In our previous article, we wrote about the procedure for determining the existence of damage and the employee’s liability for such damage before the employer, as a procedural prerequisite for obtaining a court order obliging the employee to compensate the employer for the damage caused.

On that occasion, we referred to the position adopted in case law in the judgment no. Gž1 370/23 dated 2 June 2023, according to which the employer’s claim for compensation of damage caused by an employee must be preceded by proceedings before the employer, which represent a procedural prerequisite for exercising judicial protection in a dispute resolved by the court in full jurisdiction, deciding on the actual right to compensation for damage.

The absence of this procedural prerequisite constitutes grounds for rejecting the claim in litigation initiated by the employer against the employee for compensation of the caused damage.

Continuing the analysis of this topic, this article examines in greater detail the relevant aspects of this legal institute, with reference to positions taken in judicial practice.

Conditions for Liability for Damage

An employee shall be liable for damage which they have caused to the employer at work or in connection with work, intentionally or through gross negligence, in accordance with the law (Article 163, paragraph 1 of the Labor Law).

Therefore, the damage must have been caused at work or in connection with work, and there must be a causal link between the employee’s actions or omissions and the damage incurred.

In this regard, the employee’s liability is assessed pursuant to the provisions of the Labor Law, and not the Obligations Law.

Namely, liability within the meaning of the Labor Law requires the existence of intent or gross negligence for the damage caused, and not any other form of negligence. Therefore, it is necessary to determine whether the employee acted intentionally or with gross negligence, i.e. whether their actions or omissions may be qualified in such a manner (judgment of the Court of Appeal in Novi Sad, Gž 4329/18 dated 25 October 2018), whereby the burden of proving that the damage falls within this scope lies with the employer.

Procedure for Determining Liability for Damage Before the Employer

The existence of damage, its amount, the circumstances under which it occurred, who caused the damage and the manner of compensation shall be determined by the employer, in accordance with the general act or employment agreement (Article 163, paragraph 5 of the Labor Law).

Accordingly, if the legal provision is interpreted strictly according to its literal meaning, the employer has the freedom to regulate in more detail, through its general act or employment agreement, the rules and actions within this procedure, bearing in mind that the law does not explicitly prescribe mandatory actions and activities which the employer must undertake.

On the other hand, judicial practice, in addition to the position that this procedure must be fully conducted and completed by adopting a decision establishing the employee’s liability for damage and determining the amount of damage, also indicates the obligation to involve the employee in the procedure for determining relevant facts important for deciding on their liability and the amount of damage (judgment of the Supreme Court, Rev2 1860/23 dated 19 December 2024).

Therefore, as follows from judicial practice, the employee must be given the opportunity to be heard in relation to the relevant facts in the proceedings before the employer, which may be considered the exercise of their right to defense.

Legal Nature of the Decision Establishing the Employee’s Liability for Damage

Although the issue of an employee’s liability for damage caused to the employer is regulated and assessed according to the provisions of the Labor Law, judicial practice nevertheless holds that the decision adopted by the employer in the procedure for determining the employee’s liability for damage caused by the employee’s actions or omissions at work or in connection with work does not have the character of an employer’s decision on the employee’s rights, obligations and responsibilities.

Judicial practice starts from the position that the nature of an act is not determined by its title, but by its content. In this sense, such a decision does not determine the employee’s obligations and responsibilities, but rather represents an act of legal technique, since it is not enforceable, i.e. it cannot be subject to compulsory enforcement (judgment of the Court of Appeal in Kragujevac, Gž1 3413/19 dated 23 September 2020, and judgment of the Court of Appeal in Belgrade, Gž1 1022/21 dated 9 April 2021).

Accordingly, the decision itself, regardless of the legal remedy instruction it may contain if Article 193 of the Labor Law were applied, does not enjoy judicial protection in terms of the possibility of being challenged, meaning that such instruction has no legal effect in this case.

Therefore, the above-mentioned decision represents a sui generis decision, the legal effect of which is exhausted in creating a procedural prerequisite for filing a claim by the employer against the employee for compensation of damage (judgment of the Court of Appeal in Kragujevac, Gž1 3413/19 dated 23 September 2020).

It is interesting to note the existence of a parallel position according to which this decision, which produces legal effect upon delivery to the employee, must be delivered in the manner applicable to the delivery of all individual labor-law acts (personally, or to the employee’s residence address, or by posting on the notice board, in accordance with Articles 185 and 193 of the Labor Law), considering only such method of delivery to be proper (judgment of the Supreme Court, Rev 28105/23 dated 18 January 2024).

Subject Matter of Judicial Proceedings

Since the relevant decision cannot be enforced without the employee’s consent, the employee has no legal interest in challenging it. Consequently, the subject matter of the dispute cannot be the annulment of the employer’s decision establishing the employee’s liability for damage caused, in which proceedings the employee would have standing as the claimant.

On the other hand, precisely considering that the decision is unenforceable, the employer has a legal interest in initiating court proceedings and may file a claim against the employee and, provided that the previously mentioned procedural prerequisite has been fulfilled, conduct proceedings for compensation of damage. In such proceedings, the court decides on the actual right to compensation, i.e. resolves the dispute in full jurisdiction (judgment of the Court of Appeal in Kragujevac, Gž1 3413/19 dated 23 September 2020).

Between Internal Proceedings and Judicial Dispute

The employee’s liability for damage represents a specific institute of labor law, in which substantive rules on employee liability and procedural issues concerning the exercise of judicial protection intersect.

Although judicial practice has established the importance of the prior procedure before the employer as a procedural prerequisite for exercising judicial protection, certain aspects of this institute still leave room for different interpretations.

A particular specificity lies in the fact that employee liability is assessed according to the rules of labor law, while the decision by which the employer determines the existence of damage and the employee’s liability does not have the character of a decision on the employee’s rights, obligations and responsibilities within the meaning of the Labor Law, nor does it independently acquire enforceability.

Therefore, the focus of protection is not placed on challenging the decision itself, but rather on the civil proceedings initiated by the employer for compensation of damage, in which the court decides on the actual right to compensation in full jurisdiction.

Through the positions expressed in judicial practice, an attempt is made to establish a balance between the protection of the employer’s interests and the position of the employee, while there remains a need for clearer and more precise regulation of certain issues relevant for the consistent application of this legal institute.

For employers, this means that a properly conducted internal procedure is not merely a formality, but a necessary prerequisite for successfully exercising the right to compensation of damage before the court.

This article is for informational purposes only and does not constitute legal advice. If you require additional information, please feel free to contact us.