Q: Reading a new job contract: there's a “$500 per day” penalty for not giving a 30-day notice. Can a job do this?
I am a nurse practitioner, and this was in my new job contract. This is my first time seeing something like this. So I was curious if companies can do this.
A:
Most of the time, people can enter into a contract on any terms that are mutually agreeable unless they are illegal. Penalty clauses like this may be void as against public policy if they are excessive and not a reasonable forecast of the damages a party will sustain from a breach of the agreement. Whether a penalty clause is excessive depends upon the particular facts and circumstances.
In your case, I imagine one way of reasonably determining the employer's damages for a nurse practitioner quitting without adequate notice might be the cost for the employer to bring in a locums nurse practitioner to perform your job duties until you can be replaced. So whether this provision is enforceable may depend on whether a locum tenens nurse practitioner would cost the employer around or more than $500 / day to perform your job duties.
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