Material liability at work

Material liability at work
Marek Cieślak

Marek Cieślak

CEO CGO Finance

An employee’s material liability is related to the consequences that he or she may suffer during the performance of duties. Its rules are precised in the Labour Code. What are the types of material liability at work? What is its scope? We present the details in the article below.

Table of Contents

Material liability of employees – what is it and what are its types?

Material liability of employees concerns the consequences that an employee may face in connection with the performance of duties arising from the employment relationship. Its basis is determined and exhaustively defined by the provisions of the Labor Code. In unregulated matters, the provisions of the Civil Code may apply accordingly. The Labor Code regulates only the liability of the employee for material damage, not for harm. This also includes material damage to a person.

There are two types of material liability of employees:

  • Liability for damage caused to the employer,
  • Liability for property entrusted to the employee.

Material liability of employees for damage caused to the employer

An employee incurs material liability under the rules specified in the Labor Code:

  • due to non-performance or improper performance of employment duties,
  • due to his/her fault (unintentional guilt is sufficient),
  • if he/she caused damage to the employer.

For the material liability of employees for damage caused to the employer, the above conditions must occur together. The scope of liability is determined by the actual loss suffered by the employer. What is important:

  • the employee is responsible only for the normal consequences of actions or omissions resulting in damage. The scope of duties depends on the nature of work, position, or employer’s instructions.
  • the employer must prove circumstances justifying the employee’s liability. He must also demonstrate the amount of the damage incurred.

An employee is not liable for damage to the extent that the employer or another person contributed to its occurrence or increase. Moreover, the employee does not bear the risk associated with the employer’s activity. Additionally, he is not responsible for damage within acceptable risk limits. If the employee intentionally caused damage, he must compensate it in full.

In the event of damage caused by several employees, each of them is responsible in proportion to the contribution and degree of fault. Sometimes it is not possible to determine the degree of fault and contribution. In such cases, all employees are responsible jointly and in equal parts.

The employer is solely responsible for compensating damage caused to a third party by an employee during duty. However, the employee is liable towards the employer to the extent provided by the Act.

Compensation for material liability of employees for damage caused to the employer

Compensation for damage caused to the employer is determined based on the actual damage. It may not exceed the amount of three months’ salary. The legislator set an upper limit on the compensation that an employer can demand. This pertains to employee subordination and balancing the interests of both parties. It is a common solution in employment relationships. This protects employees from the employer demanding full compensation. Especially when it exceeds three months of the employee’s pay.

The damage is compensated by paying the employer a specific amount. At the same time, the legislator allows the parties to settle in another form. For example by repairing the damaged item, if its value does not exceed 3 months’ salary. Compensation is determined using current prices unless exceptional circumstances warrant a different date.

Parties can reach a settlement agreement for employee’s damage in specific situations.

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Liability for property entrusted to the employee

The second type of employee’s material liability is responsibility for the entrusted property. It is more restrictive than the liability for causing damage to the employer. This results from the fact that in such a situation, the employee has additional duties arising from the employment relationship. Namely, taking care of the property entrusted by the employer.

Therefore, an employee entrusted with the obligation to return or account for:

  • Money, securities, or valuables,
  • Tools, instruments, or similar items, as well as personal protective equipment and workwear,

is fully responsible for any damage to this property. The employee is also liable in full for damage to property, other than that indicated above, entrusted to him or her with the obligation to return it or to account.

Premises for material liability of employees for entrusted property

The employee’s responsibility for entrusted property differs from liability for damage to the employer. It is based on different grounds. They relate to:

  • proper entrustment of property,
  • damage to the employer’s property.

In this type of liability, an employer must prove the employee’s act of causing damage. He must also prove its value and demonstrate proper entrustment of the property. In the case of material liability of employees or entrusted property, the legislator adopted the presumption of guilt. It can be however rebutted.

An employee can be exempt from the above liability. He must prove that the damage occurred for reasons beyond his control. Especially, due to the employer’s failure to provide conditions for securing the property. In certain situations, employees may assume joint material responsibility for entrusted property. The Act specifies conditions for such group liability.

Material liability – summary

Understanding regulations on the material liability of employees is essential for both parties. Employees need to know what they can be held accountable for at work and how to avoid such situations. Employers, on the other hand, should be aware of their rights and obligations on employee material liability.

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Marek Cieślak

CEO CGO Finance