Employee liability for damage at work in Croatia: who pays, when and to whom — rules and case law

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Summary: what you need to know in 60 seconds

• Employee liability is governed by Arts. 107–110 of the Labour Act as a special regulation (lex specialis); the Civil Obligations Act applies subsidiarily, and for damage to third parties Art. 1061 of the Civil Obligations Act primarily applies
• An employee is liable to the employer only for damage caused intentionally or through gross negligence — they are not liable for ordinary negligence
• The burden of proof lies with the employer: they must prove the damage, the fault (intent or gross negligence) and the causal link; a shortage alone is not proof of the employee’s fault
• As a rule, the employer is liable to third parties; the injured party may sue the employee directly only in the case of intent, and the employer’s recourse against the employee expires in six months
• A lump-sum amount of damages may be predetermined only by a collective agreement or work rules — not by an employment contract
• It is permitted to agree conditions more favourable to the employee; stricter clauses (e.g. “material responsibility for every shortage”) are impermissible
• The employer may not deduct damage from wages without the employee’s consent — and consent cannot be given in advance (Art. 96 of the Labour Act)

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1. The legal framework: the Labour Act as a special regulation

Liability for damage arising at work or in connection with work is primarily governed by Arts. 107–110 of the Labour Act, which are lex specialis in relation to the Civil Obligations Act — the COA applies subsidiarily to all matters not regulated by the Labour Act. The exception is damage caused by an employee to a third party: that is primarily governed by Art. 1061 of the COA, while the Labour Act (Art. 109) regulates only the employee’s recourse liability towards the employer.

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2. Why the employer is, as a rule, liable for damage

The legislator frames employee liability as an exception. The logic follows from the other provisions of the Labour Act: the employee works according to the employer’s instructions, and the employer is obliged to train the employee for the work, enable their education and professional development, ensure health protection and, when the organisation of work changes, train them to work under the new conditions. Whoever organises the work and reaps the benefit from it — also bears the risk. Therefore, damage arising from an error in work, insufficient training or the employee’s ordinary negligence is borne by the employer, and the employee only when their relationship to the damage crosses the threshold of intent or gross negligence.

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3. The three prerequisites of employee liability (Art. 107 of the Labour Act)

For an employee to be liable to the employer for damage, three prerequisites must be met cumulatively:

• the damage arose at work or in connection with work
• it was caused by the employee’s fault — namely intent or gross negligence
• there is a causal link between the employee’s culpable conduct and the damage

IMPORTANT: This is not strict liability — the employee is not liable merely because the employer suffered damage. The case law consistently rejects claims in which the employer proves only the damage (e.g. a shortage), but not the employee’s fault and the causal link.

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4. Intent, gross and ordinary negligence — where the line is

The case law distinguishes the degrees of fault as follows:

• intent — the employee is aware that their act or omission will cause damage; with direct intent they want and desire the damage, and with eventual intent they accept the possibility of its occurrence
• gross negligence — the employee behaves in a way that not even an averagely careful employee would behave
• ordinary negligence — the employee does not apply the heightened care of a good professional expected in a professional activity — for this the employee is not liable

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5. The burden of proof: the employer proves everything — and why a shortage is not proof

The Supreme Court of Croatia has taken a clear position: the employee is liable to the employer under the criterion of proven fault — gross negligence and intent must be proven against the employee, and the burden of proof lies with the employer (Supreme Court Rev-1713/01-2). It is not permissible to judge on the principle of presumed fault, by the mere fact that damage occurred.

In practice this most often means: a shortage in a shop or till is not in itself proof of the employee’s liability. Nor does the fact that an employee is a store manager “materially responsible” under the job classification release the employer from the obligation to prove that the damage was caused precisely by that employee’s intent or gross negligence (Zagreb County Court). It is different when fault has been established by a final criminal judgment — the civil court is bound by it (Art. 12(3) of the Civil Procedure Act), as in the case of a bank employee who transferred clients’ funds to her own account without authorisation (Zagreb County Court, Gž R-2949/2022). A finding from misdemeanour proceedings, however, does not bind the civil court.

IMPORTANT ADVICE: If your employer charges you with a shortage or damage relying only on an inventory report or an internal act on “material responsibility” — that is not sufficient for your liability. Demand that it be precisely established which of your acts caused the damage and what the intent or gross negligence consists of.

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6. When several employees cause the damage

If several employees participated in causing the damage, each is liable only for their share of the damage. Only if the shares cannot be determined does the law presume that all contributed equally, so they compensate the damage in equal parts — but even then the employer must prove the causal link and fault for each employee. Employees are liable jointly and severally (all for the entire amount) only if they caused the damage by a criminal offence committed with intent.

NOTE: The Supreme Court has expressly rejected the interpretation under which all employees would be liable for damage as soon as it cannot be determined who caused it. Collectively shifting a shortage onto all employees of a shift — a common practice in retail and hospitality — has no legal basis.

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7. A predetermined (lump-sum) amount of damages

If determining the amount of damage would cause disproportionate costs, a compensation amount may be predetermined for certain harmful acts (Art. 108 of the Labour Act). There are two essential limits: the lump sum may be determined only by a collective agreement or work rules — not by an employment contract — and it does not replace proving liability: the lump sum is decided only after the employee’s liability has been established (Rijeka County Court). If the actual damage is greater, the employer may claim the actually suffered and established damage.

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8. Damage to third parties: who is liable and how recourse works

For damage that an employee causes to a third party at work or in connection with work — a customer, client, passer-by — the employer for whom the employee was working at the time the damage was caused is liable (Art. 1061(1) of the COA). The system works as follows:

• the injured party may claim compensation directly from the employee only if the employee caused the damage intentionally — gross negligence is not sufficient for a direct claim (Supreme Court Rev 1297/2015-2)
• an employer who has compensated the injured party has a right of recourse against the employee if the latter acted intentionally or with gross negligence
• the recourse claim expires in six months from the day the damage was repaired (Art. 1061(4) of the COA)

The rule applies to an employee in an employment relationship based on an employment contract. Illustrative is a case from the Supreme Court’s practice (Rev 714/05-2): a waiter put an acquaintance behind the bar during his absence, who then physically attacked a guest — the employer was liable for the damage, because its employee failed to supervise and entrusted the job to a person who was not up to it.

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9. More favourable for the employee — allowed; stricter — not allowed

A collective agreement, work rules or an employment contract may stipulate conditions more favourable to the employee — a reduction of or even release from the duty to compensate damage (Art. 110 of the Labour Act). The opposite direction is prohibited: it is impermissible to agree stricter liability conditions than the statutory ones. Clauses such as “the employee is materially responsible for goods, money and small inventory and is obliged to compensate every shortage” turn statutory liability based on proven fault into strict liability — and are contrary to the mandatory provisions of the Labour Act.

IMPORTANT: The employer may not collect its claim by withholding payment of wages or part of them without the employee’s consent (Art. 96 of the Labour Act) — and the employee cannot give consent in advance, before the claim has even arisen and fault been established. The practice of “taking the shortage off wages”, particularly widespread in hospitality and retail, has no legal basis and exposes the employer to misdemeanour liability.

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Frequently asked questions (FAQ) about employee liability for damage

Conclusion: employee liability is the exception, not the rule

The system is set up consistently: primary liability rests with the employer, who organises the work, gives instructions and is obliged to train the employee. The employee pays only when intent or gross negligence is proven against them, a third party sues the employee directly only in the case of intent, recourse expires in six months, stricter contractual clauses have no effect, and deducting damage from wages without consent is prohibited.

If you are an employee being charged with a shortage or damage without proof of fault — do not sign anything before obtaining legal advice. If you are an employer seeking an enforceable damages claim — secure evidence of fault and causation immediately, because the six-month recourse period runs quickly.

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Need legal support in a dispute over damages arising from employment?

If you are being charged with damage or a shortage, or as an employer you are preparing a damages claim against an employee, contact us. The Primorac Legal office helps with:

• defending employees against unfounded damages claims and unlawful wage deductions
• advising employers on proving fault, causation and the amount of damage
• reviewing employment contracts, work rules and collective agreements — removing impermissible clauses on material responsibility
• filing recourse claims within the statutory six-month period
• representation in damages litigation arising from employment