Material responsibility of an employee in Ukraine

The red flags in any type of MR of employees in Ukraine are the following:

• direct damage within limits and pursuant to the effective legislation;

• guilty unlawful action of employees.

An employer should create appropriate conditions for an employee to use/ store the Company's assets. The employer will then have the right to hold liable an employee who causes damage to the Company's assets. But if the employer fails to fulfill his obligations to create the aforesaid conditions, the employee will have a compelling argument to deny the employer's claims.

Pursuant to effective labour legislation, the MR of an employee varies depending on the scope and grounds of its occurrence. Consequently, the following types of responsibility can be distinguished:

• MR of one monthly salary;

• limited MR;

• full MR.

MR is also divided in two groups depending on subject (party) of MR:

• individual MR (see types above);

• collective (team) responsibility (applies in cases of collective work fulfillment by employees and cannot be divided between employees etc.).

Employers frequently seek to place full MR on an employee, but applicable legislation strictly prohibits this unless under grounds precisely determined by labour legislation. These include:

1) an employee and an employer concluded a contract on full MR;

2) damage to material assets caused by an employee under alcoholic intoxication;

3) an officer of the Company illegally dismissed or replaced an employee;

4) a Company director is guilty of untimely payment of salary of more than one month, which resulted in compensation payments for breach of payment's terms.

It is worth mentioning that effective Ukrainian legislation determines the list of positions and works (approved by the Resolution of the State Labor Committee of the USSR No. 447/24 dated 28.12.1977) for which the contract on full MR can be concluded. Unfortunately, in practice, few employers conclude such contracts with employees employed on positions (conduct work) not envisaged by the abovementioned Resolution. These are deemed invalid and have no effect on employees. Breach of the above will likely provide sufficient reason for an employee to initiate a lawsuit.

An employee can usually bear MR not exceeding one average monthly salary (article 132 of the Labor Code of Ukraine). However, in line with par.4 of Resolution No.14 dated 29.12.1992, “on judicial practice concerning compensation of damages caused to enterprises, establishments and organisations by their employees”, approved by the Plenum of the Supreme Court of Ukraine, the amount of MR can be determined by the labour contract concluded with an employee.

Labour contracts can be concluded only with specific categories of employees determined by legislative acts of Ukraine. An average monthly salary is calculated in compliance with requirements envisaged by the Resolution of the Cabinet of Ministers No. 100 dated 08.02.1995, “on approval of the Order for calculation of an average salary”, as follows:

• a monthly salary for the last two months or actually conducted work (in case the time of employment is less than two months) foregoing to a lawsuit;

• a monthly salary for the last two months prior to an employee's dismissal or in case he/ she failed to fulfill his/ her employment obligations before commencing a lawsuit at the court.

MR of one monthly salary applies to almost all employees, and employers usually adhere to such requirements.

As previously stated, there is also limited MR of an employee. Along with MR of one monthly salary, the amount of limited MR is also determined as one average monthly salary. However, the difference between the abovementioned types of responsibility provides grounds for its application. Limited MR arises in the following cases:

• employees – damage or destruction due to negligence of materials, intermediate products, items;

• executives of companies and their deputies, executives of departments and their deputies – for unnecessary payments, improper accounting and storage of Company's material assets or money valuables etc.

Article 136 of the Labor Code precisely determines the procedure for covering damage by employees. The damage within one average monthly salary will be covered by an employee according to an executive's order. The aforesaid order is to be issued by an executive within two weeks following the date of detecting the damage and the sum is subject to collection not earlier than seven days following the employee's notification. In all other cases, cover of damage is to be fulfilled pursuant to the court ruling.

Arzinger
75 Zhylyanska St.
5th Floor, 01032
Kyiv, Ukraine

Tel/Fax: +38 (044) 390 55 33/40

[email protected]

www.arzinger.ua