitively without a thorough reading of the entire contract.

 

[eerelations]

Your employer is required to pay you at least minimum wage for each and every hour you work. If you leave your employer with less than 30 days' notice and the 50% you're required to pay still leaves you with at least minimum wage paid for every hour you were supposed to work in the remaining notice period, then you're OK. If not, well again, you need to have an attorney review your contract in its entirety.

 

[LdiJ]

There aren't too many things that are illegal for people to agree on in a contract.

I don't see anything illegal about the clause itself. It's the implementation of the clause that could be problematic.

For example, you walk into your boss' office and say "I quit today" and your boss says "Well, according to the contract you owe me $800, your final paycheck is $1200. I'm deducting the $800 and sending you $400. Withholding the money from your pay could violate wage laws and be illegal (unless the contract gave consent).

On the other hand if your boss says "Well, according to the contract you owe me $800, your final paycheck is $1200. I'm required by law to pay you the $1200 but expect a lawsuit for breach of contract to be served on you within the next couple of days." That would be perfectly legal.

There also arises from your last paragraph the question of whether you are an employee or an independent contractor.

So, you see, the question cannot be answered definitively without a thorough reading of the entire contract.

Except that the agreement says "50% of your hourly wage for 90 days"...so its going to be a heck of a lot more than 800.00 that the employer is going to be going after. Obviously its not possible to deduct 50% of 90 days worth of pay from a last paycheck.

 

[NIV]

They call it an "Independent Contractor Agreement" (even though I am not an independent contractor) and it was separate from my offer letter.

I'm not sure it would rise to a contract as it does not seem like anything was given up. If taken as a whole it seems like it meant to be a liquidated damages clause that is not reasonably related to the harm and could be defeated as being a penalty.

We could analyze it, but it wouldn't really help until all the facts are known. I see a few places it could be attacked. (Remember, however, having something to argue is not the same as a win.)

 

[commentator]

I knew of a case where an employee did give two weeks notice, though it was not required by contract, and during that time period, she later found her pay had been reduced dramatically to exactly minimum wage for the she had worked. She talked to Wage and Hour and discovered that it was fully legal for her employer to do this in her state, just as long as she had been paid minimum wage for the hours worked.

 

[LdiJ]

I knew of a case where an employee did give two weeks notice, though it was not required by contract, and during that time period, she later found her pay had been reduced dramatically to exactly minimum wage for the she had worked. She talked to Wage and Hour and discovered that it was fully legal for her employer to do this in her state, just as long as she had been paid minimum wage for the hours worked.

Again though, there is little chance that reducing someone's pay for their last pay period would result in 50% of 90 days of employment.