Employee damaged the property of the individual entrepreneur: should such an employee compensate the losses?

Many entrepreneurs transferred their employees from offices to the remote mode of work. Usually they provide laptops to be used in work. What should they do if the devices are damaged?

For example, the kid of the employee spilled milk on the keyboard. Let’s find out whether the employee shall be liable for the caused damage. If yes, to what extent.

According to the law, entrepreneurs shall create the proper working conditions for their employees and provide such employees with the necessary equipment and the employees shall carefully use the provided equipment.

According to the effective law, employers may hold their employees financially liable if the actions of such employees caused damage to the property, but only within the frames of the Labor Code of Ukraine.

We remind that there are two types of financial liability – full and limited. In the respective case, the full liability may not be applied since it is applicable only in the cases stipulated directly in the law. The complete list of such cases is stipulated in article 134 of the Labor Code of Ukraine. The laptop was damaged due to negligence. The respective reason of the property damage is not stipulated in the above stated list. Thus, the employee may be only subject to limited financially liability.

Limited financial liability is stipulated in Articles 132 and 133 of the Labor Code of Ukraine. According to the respective articles, employees shall be liable for the damage or destruction of the materials, semi-products, products, in particular, during their production, in the amount of the direct actual damage caused by their actions, but not exceeding their average monthly income. The respective amount shall be applicable to the financial liability of the employees for the damage or destruction, due to negligence, to the tools, measuring devices, working clothes and other objects provided by the employers to be used in work.

We turn your attention to the fact that if the laptop can be repaired and the price of repair is less than the average income of the employee, the amount of the damage shall be equal to the price of the repair.

If individual entrepreneurs want to hold their employees financially liable, the following conditions shall be met:

1. Presence of direct actual damage.

2. Damage is caused by the illegal actions (omissions) of the employee, in particular, due to negligence or carelessness.

What is direct actual damage? It is the loss or decrease of the property’s value, necessity of its repair or purchase of new property, i.e. the need in additional costs caused by the violation by the employees of their job duties.

At the same time, employees may voluntarily compensate the damage inflicted by them in full or partially. Upon the consent of individual entrepreneurs-their employers, the respective employees may also provide similar property or repair the damaged property to compensate the losses.

So, if the employees damaged the employers’ property while performing their job duties, the respective employees may be subject to only limited financial liability in the amount of the direct actual damage caused by their actions, but not exceeding their average monthly income. The amount of the losses exceeding the above stated amount shall not be compensated.

The following aspects should be considered when holding the employees financially liable:

1. The amount of the damage not exceeding the average monthly income shall be charged based on the order, which the employee shall read and sign. During the calculation of the average income, employers shall consider the payments for the last 3 calendar months of the work preceding the month during which the decision on holding the respective employee financially liable for the caused damage was taken.

2. The order shall be issued not later than within two weeks starting from the date of the inflicted damage discovery and shall be executed not earlier than after seven days starting from the date of the employee  notification about the respective order. During this period the employee may appeal against the respective employer’s decision.

3. The amount of the damage shall be withheld from the employee’s salary in compliance with the restrictions specified in article 128 of the Labor Code of Ukraine. The withheld amount shall not exceed 20% of the salary and in certain cases 50% of the salary.

Natalia Shcherbak, tax advisor of the newspaper “Individual entrepreneur”, specifically for the magazine “My business”