On June 3, 2019, the Judicial Chamber on civil cases of the Russian Supreme Court issued a ruling1 in a case between «Ormatek-Privolzhie» Limited liability company (“Company”) and Ramazanova I.N. in connection with the concluded refund agreement. This ruling reflects the Supreme Court’s opinion on the procedure for compensation of damage caused to employer by its former employee.
Case summary:
- Ramazanova I.N. was employed in the Company in a position of accountant. Employment contract with Ramazanova I.N. was terminated pursuant to the order of 06.06.2017;
- The Company and Ramazanova I.N. entered into an agreement of 14.06.2017 (the «Agreement») after the employment contract termination. Under the Agreement Ramazanova I.N. shall return to the Company all monetary funds that were wrongfully withdrawn by her from the Company’s cash register during the performance of her employment duties;
- Due to the evasion of Ramazanova I.N. from fulfillment of her obligations under the Agreement, the Company asked the court to recover the principal debt amount, as well as the penalty for late repayment provided for by the Agreement from Ramazanova I.N.
Courts of the first and second instance supported the Company. When examining the case, the courts were guided by the Civil code provisions based on concept that since the employment contract with Ramazanova I.N. had already been terminated at the time of the Agreement conclusion, then the relations between the parties to the Agreement were regulated by the provisions of civil and not labor legislation.
The Supreme court denied this approach due to the fact that it is based on the wrong interpretation and application of substantive law:
Pursuant to part 3 of art. 232 of the Labor Code employment contract termination after infliction of damage does not imply release of the party to this contract from liability for damages provided by the Labor code or other federal laws. An employee, who is guilty of damage to the employer, may voluntarily compensate it in whole or in part (part 4 of art. 248 of the Labor code). Compensation of damage with installment payment is allowed pursuant to agreement of the parties to the employment contract. In this case, the employee submits to the employer a commitment letter to compensate for the damage with indication of specific timelines of payments. If the employee, who submitted the commitment letter, is dismissed and refuses to compensate the specified damage, the outstanding debt is to be collected by legal means.
Thus, it follows from statutory regulation of the procedure for compensation of damage caused by employee to employer that employee’s duty to compensate the damage caused to the employer arises in connection with the labor relations between them. Equally this rule is applied to situations, when there is an agreement on voluntary compensation of material damage. Consequently, disputes over the performance of such an agreement are resolved in accordance with the Labor code provisions. Any case involving a lawsuit by employer against its former employee for compensation of damage caused by the employee during his/her employment period filed after employment contract termination must be considered in the same manner. Pursuant to part 2 of art. 381 of the Labor code this case is considered as an individual employment dispute and therefore Labor code rules are to be applied instead of Civil code rules.
Taking into account the Supreme Court’s findings, the case was sent for retrial to the court of the first instance, since the courts did not determine the actual amount of damage caused by Ramazanova I.N. pursuant to the requirements of art. 246 of the Labor code and did not establish the existence of grounds for concluding an agreement on full liability with Ramazanova I.N. During the retrial, the court will have to resolve the dispute in accordance with the applicable rules of labor law.
1 Определение Ruling of the Judicial Chamber on civil cases of the Russian Supreme Court of 03.06.2019 No. 9-KG19-5