Many employers must perform deductions from their employees’ wage as a consequence of due debts of the employee and this way, they must pay the deducted part of the salary to the employee’s creditor. Are employers aware of the impact of this obligation, respectively do they know how to proceed in such a situation?

The detailed calculation of withholding titles as well as their order is regulated by Section 131 of the Labour Code, with the rule that the employer must first perform the preferential wage deductions. The most frequent situations where the employer would have to perform such deductions (after performing the preferential deductions from employee´s wage) are: (i) the enforcement order on the commencement of the wage-deduction (hereinafter referred to as “enforcement order”), (ii) the wage deduction agreement concluded under the Labour Code and (iii) agreement on deductions from wage and other income concluded under the Civil Code. From the nature of the agreements - as a bilateral legal act, it’s automatically obvious that deductions from wages can be performed only with the consent of the debtor - employee, whereas this consent is not necessary when deductions are performed on the basis of an enforcement order.

It is common practice that indebted employees have more than one due debt. The employer in his own interest should therefore respect the order of the rightful creditors when performing the wage deductions. If, due to the employer's carelessness, the deductions are paid to the creditor who is lower in such order, the employer will put himself into the risk that the rightful creditor will demand damages results from non-paying of wage deductions in his favour. If the employer is performing the wage deduction from employee´s wage only to the sole creditor, or if the employer is the sole creditor, he can sleep peacefully and there is no need to bother with the order of entitled creditors.

Enforcement order

The strongest from the above-mentioned withholding titles is an enforcement order to initiate the execution of wage deductions, which is inconspicuously hidden in the Labour Code under the term "enforcement ordered by a court or an administrative authority". We emphasize that performance under an enforcement order, as an execution title, always takes place before performance under a wage deduction agreement and an agreement on deduction from wage and other income.

According to the law, after the enforcement order was delivered to the employer, said employer is obliged to commence deductions from the employee's wage, to not pay it out to him and to transfer it to the executor's account under the conditions mentioned in the enforcement order. The employer is also obliged to ask its new employee for confirmation from his former employer (and from a present employer, if the employee has more employers), whether an enforcement order has been issued, if so, by which executor and in whose favor it was issued. If the new employer found out about the enforcement order from other sources, he is obliged to notify the executor who issued such order within one week that he is a new payer of the wage. If an employer terminated an employment contract with its employee and there is an enforcement order on deduction from employee’s wage, the employer must inform the executor (who issued enforcement order) about such termination within one week and have to send him a calculation of performed deductions, information about outstanding debts of its employee and about the order of creditors.

If the employer is not performing the above-mentioned obligations and for that reason wage deductions are not paid to the rightful creditor at all, or they are paid to the rightful creditor only partially, this creditor is entitled to demand damages from the employer through so called sub-debtor legal action. In this case, it can easily happen that at the end of the day, the employer will pay the unpaid wage deductions to the rightful creditor from his own pocket.

Legal practice has not yet solved the question, whether a rightful creditor has the right to use a sub-debtor legal action even if the employer fails to perform his obligation (i) to notify the executor who issued the enforcement order, about the temporary working incapacity of its employee for more than 10 days, about the branch of the Social Insurance Company, which will pay sickness benefit and a about end of employee's incapacity, as well as the obligation (ii) to notify the executor that the employee entered on maternity leave or on parental leave. We support the legal opinion that in such cases the creditor has a right to apply a sub-debtor legal action, particularly because the loss has arisen by non-performing the employer's legal obligations. On the other hand, the action by the creditor is improbable - particularly because of the fact that wage deductions are performed regularly in favour of executors´ account. In short, e.g. if there will be no wage deduction in favour of executor's account because the employee is on maternity leave, the executor will realize it not later than next month and the creditor will suffer such small loss, which is not worth the time spent on court proceedings (in the overwhelming majority of cases). Employers are in any case advised to perform their information duty towards the executor.

The agreement on wage deduction under the Labour Code

The agreement on wage deductions made between the employee and the employer under the Labour Code, places the employer, as opposed to the other two withholding titles, to the position of the creditor. Employers use this agreement often for securing financial obligations of its employees, however sometimes they make an agreement without law requirements and cause invalidity of such agreement. The agreement must be made only with an employee (not e.g. with former employee), obligatorily must be in written form and its subject can be an only already existing financial claim of the employer towards the employee. The professional public has not yet given a clear opinion on whether this agreement can also secure the employee’s obligations which are not due. Part of the professional public believe that this option exists, but with the actual performance of the deductions, the employer can start after the due date of the employee's financial obligation.¹

The law doesn't provide the minimum limit of wage deduction and that's why the employer can positively motivate the employee to sign such agreement by stipulating less strict conditions, as it would be e.g. in cases of an enforcement order. On the other hand, the performance of the wage deduction on the basis of the enforcement order has, according to the law, priority before the wage deduction on the basis of an agreement and an employer can therefore, lose a right for the wage deductions towards the employee for some time. According to the mentioned above, the employer should be responsible and before signing the agreement on wage deduction should consider all related circumstances (especially in the cases, where the employee´s debt is more significant).

The agreement on wage deduction under the Civil Code

The third situation which is common in legal practice is the agreement on the deduction from wages and other income between employees and his creditor who is third person (e. g. non-bank company), according to the Civil Code. This agreement directly assigns to the employer an obligation to pay the deducted part of the wage to the creditor, even though the employer is not the party of the legal relationship between the creditor and the debtor - employee. The employer to whom such an agreement has been delivered, should in his interest review its authenticity and completeness, especially to avoid paying the wage deduction to persons who are not entitled to it. The agreement may generally be part of another contract (e. g. purchase contract), but this does not apply to consumer contracts where such agreement must be expressed in a separate document. The most practical way how to verify the authenticity of agreements is to require the original or its proven photocopy from creditor or employee. If they fail to provide it and the employer will not perform such deductions from the wages, he will have evidence that he acted responsibly and he can defend himself by justified reasons in the case of court proceedings.

Each of the mentioned withholding titles have their own specifics, but its purpose is the same - satisfaction of the financial claims of the creditors. It is necessary to mention, that the employer cannot perform deductions from the employee's wage to an unlimited extent and have to follow legal limits stipulated in the Executory Order, the Labour Code as well as the Civil Code.

In the case that the employer will receive several enforcement orders, we recommend him to apply his right to demand from the executor to determine the amount of deductions he has to perform and to determine which part of wage deductions will be payed to which creditor. If the employer and employee concluded several agreements on wage deductions, the agreement that was concluded earlier is preferred. The order of agreements concluded under the Civil Code will be determined by the day of delivery to the employer.

In conclusion, we highlight that the problematic of the wage deduction on the basis of withholding titles is much more extensive, and it does not concern only mentioned withholding titles. When handling such problematic issue, it’s necessary to consider a great number of legal regulations and apply diverse procedures on the different situations. Employers should attach appropriate importance to the withholding titles and in the case of any doubts they should, in their own interest, seek professional advice.

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1 Barancová H. a kol. Zákonník práce. Komentár 1. edition. Bratislava: C. H. Beck, 2017, 318-319 s.