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Penaltys disguised as Liquidated Damages

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  • Penaltys disguised as Liquidated Damages

    Hi Shah,

    I have an H1 Visa and a contract agreement for 3 years with my sponsor. In this contract agreement says if I transfer my visa to another company I have to pay the Company one month’s salary for each month left in the Employment Period and to pay the Company 10.000 for relocation costs and immigration costs.
    The contract also has a clause that says "The sums above are agreed upon by Employee and the Company as liquidated damages and not as a penalty"
    Is there any way to avoid this penalty disguised as liquidated damages.

    I found in wikipedia:
    At common law, a liquidated damages clause will not be enforced if its purpose is to punish the wrongdoer/party in breach rather than to compensate the injured party, in which case it is referred to as a penal or penalty clause. However, courts sitting in equity will seek to achieve a fair result and will not enforce a term that will lead to the unjust enrichment of the enforcing party.

    Any advice in my situation will be truly appreciated.


    Last edited by tuvaleelfe; 11-24-2012, 01:01 PM.

  • #2
    Dear Tuvaleelfe,

    Thank you for posting this question. This is more an employment contract question and is usually controlled by the State mentioned on the contract or one decided by jurisdiction forum (or by the court). Unfortunately it seems that the liquidated damages might be reasonable. However, it might be an issue in enforcing it. Most of the time, companies hope that no candidate will fight and usually settle it. The cost of hiring a lawyer to defend such cases are so high that most candidates settle it for less. Again, it is a state by state issue. I will recommend you contact an employment or contract attorney to assist you.
    Shah Peerally is an attorney licensed in California practicing immigration law and debt settlement. He has featured as an expert legal ****yst for many TV networks such as NDTV, Times Now and Sitarree TV. Articles about Shah Peerally and his work have appeared on newspapers such as San Jose Mercury News, Oakland Tribune, US Fiji Times, Mauritius Le Quotidien, Movers & Shakers and other prominent international newspapers. His work has been commended by Congress women Nancy Pelosi and Barbara Lee. He has a weekly radio show on KLOK 1170AM and frequently participates in legal clinics in churches, temples and mosques.

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