Early Cessation Penalty/Liquidated Damage

You are prohibited from seeking or collecting a penalty, even if agreed upon with the H-1B worker, as a result of the H-1B worker terminating employment before the stipulated end of an employment contract, usually the length of the visa.

Some characteristics of a penalty may include:

• A fixed termination payment regardless of the term of the contract and the length of time during which the contract was in effect before termination;
• An unexplained or unjustified amount of money which is not attributed to any particular cost or loss;
• An amount of money which appears unreasonable in comparison to the worker's earnings; or
• An agreement that is the result of fraud or where it cloaks oppression.

A penalty is distinguishable from liquidated damages which are reasonable approximations or estimates of anticipated or actual damages caused by the H-1B worker's breach of contract. The determination of liquidated damages is to be made on the basis of applicable state law.

Even if an H-1B worker is subject to or owes liquidated damages, you can never take a deduction from the worker's paycheck if in doing so you reduce the worker's wages below the required wage rate (RWR).

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H-1B Advisor Glossary of Terms | Wage and Hour Division