Company imposing financial penalty for resignation

J

Jason k

New Member
Jurisdiction
Ohio
I recently resigned from a position and the company does have a clause in the contract stating that they can impose a 10% salary penalty if enough notice is not given. However, the below clause is also in the contract. I am unsure if the 10% fee can be imposed. Please help.

Your employment with the Company will be on an "at-will" basis, meaning that your employment can be
terminated by you or the Company at any time, with or without cause and with or without notice. It is further
understood that the "at-will" nature of your employment with the Company is one aspect of employment that
cannot be changed. No director, manager, supervisor or representative of the Company has any authority to
enter into any agreement for employment for any specific period of time or to make any agreement contrary
to the foregoing. Nothing in this letter should be read to alter the at-will nature of your anticipated
employment with the Company
 
Unless you're under an employment contract, an employer can't require that you give advance notice (or any notice) to resign.

The short answer is no, you cannot be charged a penalty for resigning with NO ADVANCE NOTICE, if you are an employee. An employer defending a lawsuit you initiate to keep 10% of your earnings as a penalty would be a fool's errand. Heck, even if the ignorant, pompous employer retained the 10% penalty, a state labor agency would likely get your money back, assuming you filed an appropriate, timely complaint.


Without an employment contract you're another at-will employee.

Employment is "at-will" under Ohio law, meaning the employer or employee is free to end the relationship at any time, for any reason, unless there is a previous employment contract in effect.

Regardless of the circumstances of your departure, your employer must still pay you any final wages for hours that you actually worked. This payment should normally be made at the end of the regular pay period for that job–but in no event more than 30 days after your employment ends. Keep in mind, if you give two weeks notice of your intention to quit—and assuming you are an at-will employee not under contract—your employer is free to terminate your employment immediately. The employer is not obligated to let you keep working (and earn pay) for two weeks.
 
army judge said:
Unless you're under an employment contract, an employer can't require that you give advance notice (or any notice) to resign.

The short answer is no, you cannot be charged a penalty for resigning with NO ADVANCE NOTICE, if you are an employee. An employer defending a lawsuit you initiate to keep 10% of your earnings as a penalty would be a fool's errand. Heck, even if the ignorant, pompous employer retained the 10% penalty, a state labor agency would likely get your money back, assuming you filed an appropriate, timely complaint.
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(Bolding added.) But the OP indicates that he DOES have an employment contract in which he agreed to this penalty. If he does indeed have a contract then that "penalty" may indeed be enforceable. The devil would be in the details.
 
Tax Counsel said:
(Bolding added.) But the OP indicates that he DOES have an employment contract in which he agreed to this penalty. If he does indeed have a contract then that "penalty" may indeed be enforceable. The devil would be in the details.
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Yes, the devil always hides among the "details".

The mere existence of a contract isn't the only criteria that determines whether the contract is enforceable, as I'm sure you know.


Jason k said:
Your employment with the Company will be on an "at-will" basis, meaning that your employment can be
terminated by you or the Company at any time, with or without cause and with or without notice.
Click to expand...

Yes, OP alleges to have a contract.
However, is that contract valid?

OP illustrated language that seems to contradict the contract, and hasn't posted any language that addresses the 10% penalty, which seems to contradict "at-will" provisions of Virginia's laws and/or policies.
 
army judge said:
Yes, OP alleges to have a contract.
However, is that contract valid?
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Not having read the entire alleged contract, I can't say of course. The point is, it might be.

army judge said:
OP illustrated language that seems to contradict the contract, and hasn't posted any language that addresses the 10% penalty, which seems to contradict "at-will" provisions of Virginia's laws and/or policies.
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The language quoted simply reinforces that employment is "at will". It is still possible for an employer and employee to have an enforceable contract between them even though the employment is at will. The two are not mutually exclusive. Indeed, it's useful to remember that all employment situations are contractual. There may not be a writing outlining the terms of the contract, but employment situations are contractual nevertheless.
 
Tax Counsel said:
Not having read the entire alleged contract, I can't say of course. The point is, it might be.



The language quoted simply reinforces that employment is "at will". It is still possible for an employer and employee to have an enforceable contract between them even though the employment is at will. The two are not mutually exclusive. Indeed, it's useful to remember that all employment situations are contractual. There may not be a writing outlining the terms of the contract, but employment situations are contractual nevertheless.
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Please forget I exist.
I don't enjoy arguing or debating.
Thank you.
 
Here is the portion of the contract that speaks to the penalty.

Separation Prior to End of Employment Term: You agree to pay the Company liquidated damages in the
amount of 10% of expected annual regular wages 1) should you rescind your acceptance of employment in
writing less than 14 days prior to the beginning of the Employment Term or 2) should you terminate employment
voluntarily 7 or more calendar days after your date of hire and fail to submit written notification of termination to
your supervisor at least 30 calendar days prior to your final day of employment. You authorize the Company to
deduct liquidated damages from your final paycheck to the extent permitted by law and agree, if requested, to
complete a new deduction authorization form to facilitate such deductions
 
Also as clarification, the company has paid the final paycheck but are requesting we set up a payment plan and make monthly payments to them to payback the 10% penalty.
 
Jason k said:
Also as clarification, the company has paid the final paycheck but are requesting we set up a payment plan and make monthly payments to them to payback the 10% penalty.
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That certainly gives you an advantage. They have to come after you instead of you going after them. They have to decide if the cost of a lawsuit is worth 10% of your salary, though I imagine that there is an attorney fee provision in there.

There may be some issues with that contract that make the penalty unenforceable (or not) but I'll let Tax Counsel weigh in on that.

Meantime, it would help to know the following:

How much money is the 10%?

How much notice did you actually give?

Did your employer provide any consideration in addition to your job and salary when you took the job? Like send you to school or pay for you to relocate? A penalty clause is common under those circumstances.

Was the nature of your job such that lack of 30 days notice actually caused your employer to lose a substantial amount of money? Liquidation clauses don't often need justification but sometimes they do.
 
10% is $3900.

Notice given was only 2 days. Reason for this was the employment start date was Aug 1 and last day was submitted as July 31 to try and end employment before the employment commencement date to try and avoid this situation. More notice could have been given but since the position is teacher, they would of been paying me even though I wasn't working since it was over the summer. We thought this would be most advantageous for the employer.

Company paid for no direct schooling or relocation charges.

Position was online teacher.
 
Last edited:
Teacher start date was August 21st so 3 weeks could of been given but company would of been paying more that way for work not being performed (teacher during summer break). An attempt was made on my end to minimize company loss or at least that was how I viewed the situation.
 
Jason k said:
the position is teacher
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Should have revealed that important bit of information at the getgo. Teaching contracts are real contracts and very much enforceable.

You left your employer with the onus of finding a replacement for you during the month of August when any available pool of teachers would be quite shallow and the cost of replacing you would be greater than normal.

It's possible that the liquidation clause could be a reasonable estimate of the employer's loss for trying to replace you at the last minute.

Why would you want to terminate the contract if you were going to be paid for the summer without having to do anything until classes started?
 
adjusterjack said:
The employer could potentially win 8.5% instead of 10% and bring the salary down to $35,685 and be legal.
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Correct. And should there be a suit and the OP not bring it up the court likely wouldn't either. If the OP's employer wins the OP reports the underpayment to the USDOL and they jump in.
 
Unfortunately giving 30 days notice wasn't an option. Ultimately, from the sounds of it, I will likely have to pay the penalty? Do you think the best bet is to fight it until the end In hopes they don't push it or try and negotiate a discount now?
 
PayrollHRGuy said:
They can't under the FLSA rules for OT-Exempt employees pay you that little.

The FLSA requires the weekly amount that will equal $35,588 annually. At $39,000 they were legal. At $35,100 they are below.
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But part of the problem here is that $39,000 was the salary from September 2019 to August 2020. So part of this "penalty" relates to pay from last year as well as this year. How that would affect the determination of whether the OP is still considered exempt from FSLA overtime rules, I don't know.

The OP might still be subject to the penalty either way; the question would be whether the penalty would then make the OP eligible to make an OT claim. And unless the OP had overtime, that wouldn't make a difference.
 

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