What is the purpose of liquidated damages in employment law?

Liquidated damages serve a specific purpose within employment law by providing a pre-determined amount of compensation for certain breaches of contract as outlined in the employment agreement. This concept is particularly crucial in situations where calculating actual damages might be difficult or uncertain, such as when it involves lost earnings or benefits resulting from contract violations.

By establishing a fixed sum for breach of contract, liquidated damages provide clarity to both parties about the financial repercussions before any potential legal disputes arise. This not only helps prevent lengthy court battles but also encourages adherence to the contract terms, as the financial consequences are clearly defined and understood in advance. This mechanism simplifies the resolution process and offers a degree of certainty and fairness in contractual relationships.

In contrast, the other options don't align with the specific function of liquidated damages. For instance, remedies prior to a lawsuit relate more to preliminary resolutions and may not involve predetermined compensation, while punitive damages focus on penalizing wrongdoing rather than compensating for a specified breach. Lastly, damages for emotional distress are typically awarded based on the emotional impact of a situation rather than established compensation for contract breaches.