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Material liability agreement

Does your employer ask you to sign a material responsibility agreement? What does it say and what consequences can it have for you?

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If you sign a contract and cause damage to your employer, he can only recover from you an amount equivalent to 4.5 times your salary. If you have signed a material liability agreement or a liability agreement for entrusted objects, there is no financial ceiling to protect you. Unless you can prove that you did not cause the damage, you will pay the full amount. At this point, the employee who has to prove the damage is basically at a disadvantage. The employer, on the other hand, has a much simpler situation, both legally and factually: he knows who he can immediately claim compensation from and does not have to prove the employee’s fault.

Damage can take many forms. Most often, it is damage to or loss of property or money that the employer has spent to remedy the consequences of your mistake. Your breach of duty does not necessarily have to be intentional. Even if you act negligently (for example, failing to lock up properly when you leave work), this can easily backfire on you.

Deliberate acts and negligence

If you are negligent, your employer can claim damages of up to 4.5 times your average earnings. This is even if you have not signed a material liability agreement. If you are proven to have acted intentionally, there is no limit on damages. The law takes an equally strict view of cases where you cause damage while under the influence of alcohol or other addictive substances. If your intent is proven, your employer can also claim damages for lost profits

In cases where you have not breached any duty but your employer has still suffered damage (for example, because your subordinates caused the damage), your employer cannot claim compensation for such damage. This rule applies even if you are a senior employee (for example, a store manager).

If you sign a material liability agreement or an agreement on liability for loss of entrusted items, you will be subject to increased liability as an employee .

By entering into a material responsibility agreement, the employee assumes responsibility for any shortfall in any other assets entrusted to him or her by the employer at any time after the agreement is entered into, provided that the assets are assets that are eligible to be subject to a material responsibility agreement (i.e., assets that are subject to turnover or circulation and that the employee has the ability to dispose of for as long as they are entrusted to him or her). Therefore, the fact that the values entrusted to the employee are not directly defined in the material responsibility agreement is not – like the fact that no inventory of those values is taken when the agreement is concluded – detrimental to the validity of the material responsibility agreement. In this case, however, it is for the employer to prove, by other means of evidence, what values were entrusted to the employee, what their condition was at the time the employee took them over and whether the damage

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Tip: An employee is only liable for damage caused to the employer to a limited extent. What are the limitations of this material liability? What about damage caused intentionally or after quenching thirst with a hoppy drink during working hours?

Material liability agreement

If you enter into a material liability agreement, you are liable to your employer for any loss of value, such as money in the cash register, goods in the warehouse, etc. In this case, your employer can claim compensation from you without having to prove that you caused the loss. You will therefore only be relieved of the obligation to compensate if you can prove that you did not cause the loss: for example, by identifying the person at fault or proving that you could not dispose of the goods (money) entrusted to you. In practice, several employees sign a joint material liability agreement. If you are a manager, you should also take into account that your share of the compensation will be higher than for “ordinary” employees.

Liability agreement

A similar situation arises in the case of a liability agreement for the loss of entrusted items. If you take possession of certain items under this agreement (company laptop, telephone, etc.), you are liable for their loss or damage unless you can prove that you did not cause it. In addition to the financial consequences, if you cause damage to your employer, you may face dismissal or, in extreme cases, immediate termination of employment.

Tip: One way to resolve missing goods in the warehouse or so-called shortages in the cash register is to enter into a material liability agreement with the employee responsible for the values in question. What does it mean if you sign up to something like this and what can the consequences be for you? This is the focus of our article.

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Author of the article

JUDr. Ondřej Preuss, Ph.D.

Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.

Education
  • Law, Ph.D, Pf UK in Prague
  • Law, L’université Nancy-II, Nancy
  • Law, Master’s degree (Mgr.), Pf UK in Prague
  • International Territorial Studies (Bc.), FSV UK in Prague

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