An employee has a legal obligation to carefully protect all tools and materials entrusted to them for work. They must take necessary precautions to prevent damage, waste, and spoilage to the employer’s property, including cash. Above all, they should not use these resources for their personal benefit or for the benefit of a third party, unless it is for the purpose of the work they are performing. This responsibility is a key manifestation of their loyalty to the employer.
The employer-employee relationship is fundamentally based on trust. Since misappropriation of the employer’s money or property is a serious fault that undermines this trust, Ethiopian employment law has categorized it as a satisfactory and sufficient reason for immediately terminating an employment contract (Employment Proclamation, Article 27(1)(d)). Because this act constitutes an intentional breach of trust, the employer is not required to first take other disciplinary actions to correct the fault before proceeding to dismissal.
Judicial Precedent on the Severity of the Fault
In Supreme Court File No. 44720 (Ethio Telecom Gambella Region v. Ato Nebiyu Ferede et al., December 22, 2002 E.C.), employees were dismissed under Article 27(1)(d) for collecting money from phone users without issuing receipts and using it for their personal benefit, a fact they admitted. The lower court deemed the dismissal unlawful, arguing that other disciplinary actions should have been taken before dismissal. The Cassation Bench, however, overturned this decision, stating that the law does not set a precondition for taking other disciplinary actions before dismissal for this specific fault.
Elements of Lawful Dismissal under Article 27(1)(d)
A dismissal action taken under Article 27(1)(d) is lawful only when all three of the following elements are fulfilled:
- Employer’s property or money
- Misappropriation
- Personal or another person’s benefit
1. Employer’s Property or Money
It is generally not difficult to determine whether property or money belongs to the employer. However, the question arises whether misappropriation of a third party’s property that was only entrusted to the employer for work purposes can fall under Article 27(1)(d). While there is no definitive Cassation ruling, the law’s objective is to protect the employer’s property rights and ensure employee loyalty. Therefore, the provision should be interpreted broadly to include property directly related to the organization’s work.
2. Misappropriation
In its direct meaning, misappropriation refers to the improper use or utilization of the employer’s property or money. For example, an employee who uses the office phone for personal calls or trades with the employer’s money for profit commits misappropriation.
However, the Cassation Bench has applied the provision broadly, concluding that it also includes acts such as taking, concealing, embezzling, stealing, causing shortage, and similar acts beyond mere improper use.
Confirmation of Misappropriation:
- Admission: If an employee admits in writing to the employer that they used money collected in the course of work for personal benefit, this is sufficient confirmation that the fault was committed (File No. 44720).
- Audit Report: In cases concerning money and property shortages, the primary competent evidence presented is an audit report. If an audit report finds a shortage, it is considered sufficient confirmation of embezzlement for labor dispute purposes, even if the same report was rejected as incompetent evidence in a parallel civil case (File No. 42292, Ethiopian Electric Power Corp. v. Ato Kebede Abinet). The court noted that the purpose and evidentiary standards of civil and labor disputes are different.
- Criminal Acquittal: Being acquitted in a criminal case related to embezzlement does not automatically mean the employee did not commit the fault under Article 27(1)(d) in the labor dispute. This is because: “The evidentiary assessment in a criminal case is ‘beyond reasonable doubt,’… However, a case based on the Labor Proclamation is inherently closely related to disciplinary action, so the principle of evidentiary assessment applicable to any disciplinary case is looser than that of a criminal case” (File No. 37256).
- Confirmation of Shortage: Misappropriation cannot be presumed simply because a handover document is absent. It must be confirmed that the property was indeed missing after an account reconciliation or audit. Unwillingness to reconcile accounts without a confirmed shortage is not sufficient grounds for lawful termination (File No. 45858 and 49186).
3. Personal or Another Person’s Benefit
If a property or money shortage is confirmed, the question of who has the burden of proving personal benefit arises.
In the case of Ethiopian Airlines v. Ato Dereje Mamo (File No. 35484), the employee was dismissed due to a money shortage. The lower courts deemed the dismissal unlawful because the employer did not present convincing evidence that the employee had used the missing money for personal benefit. The Cassation Bench overturned this, clarifying the burden of proof as follows:
“The employee who has a money shortage has the burden of proving that he did not use the money for personal benefit, and the employer who proves the existence of the money shortage is not expected to prove this.”