Ruling over official vehicle withdrawal without financial reimbursement?
In a recent development, the Cologne Labour Court of Appeal has ruled on the legal rights of employees regarding compensation for the lost private usage of company cars after a change in their employment agreement. The case, known as Case No. 6 Sa 519/23, sheds light on an important issue that has been a topic of debate in German employment law practice.
The case revolves around an employee who had been using a company car for private purposes for over 25 years. However, during a company merger in 2021, the car was recalled, and the new employer's works agreement did not allow the employee to claim the car. The employee appealed the decision and requested future monthly payments, but was unsuccessful at the Cologne Labour Court of Appeal.
According to specialist employment lawyer Volker Görzel, the ruling is particularly relevant for employees with company car regulations in standard employment contracts. The court's decision highlights that employers are not obligated to compensate employees for lost company car usage rights if the works agreement does not allow it.
However, the legal rights of employees regarding compensation for lost private usage of company cars are not entirely absent. Typically, company car policies and agreements specify the conditions under which employees may use company vehicles privately. If private use is contractually agreed upon or has been an established benefit, employees may have a legal claim to compensation if this benefit is diminished or withdrawn, especially if the change was unilateral and without consent.
Such compensation could be monetary or in another agreed form, but it must correlate with the value of the lost private use. The value is often determined either by an agreed valuation method or by generally accepted standards such as the 1% rule for taxation of private use of company cars under German tax law.
It is crucial to note that VAT and tax implications must be considered. The provision or withdrawal of a company car as a private benefit can affect the employee’s taxable income and social security contributions. Employers sometimes cover VAT or include it in benefits in kind, but if policies change, these factors influence compensation structures.
In summary, employees have a legal right to compensation for lost private use of company cars after a change in employment agreements if such private use was part of the agreed employment conditions or benefits. The exact nature and amount of compensation depend on contractual terms, valuation of the benefit lost, and applicable tax and labor laws. This case serves as a reminder that any change reducing private use must be transparently documented and agreed upon to avoid legal conflicts.
In the context of this case, employees with company car regulations in standard employment contracts should be aware that employer compensation for lost private use of company cars may not be guaranteed if the works agreement does not allow it. However, if private use of the company car has been an established benefit in the employment agreement, employees may have a legal claim to compensation when this benefit is diminished or withdrawn, especially if the change was unilateral and without consent.
