Liability of the Employee for Damage Caused to the Employer

Article 107 of the Labor Act regulates the liability of an employee who intentionally or due to gross negligence causes damage to the employer. According to this article, the employee is obliged to compensate the damage caused to the employer. If the damage is caused by multiple employees, each employee is responsible for the portion of damage they have caused, as prescribed in Article 107(2) of the Labor Act. In cases where the exact amount of damage caused by each employee cannot be determined, it is presumed that all employees share equal responsibility and are required to divide the liability for the damage equally, as stipulated in Article 107(3) of the Labor Act. Lastly, if multiple employees have caused the damage through an intentional criminal act, all employees are jointly liable for the damage, in accordance with Article 107(4) of the Labor Act.

The term "damage caused in the course of work" refers to the damage caused by an employee, who is employed by the employer, to the employer, and it pertains to the damage arising from the employee's obligations towards the employer as determined in the employment contract (Article 10 of the Labor Act). On the other hand, the term "damage in connection with work" encompasses the conduct of the employee that goes beyond the scope of usual tasks and duties specified in the employment contract, including actions outside working hours, but which are functionally related to the employment status of the employee, where a legally relevant (adequate) causal link exists between the employee's employment status, their conduct, and the resulting damage.

Damage may arise due to the employee's fault, wherein the level of fault can be classified as intentional or gross negligence. The terms intention (dolus) and negligence (culpa) are mentioned in Article 1049 of the Obligations Act. According to this provision, fault exists when the tortfeasor intentionally or negligently causes damage. The meaning of these terms is determined by legal theory and court practice, and they are generally defined as follows:

Intention (dolus) represents a form of fault that is subjectively determined and is present when the employee deliberately causes damage through their action or omission, i.e., when they intentionally desire the cause and consequence. In legal theory, intention is divided into two degrees: a) dolus directus - when the employee expressly intends to cause damage, and b) dolus eventualis - when there is an awareness of the possibility of harmful consequences and consent is given to their occurrence. This theoretical distinction has no practical consequences as the employee is liable for every degree of intention (dolus).

On the other hand, negligence (culpa) is also theoretically divided into two degrees: a) gross negligence (culpa lata) exists when the employee fails to act as an average prudent employee would. Gross negligence refers to situations where the tortfeasor has disregarded the level of care expected from an individual of average abilities. Examples of gross negligence include the failure of a bank employee to properly verify the identity of a person before making a savings withdrawal, driving at a speed of 70 km/h on a wet and slippery road, and others. b) ordinary negligence (culpa levis) occurs when the employee fails to apply the level of care expected from a competent professional or business person.

The distinction between degrees of negligence is significant in assessing the employee's liability, as the employee is held accountable for gross negligence but is never held liable for ordinary negligence.

Lastly, the term "damage" is defined in Article 1046 of the Obligations Act and encompasses the diminishment of one's property (pecuniary damage), prevention of its increase (lost profits), and infringement of personality rights (non-pecuniary damage).

 

Employer's Liability for Damage Suffered by the Employee

Article 111 of the Labor Act establishes the employer's liability for damage suffered by the employee in the course of or in connection with work. According to this article, the employer is obligated to compensate the employee for the damage in accordance with general provisions of mandatory law. This includes compensation for injuries, medical expenses, or other forms of damage suffered by the employee due to the workplace or in connection with work. The right to compensation for damage under Article 111 of the Labor Act also applies to damage caused by the employer's violation of the employee's rights arising from the employment relationship (Article 111(2) of the Labor Act).

 

Employer's (and Employee's) Liability for Damage Caused to Third Parties

According to Article 1061 of the Obligations Act, the employer is liable for the damage caused by their employee to a third party (the injured party) during work or in connection with work. However, the employer can be exempted from liability if they prove the existence of reasons excluding the employee's liability. Additionally, in cases where the employee intentionally causes damage to a third party, the injured party can exercise their right to compensation for damages from both the employee and their employer.

The employer who has compensated the injured party for the damage has the right to claim reimbursement of the costs of repairing the damage from the employee if the employee intentionally or due to gross negligence caused the damage (employee's recourse liability). However, it is important to note that the employer's right to claim reimbursement from the employee expires within six months from the date the damage was repaired.

 

Conclusion

 

The liability of the employer for the damage caused by their employee to third parties, as well as the liability for the damage suffered by the employee in the course of work, is regulated by the provisions of the Obligations Act and the Labor Act.

The employee is obliged to compensate the damage caused to the employer with intent or gross negligence, taking into account the distinction between forms of fault as the employee is not liable to the employer for damage caused by ordinary negligence.

On the other hand, the employer is obligated to compensate the employee for the damage suffered in the course of or in connection with work in accordance with general provisions of mandatory law.

The employer is liable for the damage caused by the employee to a third party, unless reasons excluding the employee's liability are proven. In cases where the employee causes damage to a third party intentionally or due to gross negligence, both the employee and their employer bear joint liability for the damage.

This article is written in accordance with the provisions of the Obligations Act (Official Gazette 35/05, 41/08, 125/11, 78/15, 29/18, 126/21, 114/22, 156/22) and the Labor Law (Official Gazette 93/14, 127/17, 98/19, 151/22, 64/23) in force in Republic of Croatia on July 13, 2023.

 

In Zagreb, July 13, 2023.

 

Dinko Šperanda, mag. iur.,
Attorney-at-law, partner