Wisconsin Supreme Court
331 N.W.2d 357 (1983)
Towne Hotel (Towne) (defendant) hired Donald Wassenaar (plaintiff) as a general manager. The parties entered into an employment contract for a three-year term, which included a liquidated damages clause. The clause provided that Towne would fulfill the financial obligations of the agreement should Towne terminate it prior to its expiration. Wassenaar was let go 21 months before the expiration of the contract, but found work again within just a couple of months. Wassenaar sued for damages. Towne answered alleging that Wassenaar had failed to mitigate damages. The circuit court held that Wassenaar was not required to mitigate. The jury awarded $24,640, which sum represents what Wassenaar had calculated as his damages based upon the liquidated damages clause. The court of appeals reversed the trial court decision and remanded the case for a new trial. The appeals court held the liquidated damages clause void because it was a penalty. It reasoned that the employee’s salary would be easy to calculate in the event of breach and that the formula, which provided an award of full salary without considering mitigation, was unreasonable. Wassenaar petitioned the Supreme Court of Wisconsin for review on the issue of whether the liquidated damages clause is enforceable.
Rule of Law
Holding and Reasoning (Abrahamson, J.)
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