Can We Add a Clause for Employee Liability on Property Damage in Our Company?

I am working in Kerala, and I would like to know if there is any clause for the recovery of property damage or mishandling of the employer's property in our company. We don't have this clause in the offer letter. Can this clause be added?

Warm Regards,
Ujwala Kurup

Dear Ujwala, On the one hand, you have written this post anonymously. On the other hand, you have written your complete name at the bottom of your post. Is this not contradictory?

Secondly, conditions of employment are mentioned in the Appointment Letter and not in the Officer Letter. Hope you understand the difference between these two.

Appointment Letter Considerations

A letter of appointment is issued as soon as an employee joins the organization. Including a clause stating that losses incurred because of damages caused to company property will be recovered from the employee might be too negative at this stage. It could discourage employees right at the time of induction.

Standing Orders and Domestic Inquiry

Do you have standing orders approved and certified by the labor department of your area? Generally, this clause is included in the standing orders. Therefore, there is no need to make a special mention in the letter of appointment.

Whether you have standing orders or not, you should conduct a domestic inquiry. Let the Enquiry Officer (EO) consider the following points:

- Whether the employee was authorized to handle the damaged equipment.
- Whether the employee was adequately trained to handle the damaged equipment.
- Was the equipment damaged inadvertently or out of negligence?

Punishment should vary according to the outcome of the inquiry. Secondly, consider the depreciation of the equipment as well.

Balancing Losses and Employee Motivation

Losses do occur while running a business. You need to absorb some losses and should not try to recover 100% from the employee. That would be malice. If you do that, it will possibly create fear among the other employees, and they may become demotivated. Therefore, you need to strike a balance between the motivation of other employees and the recovery charges.

Thanks,

Regards,
Dinesh Divekar
[Phone Number Removed For Privacy Reasons]

Dear Ujwala,

Understanding Liability for Property Damage in Employment

Had you mentioned the type of establishment to which your query is related, it would have been easier for others to answer. Causing monetary losses or damage to the property of the employer by an employee is normally associated with the duties and responsibilities assigned to his/her job. For example, the job of a cashier is to collect and pay money as per the directions of his/her employer, and if he/she makes a short collection or excess payment by oversight, apart from the disciplinary action, if any, he/she is liable to make good the loss thus caused by him/her.

Similarly, if some valuable articles are entrusted to him for any work relating to his employment or for the sake of safe custody and he causes damage to them in the course of their use in utter disregard of the precautionary steps or loses them for any inexplicable reasons, then he is liable to make good the loss thus caused. In such cases, the employer should compute the monetary value of the loss and, after affording a reasonable opportunity, proceed to recover it from the employee.

But when the value of the loss is too much to be compensated entirely by the employee concerned, the employer has no option other than a proportionate recovery within the means of the employee, as suggested by Dinesh. For jobs involving such a nature of employment risks, it is quite usual to mention in the appointment order when the nature of the job is purely or principally supervisory or managerial.

In other cases, you can act as per the provisions of the Standing Orders applicable to such employees. Even otherwise, the provisions of deduction under Section 7(2)(c) of the Payment of Wages Act can be resorted to by the employer to recover the losses if the concerned employee as well as the establishment fall within the purview of the Act.

In the case of any other establishment to which the Payment of Gratuity Act, 1972, is applicable, if the loss results in the termination of employment of the concerned employee, his gratuity can be forfeited to the extent of the damage or loss so caused as per Section 4(6)(a) of the Act.

Regards

Yes, you can add a clause stating that the employee is responsible for properly handling employer property entrusted to him/her. The employer must also take a signed copy of the property list handed over to the employee.

Dear Ujwala, The appointment letter need not have any clause for the recovery of property damage or mishandling of the employer's property. It is sufficient to include that the employee needs to follow all "service regulations" as may be framed by the management as per the firm's HR policy. There should be a detailed provision for dealing with misconduct committed by employees and the procedure for dealing with such misconduct, along with proper delegation of powers to respective officers supervising the work of such employees.

Recovery for damages of property can be made only after establishing the misconduct or negligence in duties resulting in such damages, either by obtaining a confession in the submission made by the employee in response to the notice of show cause issued or after establishing the negligence through a proper process of domestic inquiry against the employee concerned, after giving adequate opportunity for the employee to present his defense.

Regards, A R Saoji Techno-Legal Consultant

Company Standing Orders and Disciplinary Action

The company has its standing orders for conduct, discipline, and appeal rules or service rules. You may follow these and proceed with disciplinary action for causing damage to the company's property. If you do not have these rules, it's better to have them.

Regards

Generally, these points are mentioned in Employment Agreements or are captured in some policy. Also, check the employee code of conduct (in remote cases) if the company has limited documentation published. Basically, individuals or groups, as per the case, would be liable in case of damage done intentionally or due to negligence in their job role. However, if the damage has occurred due to causes other than those attributed to you, then you cannot be held liable.

Procedure for Intentional Damage to Company Property

1. What is the procedure if an employee causes damage to the company property intentionally?

Procedure for Unintentional or Unexpected Damage to Company Property

2. What is the procedure if an employee causes damage to the company property unintentionally or unexpectedly?

In our company, we have the following departments: IT department, Maintenance department, HR, CCTV operator, Factory Manager.

The incident occurred in the Maintenance department.