Background of the OLG Zweibrücken ruling on the liability of former bank cashiers
The ruling of the Higher Regional Court (OLG) Zweibrücken dated May 8, 2023 (Ref. 7 U 214/21) addresses the civil liability of bank employees for financial losses caused by breaches of internal control mechanisms. The proceedings concerned two former cashiers of a bank who were accused of breaching their professional duties, resulting in an obligation to pay damages. According to the OLG’s decision, the former employees are required to compensate for the damages incurred. Below, the legal background, the court’s key considerations, and their relevance for banking and corporate practice will be discussed in detail.
Fundamentals of civil liability of bank employees
Legal status of bank employees in internal relations
Bank employees are in an employment relationship with the respective credit institution and are required under their employment contract to perform the duties assigned to them with due care. This particularly includes adherence to internal bank policies for monitoring and ensuring an orderly business process when managing the institution’s assets. Errors or disregard of these regulations can ultimately result in significant financial losses.
Employee liability and internal distribution of damages
Under German civil law, employees are subject to what is known as limited employee liability. For minor negligence, the employee is generally not liable; for medium-level negligence, there is an appropriate sharing of damages between the company and the employee, while in cases of gross negligence or intent, full liability is possible. In this case, the OLG based its decision on the severity of the breach of duty as well as its impact on the bank’s control mechanisms.
Key grounds for the decision of the OLG Zweibrücken
Breach of duty by disregarding internal control systems
The OLG Zweibrücken found that the former cashiers had violated the bank’s central security mechanisms and internal policies, which were core components of their contractual obligations. Ignoring such regulations, for example in the management and closing of cash balances, constitutes a significant breach of duty given the importance of these controls in risk management.
Causality and attribution of damages
From the court’s perspective, the financial loss suffered by the bank due to breaches of duty was causally linked to the conduct of the employees in question. The causality assessment covered both the immediate improper management of cash as well as the omission of control actions that were strictly required. This enabled a financial loss for which the employees must be liable under the principles of employee liability.
No exclusion of liability due to third-party responsibility
Another aspect examined by the OLG was whether contributory negligence on the part of the bank, such as supervision or organization, could reduce the employees’ liability. The court, however, made it clear that the independent breach of duty by the defendants was the primary focus, and therefore a total exclusion of liability could not be established.
Significance of the decision for practice
Increased requirements for proper cash management and internal controls
For credit institutions and other companies, the verdict emphasizes the significant importance of effective control mechanisms and the obligation of employees to consistently comply with them. Violations of internal regulations are generally considered highly significant. From a company perspective, not only the implementation but also careful training of employees in relation to internal controls is of particular importance.
Risks and liability potential in the employment relationship
The decision makes it clear that employees in the banking sector may face considerable liability risks in cases of serious breaches of duty. In addition to compensating for direct damages, legal employment consequences may also arise. It is therefore all the more important, in cases of possible breaches of duty and corresponding recourse claims, to carefully examine both internal regulations and the specific circumstances of the individual case.
Outlook and guidance on future developments
It remains to be seen whether the ruling will lead to increased awareness of the importance of internal control systems in credit institutions and whether similar situations in other industries will be assessed in a comparable way.
In connection with legal issues regarding liability, compliance requirements, or disputes between employers and employees in the banking and financial sector, it is advisable to seek qualified legal advice. The lawyers at MTR Legal advise companies and individuals nationwide and internationally on complex legal matters and are available for an initial consultation.
