Slovakia: no right to include penalty clauses in employment contracts

Employers may not generally include clauses in employment contracts requiring their employees to pay them a fixed sum by way of compensation in the event of their committing a specific breach of contract, such as breaking a piece of machinery or divulging confidential information to a competitor.

In Slovakia, the Labour Code limits an employee’s liability to pay his employer damages to three months’ salary at the rate applicable during the three months immediately before the relevant breach of contract.

Employees can also enter into agreements allowing the employer to make deductions from their salary. The agreement must be in writing and can only be entered into while the employment is ongoing. However, these are only valid under the Labour Code where the employee is already liable for the amount to be deducted. Liability does not arise until the employee makes a unilateral statement accepting liability (which need not be in writing).

The main debate is whether agreements to pay damages of less than three months’ salary can be valid when entered into during the employment but before the employee has committed any breach of his obligations or admitted any liability.

Employees are allowed to enter into pledges with their employers under which they agree to pay compensation for breaching obligations under their contract which involve breach of trust or damage caused intentionally. Any other form of pledge is not permitted.

Any other clause by which an employee agrees to pay his employer a lump sum on each occasion that he breaches a specific obligation under his contract (or non-competition clause taking effect after his employment has ended) is a contractual penalty.

Contractual penalties are specific security instruments which are not recognised under the Slovak Labour Code or any other labour law. Any instrument or provision which is not recognised by the Labour Code is not permitted.