When is an Employee liable for damages?
It is not uncommon for an employee to cause damage(s) to the employer in the performance of his duties. However, the law offers employees protection: unless the damage was caused on purpose or due to deliberate recklessness, the employee does not have to pay for it. In a recent case, the Court of Appeal in Arnhem-Leeuwarden had to decide whether an employee could (partly) be held liable for a major fraud committed by her manager.
Facts
Van Mossel Automotive Group discovered that one of their financial directors had committed fraud by embezzling more than €1 million through unauthorized payments from an ING account to third parties. The director admitted guilt and was sentenced to prison. He was also ordered to repay the damages.
Van Mossel accused a former employee of being complicit in the fraud and held her (partly) liable for the damages. This employee had, at the director’s instruction, prepared and processed the fraudulent payments from the ING account. Van Mossel argued that the employee had facilitated the fraud and should have noticed the suspicious payments given their volume. Van Mossel also stated that the employee had disguised the fraudulent transactions in the accounting records and failed to report the embezzlement. An interesting aspect of this case is that the Public Prosecutor had already decided not to pursue criminal charges against the employee due to a lack of evidence. Nonetheless, Van Mossel chose to continue the matter in civil court.
Legal Framework
The court emphasized that under Dutch law, an employee can only be held liable for damages caused to the employer during work, if the damage was caused on purpose or due tot deliberate recklessness. The court noted that deliberate recklessness requires that the employee was, immediately prior to the harmful act, fully aware of the reckless nature of his actions.
Court’s Judgment
The court concluded that Van Mossel had not provided enough evidence to prove that the employee acted with intent or deliberate recklessness. Therefore, the employee was not held liable.
The court based this conclusion, among other things, on the following:
· The ING account’s payment system had an elevated risk of fraud;
· It was not established that the employee had carried out or recorded the fraudulent payments;
· The employee was entitled to follow instructions from her supervisor, whom she, like her colleagues, trusted;
· Payments she had doubts about were booked to a so-called "suspense account";
· Some payments were checked with a financial controller.
The court also rejected Van Mossel’s claim that the employee had a specific control duty in her role. If Van Mossel had expected such responsibility, it should have been explicitly included in the employment contract or job description. The payment process for the ING account was also not documented in any policies or protocols. Furthermore, the court emphasized that the high threshold for employee liability was intended to protect employees from being held liable for mistakes or negligence during the performance of his duties.
Conclusion
The court confirmed that a high threshold applies when seeking to hold an employee liable for damages caused during work. The employer must demonstrate that the damage was caused intentionally or through deliberate recklessness. To strengthen their position, employers should clearly document what is expected of employees. Whether this would have changed the outcome for Van Mossel is uncertain, but it might have improved their chances of success in this case.
Want to know more about this judgment or employee liability? Feel free to contact our office.
