Employee Liability for Entrusted Property

Employee liability for entrusted property is one of the most demanding and precisely regulated institutions of labour law, the principles, prerequisites, and practical aspects of which are of significant importance to both employees and employers.

Unlike general liability, liability for entrusted property arises only upon fulfilment of specific conditions: proper entrustment of the property (with the employee’s consent), actual assumption of custody, and the occurrence of damage as a result of the employee’s improper discharge of the duty of custody. This liability regime encompasses, inter alia, money, securities, tools, equipment, clothing, as well as means of transport or other assets entrusted with the obligation of return or accounting, pursuant to Article 124 of the Labour Code.

The Labour Code differentiates between liability for entrusted property and the employee’s general material liability. Articles 124–127 of the Labour Code govern liability for entrusted property. The legislator provided for two basic variants: (i) entrustment with the obligation to return (e.g., company car, computer, telephone, payment cards, funds for settlement) and (ii) entrustment with the obligation to account (e.g., goods entrusted to a salesperson, cash collected by a cashier, valuable documents). In both cases, the burden of proof rests with the employee (Article 124 § 3 of the Labour Code), who, in order to be released from liability, must demonstrate that the damage arose from causes beyond his or her control. Case law of the Supreme Court and appellate courts further clarifies, inter alia, the significance of handover protocols, the reality of custody, and internal procedures.

Differences from General Liability

Conditions for Liability under Article 124 Labour Code

For liability to arise under Article 124, the following must be cumulatively satisfied:

1. Proper entrustment of property – with the employee’s consent and with the actual possibility of exercising custody;
2. Occurrence of damage – there must be a real detriment to the employer’s assets;
3. Causal link – the damage must result from improper performance of the duty of custody over the entrusted property.

Failure to satisfy any of these elements means that the employee’s liability should be assessed under the general rules (Articles 114–122 Labour Code), which entails limitation to the equivalent of three months’ remuneration if the damage was caused unintentionally.

Practical Implications for Employers

Employers should:

• make entrustments in writing, with a detailed handover protocol;
• ensure the employee has a real opportunity to exercise custody (e.g., exclusive access, clearly defined duties and procedures);
• carry out regular inventory checks of entrusted assets;
• set out rules of liability in work regulations, the employment contract, or a separate agreement.

The absence of proper entrustment, organisational shortcomings, or permitting third parties access to the property may limit or exclude employee liability, as confirmed by judicial practice.

Employee Defences

Employee liability for entrusted property is exceptionally strict, based on specific statutory prerequisites, with a principle of full liability for the damage incurred, provided the employer ensured proper entrustment and real conditions for custody.

An employee may avoid liability by proving that:

• the damage arose from causes beyond his or her control (e.g., theft despite proper safeguards, defective security systems provided by the employer);
• the entrustment was defective (e.g., absence of a handover protocol, no actual ability to secure the property);
• the fault lies with third parties to whom the employer granted access to the property.

Judicial Guidance

For the sake of legal certainty, employers should consistently use written entrustment procedures and formulate clear liability rules in employment documentation. To safeguard the interests of both parties, it is necessary to provide training, conduct periodic inventories, audit third-party access, and monitor internal procedures. Employees, in turn, when assuming custody of property, should always insist on a precise definition of the scope of liability and ensure documentation of all handovers and settlements.

In cases of doubt or unusual factual circumstances, reference should always be made to current case law and, if necessary, consultation with a labour law specialist is recommended.

Perspective of the Labour Court

Because liability for entrusted property (Articles 124–127 Labour Code) is exceptional and differs from the general principles of material liability, courts are required to examine in detail the formal prerequisites of entrustment, as their absence precludes full liability.

During proceedings, the court should establish, inter alia:

• whether the entrustment was made with the employee’s consent;
• whether the employee signed a handover protocol, a material liability agreement, or another document;
• whether there was implied acceptance of the property (e.g., collection of cash, payment card, vehicle);
• whether the employee had a real ability to exercise custody;
• whether the employee could secure the property independently;
• whether third parties had access to the property (e.g., mechanics in a workshop);
• whether the employer demonstrated an actual shortage or loss in assets;
• how the value of the damage was determined (invoices, valuation, expert opinion);
• whether a causal link exists between the entrustment and the loss;
• whether the damage was not the result of organisational failings (e.g., absence of procedures, excessive access for outsiders).

Once the employer proves proper entrustment and the existence of damage, the burden of proof shifts to the employee (Article 124 § 3 Labour Code). The court should then verify:

• whether the employee points to causes beyond his or her control (e.g., theft despite security measures, defective protection systems);
• whether supporting evidence is provided (witness statements, documentation, police report, technical report);
• whether the employee’s conduct reflects due diligence (e.g., parking in a monitored location, proper securing of equipment)

Final Remarks

From the perspective of the labour court, what matters most is the precise establishment of facts relating to the entrustment and the sequence of events leading to the damage. This liability regime is exceptional – it requires a rigorous approach, but at the same time protection of the employee against unjustified financial burdens. Liability for entrusted property is not automatic: it must be preceded by careful and proper entrustment, and the employee retains the right to defend himself or herself by demonstrating causes beyond his or her control.