An employee is legally obligated to carefully protect all tools and materials given to them for work. Therefore, they must take the necessary precautions to prevent damage, waste, and spoilage to properties entrusted to them by the employer, including cash, or to prevent damage to themselves or a third party. Above all, they should not use them for their personal benefit or for the benefit of a third party, unless for the purpose of the work they are performing. This obligation is a key manifestation of their loyalty.
Since the employer-employee relationship is based on trust, the employee must always be loyal in matters concerning the employer’s interest. Although the obligation of loyalty is not explicitly mentioned in the Proclamation, the obligation imposed on the employee in Article 13(1) includes the obligation of loyalty. This is because an employee can properly fulfill this obligation only when they are, above all, loyal to their work and employer.
Misappropriation of the employer’s money or property is a serious fault that undermines loyalty, and therefore, the law has categorized it as a satisfactory and sufficient reason for terminating an employment contract. Since it is an act of intentional breach of trust, the severity of the fault is not taken into account. In Supreme Court File No. 44720 (Appellant Ethio Telecom Gambella Region and Respondent Ato Nebiyu Ferede et al. (2 persons), December 22, 2002 E.C., unpublished), the respondents’ employment contracts were terminated by the appellant under Article 27(1)(d) because they collected money from phone users without issuing receipts and used it for their personal benefit, and admitted to committing the act. The lower court, which examined the legality of the contract termination, deemed the dismissal unlawful, stating that “even if the respondents committed a fault, other disciplinary actions should have been taken before dismissal to correct their fault.” The Cassation Bench, criticizing the lower court’s conclusion by stating that it was not included as a precondition in the Proclamation or in the appellant’s disciplinary action regulation, overturned the decision.
Article 27(1)(d) contains three elements. A dismissal action taken under this provision is lawful only when all three are fulfilled. These elements are:
Employer’s property or money
Misappropriation
Personal or another person’s benefit
Employer’s Property or Money
The terms “property” and “money” have been interpreted in various files in connection with the application of Article 27(1)(h), so it is not necessary to raise them again. It is not difficult to determine whether a property or money belongs to the employer. However, properties found in the employer’s organization may not only belong to the employer but may also be owned by a third party and entrusted to the employer for work purposes through lease, loan, deposit, or other means. This raises the question of whether misappropriation of these properties can fall under Article 27(1)(d).
When the act committed is causing damage, not misappropriation, and the damaged property is not only the employer’s but also a property directly related to the organization’s work, it is a sufficient reason to terminate the contract in accordance with Article 27(1)(h). Article 27(1)(d) does not include property directly related to the organization’s work. Its exclusion inevitably raises questions in the application of the provision. Although there is no Cassation decision that answers the question, the typical objective of Article 27(1)(d) is to protect the employer’s property rights and ensure the employee’s obligation of loyalty. Therefore, the provision should be interpreted broadly to include property directly related to the organization’s work.
Misappropriation
Misappropriation, in its direct meaning, refers to the improper use or utilization of the employer’s property or money, without including acts such as taking, concealing, and similar acts. For example, if an employee uses the office phone for personal calls, they have misappropriated it. If they trade with the employer’s money received in the course of work and return it after making a profit, they have misappropriated it. However, the way the Cassation Bench has applied the provision shows that it includes taking, concealing, embezzling, stealing, causing shortage, and similar acts, beyond merely improper use and utilization of property or money.
The employer has the obligation to confirm that the acts were committed with competent evidence. However, if the act is admitted, there is no need to present evidence. If an employee admits in writing to the employer that they used money collected in the course of work for their personal benefit, it is sufficient confirmation that the fault mentioned in Article 27(1)(d) was committed. (Appellant Ethio Telecom Gambella Region and Respondent Ato Nebiyu Ferede et al. (2 persons), December 22, 2002 E.C., File No. 44720, unpublished).
Audit Report
In connection with Article 27(1)(d), most cases decided by the Cassation Bench concern money and property shortages, and the competent evidence presented to show the shortage is an audit report. If an employee receives property or money and a shortage is found in an audit report, it is considered sufficient confirmation of embezzlement. Even if an audit report is presented as evidence in a civil case filed against the employee for the alleged shortage and is rejected as incompetent evidence, it will be accepted for proving the fault mentioned in Article 27(1)(d). (Appellant Ethiopian Electric Power Corporation and Respondent Ato Kebede Abinet, March 24, 2001 E.C., File No. 42292, Vol. 8). In this file, although the respondent argued in the civil case filed against him that the audit report was rejected and therefore incompetent to prove the shortage, the court rejected his argument, pointing out that the results of civil and labor disputes are different (and additionally, the civil case was on appeal).
Being acquitted in a criminal case related to embezzlement does not confirm that the employee did not commit embezzlement or the fault in Article 27(1)(d) in the labor dispute filed by the employee. (Appellant Addis Ababa Food Hall Administration and Respondent W/ro Wubdar Tilahun, November 4, 2001 E.C., File No. 37256, Vol. 8). The court explained that the evidentiary assessment applied in both laws differs as follows:
“…The evidentiary assessment in a criminal case is ‘beyond reasonable doubt,’ and this principle of evidentiary assessment requires strong and unambiguous evidence to convict a person of a crime. 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.”
In connection with property shortage, the absence of a handover document does not mean that misappropriation should be presumed; rather, it must be confirmed that the property was indeed missing. (Appellant Moha Soft Drinks Factory Industry S.C. and Respondent Ato Asefa Yalew, May 10, 2002 E.C., File No. 45858, unpublished). Additionally, unwillingness to reconcile accounts without the property or money shortage being confirmed by evidence is not sufficient to lawfully terminate an employment contract in the language of Article 27(1)(d). (Appellant Amdehun General Trading PLC and Respondent Ato Hussen Feqi, April 13, 2003 E.C., File No. 49186, unpublished).
In Supreme Court File No. 45858, the respondent was dismissed for failing to hand over 528 boxes of Mirinda Tonic received from the factory to the organization and for breach of trust. In the cassation argument, the court, for the sake of proper justice, requested the file from the lower court and, after reviewing it, found that the document presented by the appellant to prove that the respondent had caused a shortage of property only showed that the respondent did not present a receipt for handing over the property, and did not confirm the existence of a shortage after an account reconciliation. Therefore, since the shortage was not confirmed by audit, beyond the absence of a receipt, the court ruled that the dismissal action taken by the appellant was unlawful.
Personal or Another Person’s Benefit
If a property or money shortage is confirmed by evidentiary assessment, benefiting personally should be taken into account. In a dispute reviewed in cassation between Appellant Ethiopian Airlines and Respondent Ato Dereje Mamo (November 26, 2001 E.C., File No. 35484, Vol. 8), the respondent was dismissed for allegedly misappropriating the appellant organization’s money for personal benefit due to a shortage found. He filed a suit opposing the dismissal. The court that heard the suit, although it was confirmed that the respondent had a money shortage, deemed the employment contract termination unlawful, stating that there was no convincing evidence presented by the appellant that the respondent had used the missing money for his personal benefit. When the decision was upheld on appeal and overturned in cassation, the question of who has the burden of proving personal benefit in connection with a shortage was answered 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.”