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Determining the Material Liability

Viimati uuendatud: 15.10.2019


If something happens at the workplace which triggers material damage, it must be determines who and on what conditions is responsible for the damage and who must compensate. This is determined by the parties’ contractual obligations. The employee’s liability is divided in two: fault-based liability and contractual or material liability.

Fault-Based Liability

In the case of fault-based liability it is reckoned that the employee must fulfil their work tasks loyally, keeping the employer’s profit in mind, and use their best knowledge, skills and apply due diligence. If tasks have been fulfilled with the necessary diligence, the employee is not guilty of infringement nor materially liable.

In the case of fault-based liability, the fault forms are carelessness, severe negligence and intent. Carelessness is a situation when the employee has not paid necessary attention when fulfilling the obligation. Severe negligence is not following necessary care and intent the wish to damage property.

If the employee has breached a contractual obligation, the employer can demand material liability and damage compensation only if the employee is guilty of the violation. The guilt extent determines the extent of the damage to be compensated by the employee. If the employee has willingly breached the employment contract, they are liable for the entire damage caused to the employer.

For instance, a hull insurance covers the employer’s vehicle and if the insurance provider demands the self-liability payment from the employer, the latter may ask the employee to pay it if it is found that the employee caused the traffic accident.

If the employee admits their guilt and is ready to compensate for the damage caused, parties can agree to deduct the damage amount from the employee’s remuneration. But if the employee does not admit their fault or disagrees with the damage amount, the employer must turn to the labour dispute committee or court to have their damage compensated for. In 2015, employers filed 454 claims against employees, 90 of which were directly related to material damage caused by employees.

Contractual or Material Liability

If the employee and employer have concluded a material liability agreement, the employee is liable for preserving the assets provided for working, regardless of fault. Material liability agreement is only valid if it:

  • Has been concluded in writing (favourably as a separate document, or as a part of the employment contract);
  • Is limited by space, time and objects in a sensible and comprehensible manner (describes the assets, location and time for which, where and when the employee is responsible);
  • States that the assets that the employee is trusted with are accessible only to the employee or a determined circle of employees (e.g., a clerk is not responsible for goods sold in the shop as other unidentified people or customers also have access to it);
  • Agrees on the maximum monetary liability level;

Taking into account the maximum liability level, the employer pays the employee a reasonable additional pay (benefit must be proportional to the upper limit of the monetary liability).

In the case of material liability agreement, the employer must not prove that the employee is guilty of assets’ wreckage or loss, but must only prove that the assets that the employee was provided with are wrecked, damaged or lost. Such an agreement usually concerns employees engaged with the till and goods, but may also be concluded for using the company car. Material liability agreement is concluded bilaterally and is illegal if the abovelisted aspects are not fulfilled incl. reasonable additional pay to the employees for the liability.

It could occur that the damage is greater than the employee’s resources to compensate. Thus, the employer could consider all available insurance possibilities.

To make working and material liability rules clear to both employer and employee, the parties should certainly talk through the work tasks and their character, likely material risks and liabilities prior to concluding the employment contract.

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