An employee asks the employer to grant him/her a short-term interest-free loan. The employee offered the employer to deduct a certain amount from his/her monthly salary to repay a loan. The employee is eager to sign an agreement and consent to deduction from salary. Is it legal?

The Labor Law of the Republic of Latvia contains only 2 cases of withholding any amount from the employee’s salary:

1) withholding of losses caused to the employer by the unlawful actions of the employee (Art.79 of the Labor Law) and

2) withholding of overpaid amounts: advance payment, unused money issued for expenses and etc. (Art.78 of the Labor Law).

Both cases relate to the employment relationship between the employee and the employer. However, from a legal point of view, granting of a loan has nothing to do with employment relationship, therefore, the employee must return the loan, independently transferring the funds. And even the employee’s consent to such deductions will not have legal force, since it contradicts the Labor Law.