Penal clause in employment contract void for bypassing fault-based liability rules

The High Court of Cassation and Justice (Înalta Curte de Casaţie şi Justiţie), sitting as a panel for the preliminary resolution of points of law, admitted the referral from the Bacău Court of Appeal and ruled that a penal clause (liquidated damages) stipulated in an individual employment contract or its addendum, which assesses the damage caused to the employer by the employee through fault and in connection with the employee's work, is prohibited and is sanctioned by the nullity of the clause. The dispute involved the interpretation of Articles 10, 38, 57, 134(1), and 254(3) and (4) of the Romanian Labour Code (Law No. 53/2003), concerning whether such a clause, whereby the parties predetermine the amount of damage for work-related faults, is valid under the statutory framework that governs the employee's liability for damages. The court held that the legal basis for an employee's patrimonial liability lies exclusively in Article 254, which requires the employer to prove the damage, fault, and causal link, and that allowing a contractual penalty would bypass these mandatory safeguards, conflict with the principle that liability is personal and fault-based, and undermine the employee's right to legal protection; therefore, the clause is void as contrary to law. The decision is binding under Article 521(3) of the Civil Procedure Code and was pronounced on 20 May 2019.