Employee Liability for Damage: Only in Cases of Intent or Gross Negligence Can Employers Seek Compensation

The fundamental responsibility of employees is to personally perform the assigned work according to the instructions provided by the employer in accordance with the nature and type of work. Employees are obliged to fulfill their work obligations in accordance with the provisions of the Labor Law, international agreements concluded and ratified in accordance with the Constitution and published, which are in force, other regulations, as well as in accordance with the provisions of collective agreements and internal acts of the employer’s work regulations if they are in force and binding on the employer.

In the case of violations of assumed obligations and legally fulfilled other conditions, employers are authorized to terminate the employment contract with the employee. In performing the tasks assumed by the employment contract, one or more employees may cause damage to the employer or third parties. The Labor Law in Article 107 stipulates that an employee who intentionally or due to gross negligence causes damage to the employer while at work or in connection with work is obliged to compensate for the damage. If the damage is caused by multiple employees, each employee is responsible for the part of the damage they caused. If it is not possible to determine the part of the damage caused by each employee, all employees are considered equally responsible and compensate the damage in equal parts. If multiple employees caused damage through a criminal act committed with intent, they are jointly liable for the damage.

Limitation of Liability

For an employee to be liable to the employer for damage in accordance with the provisions of the Labor Law, such damage must be a consequence of performing the tasks assumed by the employment contract or must arise in connection with work. The court in some cases interprets that damage ‘in connection with work’ is damage that occurred outside the tasks and duties that the employee performs in the execution of their regular work tasks, but in activities that are functionally related to the employee’s employment status and in the interest of the work.

Further limitation of employee liability is reflected in the fact that the employee is liable to the employer for such damage only if it is the result of intent or gross negligence of the employee. Intent is the most serious form of fault, which is determined subjectively. It is a type of fault where the employee acts with will and knowledge aware that their actions or omissions will cause damage to the employer. Gross negligence exists in cases where the employee behaves in a way that an average careful employee would not behave. On the other hand, the employee is not liable for damage caused to the employer due to ordinary negligence. In a court proceeding that the employer would initiate against the employee for compensation for the damage incurred, the employer is, therefore, the one who, in addition to the existence of other prerequisites for the damage incurred, is obliged to prove the intent or gross negligence of the employee.

Prohibition of Set-off

The employer can only collect the incurred damage from the employee after the completion of the court proceedings initiated against the employee and only in the amount awarded by a final court judgment. The Labor Law in Article 108 provides employers the opportunity to foresee the amount of damage compensation for predetermined harmful actions through a collective agreement or work regulations. Judicial practice has shown that this can also be agreed upon in the employment contract. If the damage caused by the employee’s harmful action exceeds the established amount of compensation, the employer can certainly demand compensation in the amount of the actual suffered and established damage.

In all these cases, the employer must initiate court proceedings against the employee, obtain a final court decision, and based on such a decision initiate enforcement proceedings for collection against the employee because the law prohibits the employer from declaring a set-off against the employee’s claim against the employer. Thus, Article 96 of the Labor Law clearly stipulates that the employer must not, without the employee’s consent, collect their claim against the employee by withholding the payment of wages or any part thereof, or by withholding the payment of wage compensation or part of the wage compensation.

The law further stipulates that the employee cannot give such consent before the claim arises. The employer’s actions contrary to this provision represent a serious violation by the employer, and any consent given by the employee before the employer’s claim arises would be considered null and void. Therefore, the set-off of the employer’s claim would only be possible after the damage occurs and the amount of damage is determined, provided that the employee’s consent for the set-off is given.

Employers, Beware!

Considering that there is currently a significant number of workers engaged through temporary employment agencies in the Croatian market, it should be noted that for damage caused at work and in connection with work by assigned workers, it is not the assigned worker who is liable, but the temporary employment agency in accordance with the general provisions of mandatory law (Article 51, paragraph 2 of the Labor Law). Given that agencies are responsible for a large number of assigned workers, the question is whether they could compensate in the event of damage. Therefore, it is very important for employers to check the previous references and liquidity of temporary employment agencies before engaging ‘assigned workers’ and to secure their potential claims against them well.