Penalties incurred by the employer for

employees fault or negligence may not be

automatically deducted from salaries

Additionally, Article 1706 of the New Civil Code allows debts due from the
employee to the employer to be withheld from the employees salaries. In Milan
vs. NLRC,1 the Supreme Court defined the term debts as contemplated in
Article 1706, to wit:

Debt in this case refers to any obligation due from the

employee to the employer. It includes any accountability that the
employee may have to the employer. There is no reason to limit its
scope to uniforms and equipment.

Thus, all obligations due and demandable from the employee to the
employer may be validly withheld from the employees salaries.

However, penalties suffered by the employer on account of an

employees mistake or negligence are not considered debts due and
demandable within the meaning of the law. In observance of the employees
right to due process, the employer may not automatically assume the
employees negligence and penalize the latter for the penalties or damages it
incurred. In other words, the employer cannot resort to self-help. He must first
prove the basis of his claim against the employee that the employee had
been negligent before he may be allowed to claim reimbursement from the
latter. Thus, the employer may not automatically deduct the penalties from the
erring employees salaries.

The employers proper remedy is either an administrative sanction such as

suspension to termination or a suit for damages, or both. The employees liability
may only be considered a debt once the court confirms the employees
negligence and orders him to reimburse the employer for penalties incurred on
account thereof.

In the alternative, the employers claim may be enforced if there is a

written authorization or undertaking from the employee authorizing such a
deduction or promising to pay such liability. This may be facilitated by serving
the employee with a demand to reimburse the penalty or damage. As long as
the debt or obligation was incurred by virtue of the employer-employee
relationship, generally, it shall be included in the employees accountabilities
that are subject to clearance procedures.2

1 G.R. No. 202961, 4 February 2015

2 Ibid.

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