What is an Equipment Return Agreement?
Equipment Return Agreements are essentially agreements a company enters into with its employees to ensure that company property (e.g., equipment, corporate credit cards, uniforms and even cellphones) is returned when an employee leaves such as upon termination or resignation. Without such a clear and concise agreement, a former employee could easily fail to return equipment or take long enough to do so that it becomes damaged, lost or somehow impaired, leaving the company to shoulder any replacement or repair costs .
You should use Equipment Return Agreements in the corporate environment for a number of reasons: Equipment Return Agreements are, in many ways, a natural extension of the Plain English Provisions utilized in Non-Disclosure Agreements and Non-Competition Agreements (among others).
Important Aspects of a Return and Care Agreement
A comprehensive return and care agreement should address the terms of use, responsibility for maintenance, and conditions under which the company can reclaim the equipment. A few of the key components that could be included in your agreement are noted below:
Terms of Use
The return and care agreement can specify how and when the employee should use the company-issued device or equipment, and can also be structured to restrict the use of the items. For example, the agreement could preclude the employee from using certain applications or websites while using a personal electronic device that is issued by the employer.
It is important that employers limit the use of company-issued devices, whether they are personal electronic devices or office equipment, such as a laptop computer, to business use. In addition to the other good reasons for limiting the use to business use, one compelling reason is to avoid the application of the Personal Information Protection Electronic Documents Act (PIPEDA).
If the employee uses a PIPEDA-covered device or equipment, it is open to question whether the employee’s personal information would have been protected while the equipment was in the employee’s care and possession. Under PIPEDA, the definition of personal information is "information about an identifiable individual." The definition expressly excludes "name, title, business address or telephone number of an employee of an organization." However, if the employee’s device is subject to PIPEDA, and the employee’s name, title, business address and/or telephone number is on the device, it appears that information would be included in the PIPEDA definition of personal information.
Maintenance Recipients and Responsibilities
To avoid issues about who is responsible for maintaining a device or equipment, either the employee or the company may be permitted to maintain the equipment. For example, if the employee does not have the capability to perform maintenance, or is not permitted to do so under company policy, then the return and care agreement could specify that the company will be responsible for the maintenance of the equipment.
The return and care agreement must be careful to specify what the employee’s responsibilities are for device and equipment use. If the employee is not required to maintain the equipment, and the company retains this responsibility, then the employee should be prevented from causing damage to the property through improper use or negligent actions. As a simple example, the agreement should state that if the employee hears a noise from the device or equipment that causes him or her to suspect that there is a problem, the employee should inform the IT department immediately to prevent damage to the equipment.
Conditions of Equipment Return
The return and care agreement can state that the employee is responsible for returning all of the company’s items that have been provided to the employee. This is important because the employee could switch devices. All of the original documentation for the device and equipment should also be returned, otherwise proper servicing of the equipment could be impeded and cause unnecessary delays or costly repairs.
The return and care agreement should also document the types of equipment that can be returned at the end of employment. For example, if the employer has issued three electronic devices, the return and care agreement should specify that all three items need to be returned, and a failure to return all of the equipment could result in a reduction of the employee’s final paycheque. Although the reduction of the employee’s final paycheque is a last resort, the possibility of this outcome will be an effective deterrent for the employee to return all company property.
Legal Issues for Employers
Employers must be mindful of the laws that govern the return of company equipment and associated costs. For instance, an employer cannot make an employee pay for items that are essential to the performance of the employee’s job. If an employer wants the employee to pay for a uniform or tools to do his or her job, the employer must provide these items in accordance with state law. For example, without an agreement with the employee to the contrary, Section 2802 of the California Labor Code requires an employer to indemnify employees for all necessary expenditures or losses incurred as a direct consequence of the discharge of their duties. Also, the employer should keep in mind statutory protections for employees with respect to employment expenses and wages. Employers may need to pay for cleaning for employees who wear uniforms, pay for replacements for any damaged items not caused by employee’s intentional or negligent behavior, and may not require employees to write postdated checks or draw on future earnings for items for which the employer seeks reimbursement. Employers may also run afoul of the FLSA’s record keeping requirements. The FLSA requires employers to keep records on wages, hours, and other items that are listed in the regulations. Employers may also want to consider adding an arbitration clause to their conditional employment agreements. Arbitration can be less costly and better serve the interests of the parties than litigation, and an arbitration clause may help to avoid damages for emotional distress. However, the enforceability of arbitration agreements in employment contracts is an unsettled area of the law. There are also several recent cases in which class action waivers have been held unenforceable. If an employer decides to include a class action waiver in its conditional employment agreement, it must make sure the waiver is truly mutual. In other words, the waiver should waive a class action not only for the employee, but also for the employer. The employer should also find out if the class action waiver is enforceable under its applicable law. A number of states are beginning to carve out exceptions to class action waivers and allow certain claims to be brought on a class action basis. As a result, employers should be aware of the exception in their applicable state law and should seek legal advice about including a class action waiver in their conditional employment agreements.
Best Practices for Employees
If this is the first time an employer is asking an employee to sign a company equipment return/care agreement, it’s often recommended that the employer schedule a face-to-face meeting with the employee where the agreement is reviewed in detail, all questions are answered and the employer and employee both sign and date the document. If there are multiple employees signing such agreements, the employer may schedule a single meeting with multiple employees at the same time so questions can be answered and the agreement reviewed in a more efficient manner. In addition to scheduled meetings with newly hired employees who will be receiving company equipment, if an existing employee receives an anonymized company computer at some later point in time, it is often recommended that the employer have a meeting with only that particular employee present and the employer and employee both sign and date the agreement , so the signatures align with the actual receipt of the equipment. If an existing employee has received company equipment several times over a number of years, it is probably not necessary to continue to have the employee sign the agreement every time.
Along with the return and care requirements listed in the agreement, best practices for employees include: It is strongly recommended that if an employee finds any equipment is damaged or inoperable, or if the employee loses or misplaces any company equipment (hardware or software), the employee should immediately report the incident to the employee’s supervisor so the damage, loss or misplacement can be addressed in a timely manner. As a best practice for employers, it is often recommended that the employer provide contact information, such as a telephone number and e-mail address, for the employee to report the damage, loss or misplacement.
Breach and Disputes
Handling disputes or breaches of agreements regarding the return and care of company equipment requires a clear understanding of the terms leading up to the departure of the employee. If there are no terms set out, then this is plainly an issue that must be resolved directly with the employee. It is important that you listen to their reason for not promptly returning the equipment and work towards a resolution to keep the door open on potential future work opportunities with them. If the failure to return the equipment in a timely manner is related to any of the termination related issues set out above, such as the failure to be paid all wages/deductions or the conversion of their position to an independent contractor, the dispute may be capable of being resolved through mediation at Fair Work.
There are no laws that deal specifically with the return of company equipment by employees in Australia, but the Fair Work Regulations do provide some clarity to determine if the release of the security interests created when the employees give the required post termination reassurances and obligations under Part 1-20 of the Corporations Act will be valid. If they are not, then instead of an agreement being entered into, we consider that the best approach is to rely on breaches of the Fair Work Act, or seek orders to effect the reconveyance of the equipment. Of course, the defence to any damages claimed by the departing employee will be that they did not breach any agreements because they were never given any terms in the first place. An alternative option is to pursue court action for damages for breach of contract which have been evidenced by the employee’s failure to return equipment or repair it where there was an obligation to do so.
If it is not practicable to agree with the former employee what their obligations are, you may need to resort to advising them that you will be seeking to rely on the legal principles of conversion of goods unreasonably detained, detinue and detinue as a bailee who has not exercised appropriate care and skill.
Samples and Templates
In order to assist small businesses and other types of organizations with drafting an effective company equipment return and care agreement, the following examples and templates are provided:
Return and Care of Company Equipment Agreement:
"This [letter/e-mail] is to request that you review and execute the attached Return [and Care] of Company Equipment Agreement (the "Agreement") to confirm and acknowledge your understanding of your obligations with respect to the return of any Company equipment that you possess upon the termination of your employment/company affiliation/mail services contract with the Company [or upon the expiration of the term of the Agreement]. Please also review, sign and return your original Agreement, and return the Agreement to [insert name of employee’s supervisor/manager] by no later than [insert date]. If you have any questions about the terms and conditions of the Agreement or any obligations you may have in connection therewith, please direct your inquiries to [insert name and contact information of Human Resources contact]. Thank you for your attention to this request and for your efforts on behalf of the Company. We look forward to receiving the executed Agreement from you shortly."
Return and Care of Company Equipment Agreement:
"This Return and Care of Company Equipment Agreement (the "Agreement") constitutes a legally binding agreement between [insert name of employer] (the "Company") and [insert name of employee or company official] ("Recipient") as of [insert date]. The Recipient agrees that the Equipment, including any items that become an accessory to the Equipment (e.g., carrying cases, keyboards), is the property of the Company and shall be properly delivered back to the Company, with all of its component parts , at the end of [his/her] employment with the Company or at the termination of any contract for mail services between the Recipient and the Company (the "Term"). Upon the expiration of the Term, the Recipient shall advise the Company of any locations in which the Equipment is located such that the Company may reacquire the Equipment. The Recipient further agrees that [he/she] shall exercise reasonable care in the use of the Equipment and must refrain from any of the following uses: (a) for any illegal purposes, (b) in violation of any applicable laws, statutes, ordinances, rules and regulations, (c) in violation of the Company’s Acceptable Use Policy or [other IT convention], (d) for the benefit of any third party other than the Company, and (e) for personal use. Any damage, loss, or theft of any kind caused to the Equipment (including without limitation any associated filing containers) while in the Recipient’s possession during the Term shall be repaired or replaced by the Recipient at [his/her] sole cost and expense. For purposes of this Agreement, "Equipment" means [insert list of equipment, including all related accessories, and specify the condition and/or functionality of each item]. Recipient understands and acknowledges that the Equipment the Company provides to Recipient may, from time to time, become outdated or obsolete. The Company shall have no obligation to replace or upgrade any such Equipment with updated or replacement models. If the Recipient continues to operate and/or access the Equipment beyond the expiration of the Term, the Recipient shall be deemed to have agreed to the terms and conditions herein until such time as the Equipment is no longer in the possession of the Recipient and/or is returned to the Company. This Agreement shall remain in effect for the duration of the Recipient’s employment with the Company and shall survive any termination of the Recipient’s employment with the Company."
