What is the liability of your employee?

Legal framework for employee liability

Employee liability is primarily regulated by the Labour Code. Liability for damages of an employee differs from the classical civil liability, which is instead dealt with in the Civil Code. According to the Labour Code, an employee is obliged to act in such a way as to prevent damage. If he or she nevertheless causes damage, he or she is materially liable to the employer.

Unlike civil law, employment law protects the employee as the weaker party. Therefore, the law specifies exactly how damages are calculated and how to claim them. Different liability agreements play an important role – for example, when an employee signs a material liability agreement when working with money or goods.

Liability for damages under the Civil Code is more likely to apply in cases where the relationship goes beyond the scope of the employment relationship, for example if the rights of a third party are infringed. It is therefore crucial to distinguish whether the damage occurred in connection with the performance of work or outside it.

Liability limits – 4.5 times average earnings

As an employer, you should expect that the law significantly protects employees from disproportionately high damages. If an employee causes you damages through negligence, they may be liable to compensate you up to a maximum of 4.5 times their average monthly earnings. This limit is to prevent the employee from being existentially threatened by a single act of misconduct.

A different situation arises if the employee acted intentionally, under the influence of alcohol or other addictive substances or committed a criminal offence. In these cases, there is no longer any limit and the employee may be liable for full compensation.

He or she shall be liable in full if a deficit has been incurred on the entrusted values (e.g. cash, goods) on the basis of a written liability agreement. Alternatively, if there is a loss of entrusted items.

A specific category is that of joint material liability agreements. If employees are jointly liable for entrusted values (e.g. stock, goods or cash), each of them bears part of the liability. The damage is divided between them proportionately, unless it can be proven that one of them specifically caused it.

By knowing these rules, you as an employer can better set up work processes and internal agreements to avoid unnecessary disputes.

How an employer should proceed when a loss occurs

When an employee causes damage, the first step is to properly document the incident. As the employer, you must document when, where and how the damage occurred, and that the damage was actually incurred in the course of your employment.

As an employer, you have the right to seek compensation from the employee, but it is important to do the right thing. The first step is to prepare a claim for compensation for damage caused by the employee, which must be specific, supported by evidence and always addressed directly to the employee. In practice, it is also advisable to carry out an internal investigation so that you are clear whether there was negligence or intent – this is what determines the amount of compensation, if any.

The next step is to ensure that the compensation is correctly accounted for by the employee. The employee’s liability is entered in the accounts and then the method of payment. This may be in the form of a deduction from wages, a cash payment or an instalment agreement. Correct accounting is important not only for your company’s transparency, but also in terms of the employer’s tax obligations.

It is therefore advisable to have the entire procedure carefully documented, this will facilitate any disputes and prove that you have complied with the law.

You can agree with the employee

As an employer, you don’t always have to take the litigation route; in many situations, it’s better to deal directly with the employee. You can enter into a debt acknowledgement agreement that clearly sets out the terms of repayment. Other options are deductions from wages or setting up a repayment plan if the damage is beyond the employee’s immediate financial means.

Such a procedure has the advantage of speed and less administrative and financial burden for you. You get the assurance that the employee will pay the damage, and the employee in turn appreciates the opportunity to pay the liability gradually, without the risk of immediate debt or legal proceedings. If your relationship with the employee remains fair and both parties are seeking a reasonable solution, this option is the most effective for both employer and employee. In addition, the agreement will often help maintain good working relationships and minimize workplace conflict.

When to involve the court or a lawyer

However, there are situations where an amicable solution is not possible. Typically, these are disputes over material liability, where the employee refuses to acknowledge the damage or disputes his or her share of it. Other cases are situations where the damage caused is high, intentional or related to a criminal offence.

At such times, it is advisable to engage an attorney to prepare a claim, represent you as the employer in court and take care of drafting legally flawless documents. An attorney can also assess whether it is worth pursuing a dispute with an employee at all, or whether it would be more effective to take an alternative route, such as mediation.

What to do if an employee causes damage to your client

If the damage is not only to you as an employer, but directly to your client, the Civil Code comes into play. The client is entitled to claim compensation directly from you as the service provider or contractor, because you are acting as a contractual partner towards him.

Imagine, for example, a situation where an employee of a construction company damages a client’s newly laid floor, or where an accounting employee makes a mistake in the preparation of a tax return and the client incurs damages in the form of penalties from the tax office. In such cases, the client is entitled to seek compensation from your firm, not the employee directly. Therefore, your liability to the client cannot be transferred directly to the employee.

The employer must first compensate the client for the damage (usually in full), and only then can it make a recourse claim against the employee under the Labour Code. Therefore, it is important to have good documentation of both the internal investigation and the communication with the client – for example, an incident report, damage quantification or an expert’s report. These documents will later enable you to effectively recover costs from the employee.

Summary

If an employee causes you damage, the Labour Code allows you to claim compensation but also protects the employee as the weaker party. It is liable for negligence up to a maximum of 4.5 times the average earnings, however, in the case of intentional acts, damage under the influence of alcohol, gross negligence or criminal offences, it pays the full amount of damages. An exception to this is in cases of joint material liability, where the damage is shared between several employees. As an employer, you must always document the damage properly, conduct an internal investigation and draw up a claim for compensation addressed to the employee. Payment can then be made by deduction from wages, in cash or by installment agreement, which is usually a quicker and less conflicting solution than a lawsuit. However, if the employee refuses to acknowledge the damage, acts deliberately or the sums involved are large, it is advisable to involve a lawyer and take the case to court. Properly set up procedures and agreements will help minimize risks and ensure that any damages are paid.