Employee Liability for Damage: When Employers Can Claim Compensation

Mgr. Klára Megová
Mgr. Klára Megová
11.5.2026 | ARROWS law firm

If an employee causes damage, the employer may seek compensation—but only in precisely defined situations and within certain limits. This article explains when an employer is entitled to claim compensation at all, what the maximum amount may be, and which procedural mistakes can invalidate the claim. It also highlights practical risks that business owners and managers often underestimate.

The illustrative image shows attorneys consulting on employee liability for damages.

Summary of key points:

  • An employee is liable for damage they caused by culpably breaching their duties in the performance of work tasks or in direct connection with them. The employer must prove all prerequisites, except in special cases.
  • For damage caused by negligence, compensation is capped at a maximum of 4.5 times the employee’s average monthly earnings. In cases of intentional conduct, or conduct under the influence of alcohol or narcotic substances, the employer is entitled to full compensation without any cap, including lost profit.
  • The employer must notify the employee of the damage and its amount in writing, usually within 1 month from the date it learned that the damage occurred and who is liable for it. Wage deductions are possible only on the basis of a written agreement with the employee.
  • In the event of a shortage in entrusted valuables or the loss of entrusted tools, stricter liability applies. The employee is liable without limitation if there is a valid written agreement or a written confirmation of receipt. Fault is presumed in these cases.

Basic conditions for an employee’s liability for damage

Many employers believe that if an employee “behaves in an inexcusable manner” or breaks something, they can simply deduct any amount from the employee’s salary without issue. The reality is more complex. When setting internal rules and procedures for claiming compensation for damage, it is practical to rely on advice in the area of employment law under Czech legislation. The Labour Code (Act No. 262/2006 Coll., as amended) clearly defines when and under what conditions an employee is liable at all.

For an employer to be able to claim compensation for damage from an employee, all of the following conditions must be met simultaneously, to the extent set by law.

Occurrence of actual damage on the employer’s side

It is not enough that something broke. Damage means a pecuniary loss quantifiable in money suffered by the employer. This includes a decrease in assets (actual damage) or lost profit, i.e., a lost financial benefit the employer would have achieved if the damage had not occurred.

In practice: if an employee damages a company vehicle, this is clear actual damage (repair costs). If an employee works more slowly and time is “lost”, that in itself is not damage that can be directly recovered.

However, if during this delay the employee culpably breaches their duty, which leads to missing a delivery deadline with a client and the incurrence of a contractual penalty towards a third party, this already constitutes specific and quantifiable damage (actual damage, and potentially also lost profit) – which the employer may claim.

The key point is that the employer must substantiate the damage specifically: for example, with repair invoices, an expert report, accounting records of lost assets, or contracts. These documents must show what amounts the company had to pay to third parties due to the employee’s mistake.

Breach of a legal duty in the performance of work tasks or in direct connection with them

The employee must breach a legal duty arising from legal regulations, the employment contract, workplace rules, or instructions from supervisors. The breach must occur in the performance of work tasks or in direct connection with them.

If an employee behaves carelessly, disregards instructions, or prepares work inadequately, they breach their duty. Conversely, if there is no breach of a work duty, there is no liability for damage, even if something unpleasant happens. For example, if an employee suddenly falls ill on the way to work and has to return home, this is not a breach of duty. 

Causal link between the breach of duty and the occurrence of damage

There must be a direct causal link between the breach of duty and the occurrence of damage. The employer must prove that this specific breach directly led to the damage. For example, if a driver ignores an instruction to drive safely and causes an accident, the link is evident.

The situation is more complex where multiple factors contribute to the damage – such as faulty equipment, poor communication from management, or errors by another employee. In such a case, liability is apportioned proportionately. In disputes over who is liable for damage and to what extent, procedural strategy and evidence are typically addressed as well, which falls within the area of commercial and litigation disputes in the Czech Republic. The employee pays only their share of the damage.

Employee fault

The employee must be at fault – either intentionally or through negligence. This means that if the damage arose due to something beyond the employee’s control (for example, objective circumstances, the employer’s error, or force majeure), the employee is not liable for it.

Here, the burden of proof lies with the employer – it is the employer who must prove fault. The employee does not have to prove that they did not cause the damage; on the contrary, the employer must present sufficient evidence (witnesses, emails, records, inspection reports, etc.).

The only exceptions where fault is presumed and the employee must “defend themselves” are a shortage in entrusted valuables (cash, goods for sale) and the loss of entrusted tools or protective equipment. This applies if there is a valid written agreement on liability for the protection of valuables entrusted to the employee for accounting (the so-called material liability agreement) or a written confirmation of receipt of the item. In these cases, the employee can be released from liability only if they prove that they did not cause the damage.

What are the limits of compensation depending on the type of breach

The Labour Code distinguishes very carefully between the nature of the breach. Attorneys from ARROWS advokátní kancelář often find in discussions with company management that businesses are not aware of this distinction, and are then surprised that they “cannot deduct the damage in full”, because the law provides otherwise.

Damage caused by negligence – cap of 4.5 times average monthly earnings

If an employee causes damage through negligence (i.e., unintentionally, but they breached a legal duty, acted inattentively or carelessly, violated an instruction, etc.), the employer may claim compensation up to a maximum of 4.5 times the employee’s average monthly earnings.

How is the average monthly earnings calculated? For the purposes of damages compensation, the starting point is the employee’s average monthly earnings achieved in the reference period before the breach of duty by which the employee caused the damage. The reference period is usually the preceding calendar quarter.

If the employee’s income is irregular (with commissions, bonuses), all components of wages or salary are taken into account.

Practical example: An employee with average monthly earnings of CZK 30,000 gross forgets to switch off a machine, which overheats and damages equipment worth CZK 200,000. The employer may claim from the employee a maximum of CZK 30,000 × 4.5 = CZK 135,000. The remainder (CZK 65,000) must be covered by the employer from its own resources, insurance, or it cannot be recovered.

This is very important information – the cap often surprises managers who expected full compensation. The situation is completely different if the employee causes multiple damages over time. Then the cap is calculated separately for each damage. If an employee causes two damages through negligence, the employer is entitled to claim a total of up to 9 times the employee’s average monthly earnings (4.5 + 4.5). This also creates substantial room for recovery.

Intentional damage, under the influence of alcohol or narcotic substances – no cap

If the employee caused the damage intentionally (knowingly and with the aim of causing damage, or at least knowing that damage may occur and being indifferent to it), under the influence of alcohol (if in such a condition that they were not able to properly perform their duties), or under the influence of narcotic substances (psychotropic or other addictive substances), then the cap of 4.5 times the average monthly earnings does not apply.

The employer may claim full compensation for all damage. In addition, if the employee acted intentionally, the employer may also claim compensation for lost profit – i.e., not only the costs of repair or purchase, but also the profits the company will objectively not obtain due to the damage.

Practical example: An employee intentionally destroys a valuable contract with a client that they were supposed to archive. As a result, the company loses an order whose real value to the company is CZK 500,000. The employer may claim full compensation for lost profit from the employee, provided it can objectively substantiate its existence and amount.

However, be careful – intoxication or the influence of narcotic substances must be proven. If there are uncertainties as to whether the employee was truly “under the influence” in the legally relevant sense, it is advisable to consult the matter with attorneys from ARROWS advokátní kancelář. The court will require clear and objective evidence (e.g., medical confirmation, tests, etc.).

Special cases – liability without caps

The Labour Code addresses situations where the general protection of the employee (the cap of 4.5 times salary) is unfair to the employer. These are cases where the employee assumed direct control over specific property or money. In these regimes, the so-called presumption of fault applies – it is automatically assumed that the employee is responsible for the damage unless the employee proves otherwise. 

Shortfall in entrusted valuables (cash, valuables, goods, inventory – items the employee must account for)

If a valid written agreement on liability for the protection of valuables entrusted to the employee for accounting (the so-called material liability agreement) was concluded with the employee, the employee is liable for the resulting shortfall in full, without the limitation of 4.5 times the average monthly earnings. Here, fault is presumed – the employer only needs to prove the existence of a valid agreement and the occurrence of the shortfall.

The employee can be released from liability only if they themselves prove that the shortfall did not arise due to their fault. This may include, for example, theft by a third party which the employee could not prevent despite exercising all efforts, or a failure by the employer in security measures.

Loss of entrusted items (tools, protective equipment, special equipment)

If an item was entrusted to the employee against written confirmation (e.g., a professional saw, a laptop, a mobile phone) and the item is lost, the employee is liable for the loss. This is also liability with a presumption of fault.

Important: items whose value exceeds CZK 50,000 may be entrusted to an employee only on the basis of a written agreement on liability for the loss of entrusted items. In other cases, a written confirmation of receipt is sufficient. The employee may be released from liability if they prove that they did not cause the loss.

Related questions on employee compensation for damage 

1. Must the employer always prove the employee’s fault?
Yes, under general liability for damage (Section 250 of the Labour Code), the employer is obliged to prove fault. The only exception is a shortfall in entrusted valuables and the loss of entrusted items – there, fault is presumed and the employee must defend themselves by proving that they did not contribute to the occurrence of the damage.

2. What if other persons or the employer itself also contributed to the damage?
Liability for damage is in such a case apportioned according to the degree of fault of the individual persons (the employee, the employer, other employees). If the employer also breached its duties (e.g., did not provide a safe working environment, did not give sufficient instructions, or had defects in work organisation), its obligation to compensate for damage is reduced accordingly. Determining this proportion is often complex and frequently requires an expert opinion or legal analysis.

3. Does the employer have the right to recover compensation even after the employment ends?
Yes. The right to compensation for damage remains preserved even after the employee leaves. The employer has statutory limitation periods within which to claim compensation. Generally, a subjective limitation period of three years applies (from the moment the employer learned of the damage and who is responsible for it) and an objective limitation period of ten years (from the occurrence of the damage). If the damage was intentional, the objective limitation period is extended to fifteen years.

Employer’s procedural obligations – what must be done

Many employers believe it is enough to “call the employee and tell them how much they will pay”. The opposite is true. The Labour Code precisely defines how the employer must proceed; otherwise, it risks not obtaining compensation even in court proceedings.

Notification of the amount of damage – usually within 1 month

The employer is obliged to notify the employee in writing of the amount of the claimed compensation for damage, usually within 1 month from the day it found out that the damage occurred and who is responsible for it. This time limit is a so-called “procedural” time limit – if it is not met, it does not automatically mean the claim ceases to exist, but it is advisable to respect it so that communication is clear and properly documented, and so that the claim does not become time-barred.

The notification must be specific and supported by evidence. It includes a specific description of what happened (including time, place, persons), quantification of the costs incurred (with attachments such as invoices, receipts, estimates, expert opinions), a reference to the legal basis, and the amount of the claimed compensation with justification.

If the notification is missing or vague, the employee may feel unjustifiably taken by surprise, and in the event of a dispute it will be difficult to convince the court of the legitimacy of the employer’s claim.

Discussion with the employee and, where applicable, with the trade union organisation

The employer must discuss the amount of damage with the employee. It is not merely “to notify”, but to genuinely discuss it – to give the employee a chance to comment on the matter and present their evidence (e.g., that the breach was not their fault, or that their fault was lesser, etc.). It is advisable to make a written record of the discussion.

If the damage exceeds CZK 1,000, the employer is also required to discuss it with the trade union organisation (if one exists in the company). 

Written agreement on compensation for damage

The Labour Code prefers that the employee and the employer enter into a written agreement on compensation for damage. The agreement must include the quantified amount of the damage, the employee’s acknowledgement of the obligation to compensate for the damage, and the method and deadlines for payment (as a lump sum or in instalments).

If the employee does not sign the agreement, the employer may still seek compensation in court. However, court proceedings are time-consuming and costly. The attorneys at ARROWS, a Prague-based law firm, often assist in negotiating such an agreement so that both parties reach a reasonable arrangement and avoid a lengthy court dispute.

Related questions on the formal requirements for compensation for damage 

1. What happens if the employer does not notify the amount of the damage in time?
Formally, nothing serious – it is an organisational time limit, and failure to comply with it does not in itself extinguish the claim. But in practice, the employer unnecessarily complicates the situation. The employee may feel surprised and distrustful, and in court proceedings it then becomes more difficult to prove that the claim was asserted in a timely and proper manner. It is always better to proceed promptly and correctly.

2. Must an agreement on compensation always be in writing?
Yes, the Labour Code requires written form for its validity. An oral agreement is not legally enforceable. Ideally, the agreement should be on paper, signed by both parties, with a clear expression of the employee’s consent to the amount of compensation and the method of payment.

3. What risk arises if the employer “takes justice into their own hands” and deducts an amount from wages without consent?
The employer is in breach of legal regulations. The employee may contact the Labour Inspectorate, which may impose a fine on the employer for violating the Labour Code. Moreover, such a procedure leads to a legal dispute and the employer then has to defend itself. The attorneys at ARROWS, a Prague-based law firm, always recommend proceeding correctly – a written agreement with the employee protects both parties and is key to lawful wage deductions.

Wage deductions – special rules

Employers often ask: “Can I simply deduct it from wages?” The answer is: only with the employee’s written consent.

If both parties agree that the amount will be repaid through wage deductions, strict rules apply.

Written agreement on wage deductions

There must be a specific written agreement on wage deductions in which the employee consents to the deductions and is fully aware of the exact amount and how often the deductions will be made. This agreement must be separate from the agreement on compensation for damage, or it must form part of the agreement on compensation for damage that explicitly provides for wage deductions. A vague oral agreement is not sufficient and is unenforceable.

Non-attachable amounts from wages

The employer must not deduct so much that the employee is left without the so-called non-attachable amount (set by Government Regulation No. 595/2006 Coll., on non-attachable amounts for 2026, which is regularly updated). Deductions above this amount are limited.

Put simply: the employee must always be left with a certain amount needed for basic living costs and family maintenance. This is intended to ensure that the employee is not put at risk of financial hardship.

Deductions are not a preferential claim

Deductions for compensation for damage owed to the employer are not a so-called preferential claim. This means that if the employee also has other debts (e.g., maintenance, taxes, social security and health insurance, enforcement proceedings), deductions for compensation for damage to the employer are made only after these preferential claims have been satisfied and are limited by the rules on concurrent enforcement/deductions.

Reduction of compensation for reasons deserving special consideration

If the employee earns little and the deduction would significantly harm them, the Labour Code gives the court the option to reduce the amount of compensation for reasons deserving special consideration. Typically, this concerns the employee’s social situation, length of service with the company, etc. This reduction is not automatic, but a lawyer may be able to secure it in court proceedings.

Potential issues

How ARROWS helps (office@arws.cz)

Insufficient documentation of the damage – the employer only has a statement about the price, but no invoices or expert opinions.

We will prepare and analyse the documents, ensure the collection of the necessary evidence and, if needed, an expert opinion. We will provide a legal opinion on whether the documentation is sufficient for successful assertion of the claim.

Failure to prove causation or fault – the employer is not sure whether the damage actually arose from a breach of the employee’s duty and their fault.

We will investigate the circumstances of the case and analyse the technical and legal factors. We will assess whether a legal claim exists at all and how best to substantiate it.

Attempted wage deductions without a written agreement – the employer attempts to deduct an amount without the employee’s valid consent.

We will negotiate with the employee to reach a valid agreement on compensation and deductions and provide legal advice on the correct procedure. We will draft and review the agreement on compensation for damage and wage deductions.

Failure to meet deadlines and formal requirements – incomplete notification, missing signature, failure to discuss with the trade union, or limitation of the claim.

We coordinate the entire administrative process from the outset and ensure compliance with all procedural requirements under the Labour Code. We will assert the claim in time.

Enforcement of an unrealistic amount – the employer demands the full CZK 200,000 from the employee even though the statutory limit in the given case is only CZK 135,000.

We will calculate the maximum possible compensation and analyse when the limits apply and when they do not. We will provide advice on realistic expectations and an enforcement strategy.

Special situation: Shortfall in entrusted valuables

One of the most frequently addressed cases in practice is the so-called “material liability” of employees who work with cash, goods, or other valuable items that are part of turnover or circulation. Here, the liability rules change dramatically.

What are entrusted valuables?

Entrusted valuables are items that the employer entrusts to the employee for accounting. These include cash (money in the cash register), valuables (cheques, meal vouchers, tickets, postage stamps), goods intended for sale, material inventory, and other items that are part of the employer’s turnover or circulation and which the employee can personally control for the entire period for which they were entrusted to them. 

Key element: Written agreement on liability for safeguarding valuables (so-called material liability)

For an employee to be liable for a shortage in entrusted assets, a valid written agreement on liability for the protection of assets entrusted to the employee for accounting (the so-called material liability agreement) must be concluded with them. Without this agreement, the employee is protected by the standard rules of general liability for damage (a limit of 4.5 times average earnings, fault must be proven, etc.).

With the agreement, the situation reverses: the employer only has to prove the existence of a valid agreement and the occurrence of a shortage – the rest is up to the employee.

Fault is presumed – the employee is automatically liable unless they themselves prove that the shortage did not arise through their fault (e.g., it was theft by a third party that the employee could not prevent despite making every effort, or there was a failure by the employer in securing the assets). 

The employee is liable for the full amount of the shortage without any cap – no limitation to 4.5 times the average monthly earnings applies. The shortage is calculated as the difference between the accounting records and the actual physical state of the entrusted assets.

Practical example: A shop assistant has a valid written agreement on liability for cash in the register. At the end of the shift, it is found that CZK 10,000 is missing from the register. Without the agreement, the shop assistant would be liable at most up to 4.5 times their wages (and the employer would have to prove their fault). With the agreement, they are obliged to reimburse the full CZK 10,000 unless they prove that they did not cause the shortage.

Release from liability – what the employee must prove

The employee is released from liability for the shortage if they can demonstrate that the shortage arose without their fault (e.g., it was theft by a third party that the employee could not foresee or prevent despite proper performance of their duties and compliance with all security measures). Also, if the employer did not provide adequate working conditions (e.g., insufficient security of the premises, a non-functioning safe, an unreasonable number of people who have access to the assets, etc.).

Or if the shortage was caused by a natural disaster (fire, flood – although even here it would be assessed whether the employee properly performed their duties).

This is where attorneys from ARROWS advokátní kancelář often assist employees who feel they are being unfairly accused. If an employee is not sure whether the agreement exists or how it applies to them, they should clarify their position with a professional.

Related questions on material liability 

1. What must an agreement on liability for entrusted assets look like?
It must be in writing and must clearly specify which assets are entrusted and what the employee is liable for. The agreement is usually concluded when the employee starts, or when their job position and the related duties change. It must not be concluded with a person under 18 years of age. Attorneys from ARROWS advokátní kancelář can prepare a template agreement tailored to your company – contact office@arws.cz.

2. What if, in reality, several employees work with the same assets?
In that case, a joint agreement on liability for the protection of assets can be concluded, where all employees are jointly liable for the shortage. The shortage is then divided according to their gross earnings achieved, with the earnings of the manager and their deputies counted at double the amount. 

3. May an employer, without notice and without an agreement, simply “take” part of an employee’s wages when they notice a shortage?
Absolutely not. That would be unlawful conduct that could lead to fines from the Labour Inspectorate and civil disputes. The employer must have a valid wage deduction agreement, must inform the employee, and must properly agree it with them. Without this, the employer risks criminal, civil, and employment-law issues.

Employee liability insurance – practical protection

Many employers do not realise that employee liability insurance for damage exists (often colloquially called “idiot insurance”). This is insurance that covers part or all of the compensation amount that an employee negligently causes to their employer.

What the insurance covers:

It typically covers damage caused by negligently performed work, damage to vehicles that the employee drives in the course of performing work tasks, and damage to the employer’s property caused by negligence.

In some cases, it also covers the loss of entrusted items or tools, if this is explicitly agreed and covered in the insurance contract.

When the policy is worth it:

If an employee causes damage covered by the policy, the employer asserts the claim against the employee, who then asks their insurer to pay the compensation. The insurer then pays the damage (up to the agreed limit, after deduction of the agreed excess).

The employee is not personally put at such existential risk by high wage deductions and the employer has at least partial risk coverage, without having to recover the damage in full directly from the employee.

It is also a good signal to employees – they see that the employer acknowledges the risks and that the employee is not “without a parachute”.

Special case: Loss of entrusted tools and protective equipment

Similarly to entrusted assets, special liability rules also apply here. When an employer entrusts an employee with tools, protective work equipment (for example construction equipment, personal protective elements, etc.) or other items for the performance of work tasks under a written receipt confirmation, and these items are then lost, the employee is liable for their loss.

Specific rule: If the price of the entrusted item exceeds CZK 50,000, a written agreement on liability for the loss of entrusted items must be concluded. Without this agreement, the employer cannot require the employee to compensate in full for the loss of an item whose price exceeds CZK 50,000. In other cases (price up to CZK 50,000), a written receipt confirmation is sufficient.

The employee is liable in full without any cap (i.e., the limitation of 4.5 times average earnings does not apply). Fault is also presumed here. They are released only if they prove that the loss did not arise through their fault (e.g., theft that they could not prevent despite proper performance of their duties).

Potential issues

How ARROWS can help (office@arws.cz)

The employer is not sure whether they are entitled to compensation at all – isn’t this more about the “clumsy employee syndrome” than legal liability?

We will provide a legal analysis of the situation and assess whether all statutory prerequisites for liability under the Czech Labour Code are met. We will prepare an expert opinion on whether the claim is justified.

The employer has documents on the damage, but they are not sufficiently specific or complete.

We will assist with collecting missing evidence and communicating with third parties (repair technicians, suppliers). If needed, we will arrange an expert report, legal review, and completion of the documentation.

The employee refuses to sign a compensation agreement and wants to resolve the matter in court.

We will provide legal representation for the employer in court proceedings and prepare the evidence file. We will present qualified arguments before the court and manage the entire proceedings through to completion.

The employer seeks compensation, but the employee claims it was the employer’s fault or someone else’s.

We will conduct a legal analysis of causation and fault and lead negotiations with the employee. If necessary, we will represent the employer in court litigation.

The employer wants to make deductions from wages without a valid agreement with the employee.

We will provide legal advice on the rules for wage deductions under Czech law and help prepare and conclude a written agreement with the employee. We will ensure the procedure complies with applicable legal regulations.

The employer believes the claim is already time-barred, or does not know how to secure it legally.

We will carry out a legal analysis of limitation periods and assess whether the claim can still be asserted. If necessary, we will file a lawsuit at the last moment to preserve the claim.

Final summary

Employee liability for damage is an area that may seem straightforward at first glance, but in practice it involves a number of legal pitfalls and procedural details. Knowing and following them can either effectively protect the employer or, conversely, expose them to the risk of litigation, financial loss, or suspicion of violating employee rights.

Key points for employers:

  • Proving all four prerequisites – The employer must clearly prove the occurrence of damage, breach of duty, causation, and fault. Without all four elements, the claim is not valid (except for specific cases of presumed fault).
  • Respecting compensation limits – For damage caused by negligence, compensation is capped at 4.5 times the employee’s average monthly earnings. Intentional conduct, intoxication, or the influence of drugs leads to full compensation. If the employer ignores this cap, full compensation cannot be enforced in court proceedings.
  • Following the procedure – Written notification of the amount of damage, discussion with the employee and, where applicable, with the trade union, a written agreement on compensation for damage, and a written agreement on wage deductions – these are essential steps. Procedural errors can invalidate even an otherwise justified claim.
  • Considering insurance – For companies where the risk of damage is higher, it makes sense to inform employees about the option to take out employee liability insurance. This can save unnecessary disputes and costs on both sides.
  • Timely action – Do not postpone dealing with damage “until later”. Limitation periods run, and after three to ten (or fifteen) years the claim becomes time-barred and unenforceable.

This period is also important for employees – they should be aware that they are liable only for damage they caused, and in cases of negligence only up to the statutory limit. They should arrange employee liability insurance (if the employer has not arranged it or does not contribute to it) to protect themselves against high deductions and financial difficulties.

If either the employer or the employee is unsure how to proceed in a specific situation, or whether the claim is justified or how it can be enforced, it is highly advisable to consult the matter with the lawyers at ARROWS, a Prague-based law firm. ARROWS lawyers deal with these issues on a daily basis and know how to avoid mistakes and effectively protect your interests. Contact us at office@arws.cz and we will clarify the situation for you.

FAQ

1. Do I have to choose between forgiving the employee for the damage or claiming compensation from them? Can I “change my mind” later?
Legally, you are not bound by a choice in the sense that you must immediately waive the claim or assert it. However, in practice it is sensible to decide soon and communicate clearly. If you are unsure whether it makes sense to pursue the claim, consult the lawyers at ARROWS, a Prague-based law firm – we will help you assess whether it is realistic and how to proceed to minimise risks.

2. The employee claims the damage was caused by equipment failure, not by them. How is this proven?
What matters is proving fault, which lies with the employer. If the equipment did in fact fail and the employee acted according to instructions and had no possibility to prevent the failure, then they are not at fault. However, if the employee ignored warning signs (e.g., unusual machine noise, colleagues’ warnings) and should have reported them but did not, they may be partially at fault due to negligence – even if the original cause was a malfunction. 

3. A labour inspectorate inspection visited the company and found that we were deducting amounts from the employee’s wages for damage compensation without their consent. What are the consequences?
The labour inspectorate may impose a fine on the employer for violating employee rights under the Czech Labour Code. The employee may then claim repayment of the unlawfully deducted amounts. It is always better to proceed correctly from the outset. If an error has already occurred, consult the ARROWS team at office@arws.cz – we will help you remedy the situation and minimise risks.

4. What if the employee caused damage to a previous employer and I do not know about it? Can I demand compensation from the employee now?
The debt is not yours, so you cannot claim compensation for yourself. However, be careful with wage deductions: if the employee validly concluded a wage deduction agreement with the previous employer, its priority order under the Czech Labour Code remains preserved even with you. As the new employer, you are obliged to continue making the deductions and remit the amounts to the entitled party as soon as you learn about them from the employee or the former employer. 

5. Is it important to have a so-called “damage committee” within the company? Does it help?
The Czech Labour Code does not expressly require it – formally, the amount of compensation for damage is determined by the employer. However, especially in larger companies, we strongly recommend it. A committee ensures an objective assessment of how the damage occurred, fault, and the appropriate amount of compensation. The decision then does not appear to be the arbitrariness of an individual, which reduces the risk of future disputes. At ARROWS, we will be happy to advise you on how to properly embed the committee in internal regulations. 

Disclaimer: The information contained in this article is for general informational purposes only and serves as a basic guide to the issue as of 2026. Although we strive for maximum accuracy, laws and their interpretation evolve over time. We are ARROWS Law Firm, a member of the Czech Bar Association (our supervisory authority), and for the maximum security of our clients, we are insured for professional liability with a limit of CZK 400,000,000. To verify the current wording of the regulations and their application to your specific situation, it is necessary to contact ARROWS Law Firm directly (office@arws.cz). We are not liable for any damages arising from the independent use of the information in this article without prior individual legal consultation.

Read also: