A statutory and contractual remedy that is used differently in the employment and commercial contract contexts.

In the employment law context, liquidated damages are a statutory remedy for victims of certain unlawful employment discrimination or wage violations. Liquidated damages are a fixed amount defined by the statutes that authorize them, commonly equal to the plaintiff's back pay award. Liquidated damages in this context are sometimes referred to as double damages.

The federal employment statutes that expressly authorize liquidated damages as an available remedy include the:

Liquidated damages are viewed under most employment discrimination statutes, such as the ADEA, as primarily punitive and therefore only awarded for intentional misconduct or where the employer has not acted in good faith. Under the FLSA, however, liquidated damages for wage violations are not punitive, but are intended to compensate employees for the delay in receiving wages owed to them. Liquidated damages for FLSA wage violations are therefore the rule, not the exception, and generally are awarded unless the employer shows that it acted in good faith and had reasonable grounds to believe that its actions did not violate the FLSA.

For more information on liquidated damages in federal discrimination cases, see Practice Note, Remedies: Punitive and Liquidated Damages in Employment Discrimination Cases.

Liquidated damages may also be available under state anti-discrimination and wage and hour statutes. For more on state law remedies, see Anti-Discrimination Laws: State Q&A Tool and Wage and Hour Laws: State Q&A Tool.

In the contractual context, some employment contracts contain a liquidated damages clause requiring the breaching party to pay a pre-determined amount to the other party as compensation for the breaching party's failure to comply with a particular obligation. Employers sometimes include a liquidated damages clause in contracts where it may be difficult to calculate the actual damages in the event of breach, such as non-compete or non-solicitation agreements.

Liquidated damages are also common in commercial and other contracts, such as contracts for the sale of goods, operations and management agreements, and project finance construction contracts. For a sample provision in a commercial contract, see Standard Clause, General Contract Clauses: Liquidated Damages.

For more information on using liquidated damages clauses in operations and management agreements, see Practice Note, O&M Agreements: Issues to Consider: Liquidated Damages. For more information on using liquidated damages clauses in construction project finance agreements, see Practice Note, Understanding Project Finance Construction Contracts: Liquidated Damages.