Penalty Clause in Employment Contract: What You Need to Know

Questioner

Employer offers regular (average for a Dutch employee) employment contract, only dealt with under the heading 'Penalty clause', a relatively heavy description as far as I can judge: 'If the employee fails to fulfil any obligation arising from this agreement or fails to fulfil it in full or violates any provision thereof, he shall forfeit to the employer an immediately and fully claimable fine of €25,000, without any notice of default or judicial intervention being required, without prejudice to the possibility of summary dismissal for urgent reasons.' Is this a realistic penalty clause (realistic = average Dutch employee with modal income) or is this relatively heavy? Despite the fact that I am not considering committing any violation. For example, my contact states the working hours. As I now read the penalty clause, a penalty clause can (in theory) be demanded in the event of a violation of this (the judge will never approve this, but still). This makes me doubt whether this is not a relatively (too) heavy penalty clause. I would like to hear your opinion before I sign anything.

Lawyer

The penalty you mention usually applies in a contract to a confidentiality clause, a relationship clause and/or a non-competition clause. For another violation, I think this penalty will not be awarded quickly. The amount mentioned in the penalty provision is relatively high. Usually an amount of around 5,000 to 10,000 is mentioned but then with a smaller fine per day that the violation continues. In many cases, a fine that high will be reduced by the court. Whether and to what extent this is the case depends on whether the court finds that awarding the fine would lead to an excessive and unacceptable result. In this respect, the relationship between the actual damage and the amount of the fine is taken into account, but also the nature of the agreement, the content and scope of the clause and the circumstances under which it was invoked. In other words, it really depends on the circumstances. But you don't have to worry about having to pay this fine if, for example, you are late once.