Library of PH Labor Law

Unreturned Company properties

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1. Summary

▪ Former employees who fail or refuse to return Company properties may face legal action.

▪ Companies may hold such employees liable for damages, among others.

2. Concept

Employees are required to return company-issued properties on/before their exit from the employment. Failure and/or refusal to return Company properties may expose them to legal action.

The company-issued properties may come in various forms, such as a car, laptop, mobile device, to name a few.

3. Company-issued properties

Company-issued properties are owned by the employer. Thus, on/before exit from employment, the employee has the obligation to return these properties to the employer.

By way of exception, the employee may be entitled to the company-issued properties if there is a valid and legal reason. These include but are not limited to, these were given to the employees as part of their incentive/benefit/bonus, or the employee was allowed to purchase such items, or it is stipulated in the employment contract, company policy, collective bargaining agreement, or other employment agreement, among others.

However, it should be emphasized that the employee’s entitlement to the company-issued properties is not presumed or assumed. There must be clear and specific legal basis for the right to own such properties.

4. Consequences for failure to return

The consequences for the failure and/or refusal to return company-issued properties may vary depending on the nature of the items and relevant circumstances. The following are some of the possible legal liabilities.

a. Damages

The primary liability of employees who fail and/or refuse to return company-issued properties is for damages.

Usually, the damages will be the value of the item subject to depreciation costs. However, if the item cannot be easily bought in the market – such as those that are customized or made to order, the full market value of the item may be demanded.

In addition, if there is a resulting damage or impact on the business for the employee’s failure/refusal to return the company-issued properties, these may also be demanded by the employer. For instance, if a licensed software was installed on the laptop and it is heavily relied upon by the Company for its business operations, the employee may be held liable for damages should the Company face liability as a result of being unable to delivery on commitments to customers/clients. If the affected customers/clients sue and win a breach of contract with damages against the Company, the latter may charge reimbursement against the former employee who caused the incident.

b. Intellectual property violation

There may also be a potential liability for intellectual property violation if the former employee’s work involved creating intellectual property for the Company, such as designs, trademarks, plans, to name a few. These are all owned by the Company. Hence, on/before leaving employment, employees should turn-over any intellectual property that they may have created in connection with their work for the Company.

5. Employment contract, company policies, CBA

The above discussions may be superseded by any stipulation favorable to the employee via an employment contract, company policies, collective bargaining agreement, or analogous thereto.

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References

▪ Republic Act No. 386, a.k.a. Civil Code (under the law on contracts)

▪ Republic Act No. 8293, a.k.a. Intellectual Property Code

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