The following article by NPLaw provides readers with essential information regarding compensation for damage caused by employees’ incidents, including definitions, relevant legal provisions, and the procedures to be followed when such incidents occur.
I. Can compensation for damage caused by employees’ incidents affect a company’s reputation?
When an incident occurs, enterprises are not only concerned with compensation for damage caused by employees but also pay close attention to their corporate reputation. At this point, a question arises: Does compensation for damage caused by employees’ incidents affect the company’s reputation?
In fact, a company’s reputation may be adversely affected by incidents caused by employees in several aspects, including:
- Loss of customer trust: Incidents caused by employees that result in damage to customers may lead to concerns regarding the quality of the company’s goods or services.
- Impact on business relationships: Business partners may reassess the risks of cooperating with an enterprise whose employees have caused incidents leading to losses for partners or customers.
II. What is compensation for damage caused by employees’ incidents?
To properly understand the applicable legal provisions and their nature, it is necessary to first determine what constitutes compensation for damage caused by employees’ incidents.
Although current legislation does not provide a specific definition of such a term, based on prevailing practices and relevant legal provisions, NPLaw defines it as a legal liability or financial obligation arising when an employee causes damage to a third party or to the employer itself in the course of performing assigned duties.
1. What forms of compensation are applicable?
To facilitate employees in compensating for damage and to mitigate losses suffered by the employer (legal entity), current law provides for various forms of compensation.
Pursuant to Clause 1 Article 585 of the 2015 Civil Code and Article 129 of the 2019 Labor Code, forms of compensation include:
- Monetary compensation: Employees who cause damage may be required to compensate by way of salary deductions or direct payment.
- Compensation in kind: Employees may compensate by providing assets or property equivalent to the damage caused.
- Compensation through performance of work: For example, if an employee causes delays in a construction project, resulting in losses to the enterprise, the employer may require compensation through additional working hours or remedial work.
In summary, employees may compensate for damage through one of the following forms: monetary payment, in-kind compensation, or performance of specific work.
2. What factors determine the level of compensation?
In addition to the form of compensation, determining the extent of liability is a matter of significant concern for enterprises. Proper determination ensures the protection of the employer’s interests while allowing employees an opportunity to rectify their wrongdoing.
Pursuant to Clause 1 Article 130 of the Labor Code 2019, the determining factors include:
- The employee’s fault;
- The actual extent of damage;
- The employee’s personal circumstances and family situation;
- The assets of the employee causing the damage.
These criteria reflect a balanced legal approach, ensuring that compensation is aligned with both the enterprise’s loss and the employee’s actual capacity to fulfill such obligations.
III. Legal regulations governing compensation for damage caused by employees’ incidents
1. Which legal instruments regulate compensation for damage caused by employees’ incidents?
To identify the applicable legal framework, it is necessary to understand the nature of such compensation. It is a liability arising from damage caused by an employee to the employer during the course of employment; therefore, it falls within the scope of labor law.
Additionally, as the liability arises on the basis of equality, autonomy of will, and independent property responsibility, it is also governed by civil law (Article 1 of the 2015 Civil Code).
Accordingly, the relevant legal instruments include:
- Civil Code No. 91/2015/QH13: Governing liability for damage caused by persons of a legal entity (Article 597);
- Labor Code No. 45/2019/QH14: Governing compensation and handling of compensation (Articles 129 and 130);
- Decree No. 145/2020/ND-CP: Detailing procedures, time limits, and complaint mechanisms relating to compensation for damage caused by employees (Articles 71, 72, and 73).
Understanding these legal documents enables enterprises to identify applicable provisions and establish an appropriate legal basis.
2. What is the procedure for handling compensation?
Once an incident is identified, enterprises must not only determine the level of compensation but also comply with the procedural requirements. Proper adherence serves as strong evidence in preventing future disputes.
Pursuant to Article 71 of Decree 145/2020/ND-CP, the procedure includes:
- Step 1: Request for written explanation
Upon discovering that an employee has caused damage or loss of tools, equipment, or other assets, or has otherwise caused damage or excessive material consumption, the employer shall require the employee to submit a written explanation.
- Step 2: Meeting to handle compensation
At least five working days prior to the meeting, the employer must notify all required participants and ensure that such notice is duly received.
Participants must confirm attendance. If any participant is unable to attend at the scheduled time or place, both parties may agree on changes; otherwise, the employer shall decide.
The meeting shall proceed as scheduled, even if certain participants are absent or fail to confirm attendance.
- Step 3: Preparation of meeting minutes
After the meeting, minutes must be prepared, clearly recording the content and adopted before conclusion. The minutes must bear signatures of participants; in case of refusal to sign, the recorder must state the name and reason (if any).
- Step 4: Issuance of decision on compensation
Based on the meeting minutes, the employer shall issue a decision within the statutory time limit, specifying the extent, cause, amount, method, and time frame for compensation, and send it to relevant participants.
These are the basic procedural steps; however, depending on specific circumstances, enterprises may adjust them accordingly.
3. Who has the authority to decide the level of compensation?
The authority to issue decisions on compensation is a practical concern for many enterprises.
Pursuant to Point h Clause 2 Article 69 of Decree 145/2020/ND-CP, internal labor regulations must specify material liability, including cases of compensation, corresponding levels, and competent authorities.
Clause 1 Article 69 further requires employers to issue internal labor regulations (in writing if employing 10 or more employees), or otherwise incorporate such provisions into employment contracts.
Accordingly, the authority to determine compensation levels is specified in the company’s internal labor regulations or employment contracts.
4. Is evidence required to claim compensation?
Evidence is necessary for compensation claims. Under Article 584 of the 2015 Civil Code, grounds for liability include:
- Actual damage;
- An act causing damage;
- A causal relationship between the act and the damage.
Additionally, a written explanation from the employee is also required under Article 71 of Decree 145/2020/ND-CP.
IV. Questions on compensation for damage caused by employees’ incidents
1. Is it possible to require an employee to compensate for damage caused by their incident?
Article 597 of the 2015 Civil Code stipulates liability for damage caused by members of a legal entity as follows: A legal entity must compensate for damage caused by its members in the course of performing assigned tasks; if the legal entity has paid such compensation, it is entitled to request the person at fault in causing the damage to reimburse an amount in accordance with the law.
Accordingly, an enterprise is entitled to require an employee to compensate for damage caused during the performance of assigned duties.
2. Is it necessary to prepare a written record when an incident occurs in order to claim compensation?
Clause 1 Article 71 of Decree No. 145/2020/ND-CP provides that, upon detecting an incident caused by an employee, the employer may request the employee to submit a written explanation of the incident. In addition, one of the grounds leading to liability for compensation is the existence of actual damage.
Therefore, it is necessary to prepare a written record when an incident occurs as a basis for claiming compensation.
3. Is it possible to request insurance coverage for damage caused by an employee’s incident?
The nature of insurance is to share or mitigate financial losses arising from risks for the insured. Accordingly, where an enterprise has obtained insurance (such as property insurance or liability insurance), and the incident caused by the employee does not fall within the scope of exclusions, the enterprise may request the insurer to cover the damage.
4. Can compensation for damage caused by an employee’s incident lead to dismissal?
Clause 2 Article 125 of the 2019 Labor Code provides that employees who cause serious damage or threaten to cause particularly serious damage to the property or interests of the employer may be subject to dismissal as a disciplinary measure.
Therefore, where an employee’s incident results in serious damage and leads to compensation liability, it may lead to termination of employment in the form of dismissal.
5. Is compensation required in cases of force majeure?
Clause 2 Article 129 of the 2019 Labor Code stipulates that in cases of natural disasters, fires, enemy sabotage, dangerous epidemics, catastrophes, or other objective events that are unforeseeable and unavoidable despite the application of all necessary and possible measures, compensation is not required.
Additionally, Clause 1 Article 156 of the 2015 Civil Code defines force majeure as an event that occurs objectively, is unforeseeable, and cannot be remedied despite all necessary and permissible measures being taken.
Accordingly, it can be concluded that where an employee causes damage due to force majeure, the enterprise is not entitled to claim compensation.
V. Should enterprises consult a lawyer?
Issues relating to compensation for damage caused by employees’ incidents directly affect the lawful rights and interests of both employers and employees. Improper handling may also harm the enterprise’s reputation and long-term development.
Therefore, seeking legal advice is an optimal solution and is increasingly preferred by enterprises.
NPLaw, with extensive experience in the legal field, is a trusted partner for organizations and individuals seeking advice on compensation matters. With a team of highly qualified professionals, we are committed to protecting our clients’ legitimate rights and interests.
In conclusion, this article provides a comprehensive overview of compensation for damage caused by employees’ incidents. Understanding these regulations helps minimize legal risks and ensures effective protection of rights.
