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Suppose a company were to specify, in a contract, that a candidate is bound to remain an employee, with all the work obligations that come with the role, unless and until one of two things happens:

  1. The company terminates the contract in writing,
  2. Circumstances entirely outside of the employee's control results in the employee's death.

Additionally, they throw in a penalty specifically designed to deter termination - such as now OWING the company money, as opposed to being paid. For example, you quit, and now you have to pay back all of the money we paid you throughout your employment here.

Would such a contract be legally enforcible?

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    Does this answer your question? Is a contract allowed to have illegal / unenforceable clauses? Commented May 2, 2021 at 0:43
  • So when circumstances that are within the employees control (say smoking) lead to the employee's death, then the corpse still needs to work?
    – MSalters
    Commented May 3, 2021 at 14:55
  • @BlueDogRanch: The question is, would the clause in this contract be illegal or unenforceable?
    – moonman239
    Commented May 3, 2021 at 23:38

1 Answer 1

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No, a penalty clause is illegal, end of story. A contract could include a "liquidated damages" clause – this is how late fees are legal – that if you breach the contract in a certain way, you will compensate the company for the damage that you have done (bookkeeping, interest on money owed) in a standard and reasonable manner. Incidentally, what you describe is slavery, which is illegal throughout the US. The closest you could get is if the company offers a benefit for staying with the company for some period of time, then the employee might forego that benefit if they don't fulfill that aspect of the contract.

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    Liquidated damages for quitting can be allowed in some situations. For instance, federal employees are often required to sign a continued service agreement before the government will pay for expensive outside training, where if they quit before the agreement ends they have to repay the government for the training. However, those agreements are finite (often the length of the training for long-term training and three times the length for shorter-term training), don't require repayment if you're fired, and don't require repayment of salary.
    – cpast
    Commented May 2, 2021 at 1:13
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    Slavery in the US is only illegal for people not sentenced to it as punishment for a crime.
    – Dale M
    Commented May 2, 2021 at 6:08
  • @cpast Also worth noting is that the cost isn't an arbitrarily high deterrent- it's a percentage of the amount the company wasted on training. Commented May 2, 2021 at 11:02
  • There are a handful of legal contracts for personal services which can be specifically enforced, the most familiar of which is for military service (the others are similar, paramilitary roles such as the epidemiology service of the CDC).
    – ohwilleke
    Commented May 3, 2021 at 19:10
  • @DaleM Colorado's state constitution no prohibits slavery or involuntary servitude as punishment for a crime and no federal law currently imposes that penalty. Also, strictly speaking, it would be involuntarily servitude if you were forced to work at the job, rather than slavery. Slaves have no right to be paid and are legally property. Indentured servants have more rights than that.
    – ohwilleke
    Commented May 4, 2021 at 0:16

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