HW Legal
When can an employee be liable to compensate their employer for damage? When must they reimburse the full amount, and when is their liability limited?
1. Breach of employment duties
An employee is liable to compensate an employer for damage caused by a culpable breach of duties in the performance of work tasks or in direct connection with them.
In general, the following conditions must be met for liability to arise:
- a breach of an employment duty in the performance of work tasks or in direct connection with them;
- damage suffered by the employer;
- a causal link between the breach of duty and the damage; and
- fault on the part of the employee, whether intentional or negligent.
What if the damage was also caused by the employer's own breach of duties?
In that case, the employee's liability is reduced proportionately.
As a general rule, the employer bears the burden of proving the employee's fault, whether intentional or negligent. An exception applies in cases involving responsibility for entrusted assets (discussed below).
The employee is required to remedy the damage by restoring the previous state where possible or, alternatively, by paying monetary compensation.
Limitation of liability
Where the damage was caused through negligence, the employee's liability is limited. Monetary compensation may not exceed 4.5 times the employee's average monthly earnings prior to the breach of duty.
This limitation does not apply where the damage was caused:
- intentionally;
- while under the influence of alcohol; or
- following the misuse of other addictive substances.
Furthermore, where the employee caused the damage intentionally, the employer may also claim compensation for lost profits.
An employee is likewise liable for damage caused by intentional conduct contrary to accepted standards of morality. In such cases, the employee need not have breached a statutory duty; it is sufficient that the conduct is generally regarded as immoral or contrary to good morals.
2. Failure to warn of danger or failure to intervene
If there is a risk that damage may occur to the employer, the employee has a duty to notify a superior manager.
Where urgent action is required, the employee must take reasonable steps to prevent the damage, unless:
- they are objectively unable to prevent it (for example due to a lack of necessary skills or physical ability); or
- intervention would expose them or another person to serious danger.
If an employee intentionally or negligently fails to warn of the danger or fails to intervene, and the damage cannot otherwise be recovered, the employer may require the employee to contribute towards compensation for the loss.
The following conditions must be satisfied:
- breach of the duty to warn of imminent damage or to intervene;
- damage suffered by the employer;
- a causal link between the breach and the damage;
- at least conscious negligence on the part of the employee; and
- the damage cannot be compensated in another way.
In such cases, the employee's liability is secondary in nature.
The employee is not the person who directly caused the damage. Rather, they failed to report or prevent the danger.
Accordingly, the primary liability rests with the direct wrongdoer.
Example
A neighbour leaves a building in which the employer has its premises and throws away a cigarette butt into dry grass near the employer's parked vehicles.
The grass begins to smoulder and catches fire. An employee notices the fire spreading towards the vehicles and realises that damage is likely.
Depending on the circumstances, the employee should either notify a superior or take reasonable steps to prevent the damage.
Instead, the employee does nothing because they are in a hurry to leave work.
The fire subsequently damages the vehicles.
Who is liable?
If the direct wrongdoer (the neighbour) is identified, they will be liable for the damage.
If the direct wrongdoer cannot be identified, the employee's secondary liability may arise.
Would the employee then have to compensate the employer for the full amount of the damage?
No.
In such circumstances, the employee is required only to contribute to compensation to an extent appropriate in light of all the circumstances.
Particular regard is given to:
- the reasons why the employee failed to fulfil their duty; and
- the significance of the damage for the employer.
The employee's liability is capped at three times their average monthly earnings.
Damage caused while preventing danger
An employee who causes damage while preventing imminent danger or damage is generally not liable for that damage.
Exceptions apply where the employee:
- intentionally created the danger themselves; or
- acted in a manner clearly disproportionate to the circumstances when attempting to avert it.
Special category: liability for entrusted assets
A special category of employee liability concerns shortages in entrusted assets and the loss of entrusted items.
This differs from ordinary employee liability because the legal requirements are stricter for employees.
The following conditions apply:
- a written agreement on responsibility for entrusted assets has been concluded;
- a shortage arises in respect of entrusted assets (cash, goods, inventory, materials, etc.); and
- the employee's fault is presumed.
What is an agreement on responsibility for entrusted assets?
This is an agreement under which an employee accepts responsibility for assets entrusted to them by the employer and which they are required to account for.
Such an agreement may be concluded only with:
- employees;
- workers under a work performance agreement (DPP); or
- workers under a work activity agreement (DPČ).
The agreement must be in writing.
It may be concluded only with an employee who is at least 18 years old and has full legal capacity.
The employee may avoid liability if they prove that the shortage arose wholly or partly without their fault.
What are entrusted assets?
Examples include:
- cash;
- securities and vouchers;
- goods;
- inventories and materials; and
- other assets intended for circulation or sale.
The employee must have personal control over these assets throughout the period during which they are entrusted.
Items such as tools, company vehicles, or office equipment are generally not entrusted assets because they are not intended for circulation or sale. These are instead classified as entrusted items (see below).
For example, if a warehouse employee signs an agreement on responsibility for entrusted assets, they may be liable for shortages in goods stored within that warehouse and under their control.
Once those goods leave the warehouse—for example, when transferred to a retail store—they cease to be within the employee's sphere of control and are no longer covered by that particular agreement.
Important note
The assets for which the employee is responsible do not need to be individually listed in the agreement.
The employee's responsibility extends not only to assets entrusted at the time the agreement is signed but also to any qualifying assets entrusted afterwards.
Liability for loss of entrusted items
The conditions for liability are:
- the employee acknowledged receipt of the entrusted item in writing, or a written agreement regarding entrusted items was concluded;
- damage occurred through the loss of the entrusted item; and
- the employee's fault is presumed.
Examples of entrusted items include:
- tools;
- protective equipment; and
- similar work-related items.
Employees may be entrusted with virtually any number of items against written acknowledgment.
However, where the value of an individual item exceeds CZK 50,000, a specific written agreement regarding responsibility for entrusted items must be concluded.
What is an agreement regarding entrusted items?
Under this agreement, the employee undertakes to compensate the employer if the entrusted item is lost.
The agreement must:
- be in writing;
- be concluded with an employee who has full legal capacity; and
- be concluded with an employee aged at least 18 years.
Each entrusted item with a value exceeding CZK 50,000 must be individually covered by such an agreement.
Again, the employee is released from liability if they prove that the loss occurred wholly or partly without their fault.
Example from case law
An employee may successfully demonstrate lack of fault where, for example, they prove that the lost items were stored in a locked locker at the workplace.
Similarly, liability will not arise where the employee was unable to safeguard the items because of a workplace injury.
The employee may also avoid liability if it is established that the employer failed to provide adequate facilities for safeguarding the entrusted items—for example, by failing to provide a lockable locker—thereby contributing to their loss.