Contractual Penalties in Standardized Employment Agreements: Are They Still Enforceable?

It is not unheard of in Germany that an employee and employer agree on a start date, but as soon as the start date arrives, the employee is nowhere to be seen (probably because he found a better position in the meantime). What can the employer do to protect himself against this? Often employers will include contractual penalty clauses in employment agreements. The contractual penalty clause sets forth that if an employee fails to satisfy a term of the employment agreement that is subject to the penalty, the employee will be required to pay to the employer the agreed financial penalty. This device is most commonly used if an employer would otherwise have difficulty in proving the actual damages suffered as a result of the employee’s breach, e.g., if the employee failed to begin his employment on the agreed date or if the employee breached his post-termination non-compete obligations.