Employee Material Liability: When You Have to Pay and When You Don’t
An employee is not automatically obliged to compensate the employer for losses caused by a mistake. The law defines the conditions under which material liability arises, its limits, the procedure for compensation, and cases when the court may reduce the compensation amount.
The Labor and Employment Inspection of the Dnipro City Council reminded that according to Article 130 of the Labor Code of Ukraine, employees are materially liable only for direct actual damage caused to the enterprise as a result of violating labor duties.
When an employee can be held materially liable
To hold an employee materially liable, it is necessary to simultaneously prove:
- the presence of direct actual damage;
- the illegality of the employee's actions;
- the employee's fault;
- a causal link between the employee's actions and the damage caused.
Limits of material liability
According to Article 132 of the Labor Code of Ukraine, the general rule is that an employee is liable only within the limits of their average monthly salary.
Full material liability, as provided by Article 134 of the Labor Code of Ukraine, arises only in cases defined by law. In particular, if the damage was caused intentionally, a shortage of property was found, the employee was under the influence of alcohol or drugs, received property under one-time documents, or in other cases directly established by legislation.
How the amount of damage is determined
According to Article 135-3 of the Labor Code of Ukraine, the amount of damage is determined based on actual losses supported by accounting documents and the real value of the property.
How damage is compensated
Article 136 of the Labor Code of Ukraine provides three methods of compensation:
- voluntary compensation;
- deduction from wages within the limits established by law;
- recovery of damages through court proceedings.
What the Supreme Court decided
The Inspection drew attention to a case filed by PJSC "State Savings Bank of Ukraine" against an employee for compensation of damage caused during the performance of labor duties.
The bank employee caused a traffic accident while performing official duties. The bank, as the employer, compensated the victims for the damage caused and then filed a recourse claim against the employee.
The Supreme Court noted that if the employer, according to Article 1172 of the Civil Code of Ukraine, compensated for damage caused by its employee to third parties, it has the right to claim compensation from the employee by way of recourse.
The basis for this is Article 1191 of the Civil Code of Ukraine and paragraph 3 of part one of Article 134 of the Labor Code of Ukraine.
At the same time, the appellate court, applying Article 137 of the Labor Code of Ukraine, took into account the employee's financial situation, negligent fault, and reduced the compensation amount by 50%. This position was supported by the Supreme Court.
This refers to the Supreme Court ruling dated January 16, 2023, in case No. 664/1499/17 (proceeding No. 61-6115св20).
What this means for employees and employers
The Inspection emphasizes that even if the employee's fault is proven, the court does not always recover the full amount of damages.
When considering such cases, the court takes into account the nature of the employee's fault, the circumstances of the damage, their financial situation, as well as the principles of fairness and proportionality of liability.
Thus, material liability in labor law is based on a balance between protecting the employer's interests and guaranteeing the rights of the employee.
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