A practical legal article for employers, HR, and employees (Philippine context).

1) Why this topic is tricky in Philippine labor law

In the Philippines, “company-issued equipment” (laptops, phones, tools, POS devices, tablets, uniforms, ID cards, radios, vehicle accessories, specialized instruments, etc.) is the employer’s property, but the employee is often the one with custody and day-to-day control. When something gets lost or goes missing, disputes tend to cluster around three questions:

Can the employer require the employee to pay?
Can the employer deduct the cost from wages or final pay?
Can the employer discipline or terminate the employee over the loss?

Each question has a different legal framework. The short version is:

Payment / reimbursement depends on proof of fault (e.g., negligence) and the validity of the policy/undertaking.
Salary deductions are heavily restricted and usually require employee authorization or a legally recognized basis, plus due process.
Discipline / termination depends on whether the loss is tied to a lawful ground (just cause) and whether procedural due process was observed.

2) Key legal concepts you must understand first

A. Custody is not automatic liability

Merely receiving company equipment does not automatically mean the employee must pay if it’s lost. Custody establishes responsibility to care for the item, but financial liability typically hinges on fault—most often negligence or willful misconduct.

B. “Fault” can range from intentional to accidental

Employers commonly categorize loss cases as:

Willful act / dishonesty (theft, misappropriation, selling equipment)
Gross negligence (reckless disregard of basic care)
Simple negligence (carelessness)
No fault (robbery with violence, fire, fortuitous events, circumstances beyond control)

In Philippine practice, the more the case resembles dishonesty or gross negligence—especially in positions of trust—the more likely discipline (including termination) is upheld, provided due process is observed.

C. Civil liability vs. labor standards are different tracks

An employer may want to recover money (civil law concepts like damages) and impose discipline (labor law). But wage deductions and termination must comply with labor standards and due process—even if the employer believes the employee is “civilly liable.”

3) What laws and doctrines commonly apply (Philippine context)

A. Labor standards on wage deductions (core issue)

Philippine labor standards strongly protect wages. As a rule:

Employers cannot freely deduct amounts from wages to cover losses or damages.
Deductions generally need to fall under recognized categories (e.g., those required by law, those authorized in writing by the employee for a lawful purpose, or those allowed under specific labor rules/policies such as certain “deductions for loss or damage” subject to strict conditions).

Practical effect: even if the company believes the employee should pay, the company usually cannot simply “charge it to payroll” unless the deduction is legally and procedurally defensible.

B. Employer property rules and management prerogative

Employers can adopt policies on:

issuance and return of equipment,
accountability forms,
incident reporting,
investigations and sanctions.

But policies cannot override wage protection rules or due process requirements.

C. Just causes for discipline/termination (loss-related)

Loss of company property can lead to discipline or termination depending on facts. In Philippine labor law, termination for just cause is assessed under standards like:

Serious misconduct
Willful disobedience
Fraud or willful breach of trust
Commission of a crime or offense against the employer/persons
Other analogous causes
Gross and habitual neglect of duties (where applicable)

Important nuance: “Loss of trust and confidence” is typically applied more strictly to employees in positions of trust (e.g., cash custodians, finance staff, property custodians, managerial employees), but it is not a shortcut—there still must be a factual basis.

D. Due process in discipline and termination (non-negotiable)

Even if the employer has a strong case on the merits, discipline or termination can be ruled procedurally defective if the employer fails to follow due process:

Notice of charge (first notice) describing the facts, rules violated, and giving time to explain
Opportunity to be heard (written explanation, conference/hearing where appropriate)
Notice of decision (second notice) explaining the findings and penalty

4) When can an employee be made to pay for lost equipment?

A. The strongest cases for employee financial liability

Employers have a stronger basis to demand payment when they can show:

The equipment was issued and acknowledged (asset tag, serial, condition, valuation or replacement cost standard).
The employee had custody/control at the relevant time.
Loss occurred due to the employee’s fault (willful act, dishonesty, or negligence).
There is a valid written undertaking/policy that is reasonable and not contrary to law/public policy.
Due process was followed (investigation, written explanation, documented findings).

B. Harder cases (where liability is often disputed)

Robbery / theft by a third party where the employee exercised reasonable care
Force majeure / fortuitous events (fire, flood, calamities)
Loss caused by inadequate security controls attributable to the company (e.g., no lockers, unsafe worksite, employer-required travel without safeguards)
Shared custody situations (multiple users, pooled devices, poor inventory management)
No clear issuance/turnover records (no serial numbers, no accountability form)

C. “Accountability forms” help—but they are not magic

A signed accountability form is useful evidence, but it does not automatically validate wage deductions or guarantee that the employee must pay regardless of circumstances. Overly harsh “strict liability” clauses (pay no matter what) are more vulnerable to challenge, especially if they operate like a penalty and ignore fault and due process.

5) Can the employer deduct the cost from salary or final pay?

A. Salary deductions are restricted

As a general rule, an employer should avoid unilateral deductions to cover loss/damage. Safer routes typically include:

Written authorization by the employee specifying the amount and purpose (and the authorization must be voluntary and for a lawful purpose), or
A deduction mechanism that fits recognized labor standards for deductions due to loss/damage, which in practice demands careful compliance and documentation (including proof of fault and opportunity to explain), or
Separate recovery (e.g., demand letter and, if necessary, a civil claim) rather than payroll deductions.

B. Final pay / back pay is not a free-for-all

Employers sometimes “offset” the cost of equipment against final pay. This is commonly contested. Withholding final pay as leverage can raise labor standard issues unless the employer can justify the withholding under a lawful ground and proper documentation.

Practical best practice: treat final pay as protected; if recovery is disputed, document the claim and pursue lawful channels rather than forcibly netting it out.

C. “Security deposits” and similar schemes are risky

Requiring employees to post deposits for tools/equipment can be problematic, especially if it functions as an unlawful wage deduction or circumvents wage protections. If a company uses deposits, it should be prepared to justify legality and fairness and to apply strict controls and refund rules.

6) Can the employer terminate an employee for losing company equipment?

A. Yes—sometimes—but facts and position matter

Termination is most defensible when the loss is linked to:

Dishonesty (e.g., theft, falsification, concealment)
Willful breach of trust (especially for custodians/finance/property roles)
Gross negligence (reckless handling; repeated violations; clear disregard of rules)
Gross and habitual neglect (pattern of negligence, not an isolated lapse)

For a rank-and-file employee whose job does not involve special trust, an isolated loss due to simple negligence often does not justify the harshest penalty unless circumstances are severe and well-proven.

B. “Loss of trust and confidence” needs a factual anchor

Employers frequently invoke loss of trust. In Philippine practice, it generally requires:

the employee occupies a position of trust (managerial or fiduciary), and
the employer has a reasonable basis for believing the employee is responsible for the misconduct/breach.

It is not enough to say “we no longer trust you” with no documented incident narrative and investigation.

C. Due process failures can still expose the employer

Even with a strong substantive case, failure to follow procedural due process can result in liability for damages/penalties (depending on the forum’s findings and applicable rules), or a finding that dismissal was defective.

7) The employer’s burden: documentation and a credible investigation

In disputes, outcomes often turn on recordkeeping. Strong employer documentation typically includes:

Issuance records: asset tag, serial number, condition, photos if relevant
Signed accountability/receipt and clear policy acknowledgment
Security measures provided (lockers, device encryption, tracking, reporting protocols)
Incident report: when/where last seen, circumstances, witnesses
Proof of employee fault: policy violations (e.g., left device unattended), contradictory statements, CCTV, audit logs
Investigation minutes and notices (charge notice, employee explanation, hearing notes, decision notice)
Valuation method: replacement cost rules, depreciation policy, repair estimates

Weak documentation commonly includes vague “accountability” without serial numbers, no proof of custody at the time, no explanation of valuation, and no due process trail.

8) Common scenarios and how they usually play out

Scenario 1: Laptop stolen while employee ate at a café (left unattended)

If policy clearly prohibited leaving devices unattended and facts show disregard, employer has a stronger case for negligence and disciplinary action.
Payroll deduction still requires lawful basis and process; a signed authorization helps.

Scenario 2: Phone stolen in a robbery with violence while on field work

If the employee exercised reasonable care and promptly reported, employee liability is harder to impose.
Employer should assess whether safeguards were provided (secure bags, protocols).

Scenario 3: Missing equipment in an office with shared access

Employer must establish custody/control and chain-of-responsibility. Without it, attributing liability to one employee is difficult.

Scenario 4: Employee resigns and fails to return device

Employer can demand return and may pursue remedies; discipline/termination becomes moot if the employee already separated, but the company can still pursue recovery.
Withholding final pay purely as pressure is risky if the set-off is not clearly lawful and documented.

Scenario 5: Repeated losses despite warnings

Pattern evidence can support “habitual neglect” or escalation of penalties, provided warnings, coaching, and progressive discipline are documented.

9) Data privacy and device contents: an often-missed angle

Company devices may store personal data (employee/customer data). Loss can trigger:

security incident response obligations,
internal breach reporting,
potential regulatory exposure depending on the data and the organization’s obligations.

From an employment standpoint, data risk can also influence the seriousness of the incident—but it still does not eliminate the need to prove fault and follow due process.

10) Best-practice policy design (legally safer and more defensible)

A. What a good equipment accountability policy includes

Clear scope: what items are covered, who qualifies, custody rules
Issuance/return process: documentation, condition checks, deadlines
Care standards: prohibited acts (e.g., leaving unattended in public), required safeguards
Incident reporting: deadlines (e.g., within 24 hours), police report requirements for theft, internal ticketing
Investigation process: fact-finding, employee explanation, decision timeline
Valuation rules: depreciation schedule, repair vs replacement, caps where appropriate
Recovery mechanism:
- preference for voluntary written authorization for any payroll deduction,
- installment options to avoid unconscionable deductions,
- alternative recovery routes if disputed
Discipline matrix: proportional penalties (warning → suspension → termination for severe/repeat cases)
Exceptions: fortuitous events, documented third-party crimes, employer security failures
Privacy/security controls: encryption, MDM, remote wipe, access control

B. Drafting tips for accountability undertakings

Avoid “pay no matter what” language.
Tie reimbursement to fault established after investigation.
Specify how cost is computed (replacement/repair less depreciation).
Include a clause on voluntary written authorization for any deduction, separate from the accountability receipt (so it’s clearly consensual and amount-specific).

11) Practical guidance for employees

If you’re an employee facing a charge for lost equipment:

Report the incident immediately and in writing.
Provide a clear timeline and circumstances.
If theft/robbery occurred, secure objective proof (police report, affidavits, incident logs).
Ask for the policy basis and valuation basis (repair vs replacement; depreciation).
Be cautious about signing a blank or open-ended salary deduction authorization.
If you accept responsibility, try to negotiate a fair valuation and installment plan.

12) Practical guidance for employers and HR

To reduce disputes and win defensible cases:

Treat equipment loss like an investigable incident, not an automatic payroll charge.
Build strong chain-of-custody controls and asset records.
Make valuations reasonable and consistent (depreciation, repair first where feasible).
Use progressive discipline unless facts justify severe penalties.
Keep wage deductions strictly compliant; prefer separate, explicit authorizations.
Always execute due process notices properly, even for “obvious” cases.

13) A quick compliance checklist (one-page style)

Before issuing equipment

✅ Asset tag + serial + condition record
✅ Signed receipt/accountability + policy acknowledgment
✅ Security controls (MDM, encryption, tracking if applicable)

When loss occurs

✅ Incident report + immediate notice to HR/IT
✅ Containment (remote lock/wipe, credential resets)
✅ Investigation: custody, last known location, policy breaches, evidence
✅ Employee written explanation + opportunity to be heard
✅ Documented decision + proportionate sanction
✅ Valuation computed consistently (repair/replacement, depreciation)

If recovering cost

✅ Use lawful recovery path (prefer written, amount-specific authorization)
✅ Avoid unilateral wage/final pay deductions without solid legal basis
✅ Keep records of agreement and payment schedule

Bottom line

In the Philippines, employees can be held liable for lost company-issued equipment, but liability is not automatic and must be anchored on fault, fairness, documentation, and due process. Even when reimbursement is justified, wage deductions are restricted and must be handled carefully. For discipline or termination, the employer must show a valid just cause and follow procedural due process.

If you want, I can also provide:

a model “Equipment Issuance & Accountability Policy” outline,
a sample two-notice template for investigations, and
a depreciation-based valuation table that employers commonly use for devices/tools.