Liquidated damages clause in favour of the employee
According to the provisions of art. 269 (1) of the Labour Code, “theemployer shall be bound, under the contractual civil liability rulesand principles, to indemnify the employee in case that the employeeincurs a material damage from the employer’s fault during theperformance of the employee’s job duties or in relation to theemployee’s job”. Consequently, the patrimonial liability regulated bythe Labour Code is, in legal terms, a form of contractual civilliability, having certain particularities generated by the specificfeatures of the employment relationships.
The amount of the damages due by the employer shall be subject tothe contractual civil liability principles and shall be set in one ofthe following ways: in court (judicial assessment), by law (legalassessment), by the parties’ convention (conventional assessment).Whereas art. 269 (2) of the Labour Code provides that “in case of theemployer’s refusal to indemnify the employee, the employee may file acomplaint to the relevant courts”, thus indirectly referring to theparties’ agreement, in our opinion the liquidated damages clause whichallows the parties to set in advance the amount of the damage incurredby the employee is also admissible and may be included in theindividual employment contract, either upon the conclusion thereof orlater. The court may reduce the liquidated damages clause set forth infavour of the employee if its amount is excessive, breaches the equityand good faith principle and leads to profiteering by the beneficiarythereof.
Liquidated damages clause in favour of the employer
Regarding the liquidated damages clause set forth in favour of theemployer, we should specify right from the start that there is noexplicit legal rule prohibiting the insertion of such clause in anindividual employment contract.
Therefore the specialized doctrine includes various opinions regarding the admissibility or inadmissibility of such clause.
A first opinion specifies that in case of the employee’s liabilityagainst the employer the liquidated damages clauses are inadmissible,being null and void.
A first argument supporting this opinion consists in the fact thataccording to art. 281 of the Labour Code, together with art. (67) ofthe Law no. 168/1999, the patrimonial liability of the employee may beraised only in court.
A second argument is that such clause provided in favour of theemployer implies that the employer is exempted from the obligation toprove the damage. But art. 38 of the Labour Code does not allow theemployee to waive from his/her right, correlative to the obligation toprove, obligation that falls upon the employer, under art. 287 of theLabour Code.
This solution is also supported by the fact that many texts of theLabour Code make reference to the courts, establishing this way thejudicial solution, whenever it is about the mutual claims of theparties to the legal relationship of employment.
A second opinion specified by the doctrine consists in theadmissibility of the liquidated damages clause in principle and in theassumption in question, under certain circumstances.
Therefore there is specified that if the damage incurred by theemployer is below the level of the liquidated damages clause, suchclause shall be efficient only up to the actual level of the damage.But if the contract does specifically mention that the application ofthe liquidated damages clause is not subject to the actual level of thedamage, then in legal terms the liquidated damages clause enhances theliability, being valid under the circumstances where such clause isvalid in employment contracts. Accordingly, if the damage is higherthan the damage set forth by the liquidated damages clause, then theliquidated damages clause shall reduce the liability.
The liquidated damages clause set as percentage quota is not admissiblein principle, as the employee is not under any pecuniary obligation.But such liquidated damages clause may be provided in case of theemployees who manage amounts of money on behalf of their employer.
Hereinafter we will present the reasons why, in our opinion, it isadmissible to insert in the individual employment contract a liquidateddamages clause provided in favour of the employer, specifying at thesame time the criticism against the opposite solution.
According to the provisions of art. 270 (1) of the Labour Code, “theemployees are held liable with their patrimony, under the contractualcivil liability rules and principles, in respect of the materialdamages caused to the employer from their fault and in relation totheir job”. According to the civil liability rules and principles, thedamage shall be fully covered, meaning that not only the damageactually caused but also the potential lost profit. Having regard tothe provisions of art. 270 (1) hereinabove specified, the employer maynot claim non-material damages from the employee in respect of thedamage caused.
Even if the Labour Code does not specifically provide thepossibility of the parties’ agreement regarding the employee’sliability (as opposed to the employer’s liability, case where, ashereinabove specified, art. 269 (1) refers to the parties’ agreementregarding the employee’s indemnification by the employer), in ouropinion such agreement is allowed, for the following reasons:
1. According to the provisions of art. 295 (1) of the Labour Code, “theprovisions hereof are completed by the other provisions of the labourlaw and, unless incompatible with the particularities of the employmentrelationships provided herein, by the provisions of the civil law”. Thecivil liability allows for the payment of the damage caused, as aresult of the parties’ agreement.
2. There is no compulsory legal rule forbidding the conclusion of suchagreement. Moreover, art. 20 (1) of the Labour Code allows the partiesto an individual employment contract to negotiate and insert in suchcontract specific clauses, as listed to paragraph 2 of the hereinabovespecified article, but without limitation.
3. It is obviously useful to cover the damage by the parties’agreement, at least in order to avoid a trial, otherwise required. Likeany other contract, the obligations under the individual employmentcontract are not only those specifically included in the contentsthereof, but also “all the consequences attached to such obligations bythe equity, customs or law” (according to art. 970 of the Civil Code).In addition, the good faith principle, established by art. 8 of theLabour Code, also leads to the possibility of covering the damage bythe parties’ agreement.
4. Even if art. 164 (2) of the Labour Code provides that “the amountswithheld as damages caused to the employer may not be withheld unlessthe employee’s obligation is due, liquidated and payable and has beenfound as such by a final and irrevocable court decision”, theConstitutional Court, by the decision no. 24/2003, specifies that thislegal text refers only to the cases where the employee does notwillingly cover the damage caused to the employer.
As a consequence of the fact that the parties’ agreement in case ofthe coverage by the employee of the damage caused to the employer, asexpression of the contractual freedom principle, under which themethods to fulfil and extinct the mutual obligations are established,is allowed under the law, the liquidated damages clause allowing theparties to establish in advance the amount of such damage is alsoadmissible.
Nevertheless, such liquidated damages clause should comply with thecompulsory requirements provided by the Labour Code in the case of suchliability type.
Therefore, we should consider the provisions of art. 273 et seq. ofthe Labour Code, according to which the employer may recover its claim– representing the coverage of the damage caused by the employee – bywithholding monthly amounts from his/her salary; such amounts may notexceed one third of his/her monthly net salary and may not exceed,together with the other amounts withheld from such employee, half ofhis/her salary (according to art. 155 of the Labour Code, “salaryincludes basic salary, allowances, benefits and other increments”;therefore all these salary rights are considered when calculating theinstalment amount).
The aim of the liquidated damages clause is to determine, in advanceand conventionally, the damages due for default and the liquidateddamages clause shall be due by the defaulting party in case that allthe indemnification requirements are fulfilled. Consequently, theemployee owes damages and interest only if the conditions of his/herliability are proved, in respect of the breach of the obligationsundertaken and of the damage occurrence. Therefore, in our opinion,providing a legally undertaken liquidated damages clause, under whichthe damage that the employee would cause to the employer is determinedin advance, does not infringe art. 38 of the Labour Code. By this legaltext, the aim of the legislative was not to forbid any conventions, butonly those under which the employee would waive from his/her compulsoryrights provided by the law.
The admissibility of the liquidated damages clause in individualemployment contracts does not conflict neither with the provisions ofart. 287 of the Labour Code, according to which it is the obligation ofthe employer to provide evidence in case of labour conflicts.Therefore, the liquidated damages clause does not reverse theobligation to provide evidence regarding the existence of the liabilityrelationship, of the employee’s obligation to repair the damage. Infact the liquidated damages clause determines in advance only theamount of the damage, which does not infringe in any way the abovespecified text.
In conclusion, considering the aforesaid specifications, inour opinion inserting a liquidated damages clause in the individualemployment contract is admissible and does not infringe the legislationin force, both in case that such clause is inserted in favour of theemployer and in case that it is inserted in favour of the employee.