LEGAL OPINION
A liquidated damages for contract release provision is a provision that states how much a teacher must pay in order to be released from his/her contract. Many times, such a provision is found in the negotiated agreement. Other times, it is found in board policy and/or inserted in the actual teaching contract which is signed by individual teachers. If found in the negotiated agreement, the South Dakota Supreme Court has ruled that such a provision or an increase in the amounts assessed by the board can be imposed after good faith negotiations. If found solely in board policy and/or inserted in the individual teaching contract (without a corresponding negotiated provision), the law is not so clear on whether the liquidated damages provision can be imposed.
SDCL 53-9-5 dictates that liquidated damages provisions are void (unenforceable) in any contract unless both parties agree to such a provision. This means that, in most contract situations, unless both parties agree to the liquidated damages clause, both as to the existence of the clause and the amount of liquidated damages assessed, it is not enforceable.
In negotiated agreements, however, that agreement or consent is presumed if there is impasse after good faith negotiations. This is because state statute, SDCL 3-18-8.2, mandates that the board implement/impose its last offer in those circumstances. The Council of Higher Education case ruled that this statute specifically allows the formation of the negotiated agreement without the bargaining unit’s express consent.
The South Dakota Supreme Court’s ruling in Council of Higher Education applies only to the consent requirement of SDCL 53-9-5. This statute also states that liquidated damages provisions are valid only “where it would be impracticable or extremely difficult to fix actual damage.” The board must still meet this criteria in order for there to be a valid liquidated damages provision in the negotiated agreement.
It is the opinion of SDEA legal counsel that a board which increases, via the impasse process, the amount of liquidated damages it assesses excessively does so at its own risk. If challenged, the board would have to show it negotiated the amount in good faith and would have to justify the increase. This would also apply in cases where a board was imposing a brand new liquidated damages provision.
As stated earlier, the law is not as clear on whether a board can “impose” a liquidated damages provision if that provision is contained solely within board policy and/or inserted in the individual teaching contract (without a corresponding negotiated provision). As the Council of Higher Education implied consent ruling only applies to liquidated damages provisions obtained via the negotiations process, it is the opinion of legal counsel that this type of liquidated damages provision cannot be “imposed” as it must meet the agreement requirement of SDCL 53-9-5. Further, there is a Clay County Circuit Court opinion from 1992, Vermillion Education Association v. Vermillion Board of Education, Clay Co. Civ. No. 92, which states that a school board cannot impose liquidated damages as board policy.
Given all the different variables that are at play when it comes to liquidated damages provision, locals and members should not just accept the board’s liquidated damages provision or proposal at face value. The local’s or member’s UniServ Director should be consulted in a timely manner for appropriate advice.
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