Legal dispute over the use of a company car for private purposes: Recent ruling by the Hamm Regional Labor Court
On January 23, 2024, the Hamm Regional Labor Court issued a groundbreaking ruling (case no. 6 Sa 1030/23) regarding the continued provision of a company car for private use. This case decided whether an employee is still entitled to use their company car for private purposes. This decision could have far-reaching implications for similar cases in labor law.
Facts: Dispute over the provision of a company car for private use
The present proceedings concerned the provision of a company car, which was also intended for private use. The plaintiff, who has been employed by the defendant since February 1, 2009, most recently earned a gross annual salary of approximately €130,000, including a non-cash benefit of €1,119 gross per month. In 2015, the parties signed an employment contract that appointed the plaintiff as a sales manager in the marketing and sales department. The contract did not contain any specific provisions regarding the provision of the company car, but a supplementary agreement provided the plaintiff with a function-specific company car.
In 2021, the contract was amended when the plaintiff assumed the position of Area Sales Manager in July. This agreement stipulated that he could be granted a function-related company car, provided company policies permitted it. Upon termination of employment, this entitlement would cease, and the defendant reserved the right to reclaim the company car for objective reasons.
Since February 2023, the plaintiff has worked as a sales partner manager for individual customers without any contract changes. The company car continued to be made available to him. During an inspection in March 2023, the defendant determined that the plaintiff did not meet the required business absence requirement of more than 50 days. The defendant then demanded that he return the company car by December 31, 2023, at the latest. The plaintiff filed a lawsuit to enforce the provision of the company car for private use beyond December 31, 2023.
Reasons for the decision in the legal dispute concerning the provision of a company car for private use
The Hamm Regional Labor Court (LAG Hamm) ruled in favor of the plaintiff, requiring the defendant to provide him with a company car for private use beyond December 31, 2023. While the Dortmund Labor Court dismissed the claim, the Hamm Regional Labor Court recognized the plaintiff's claim as not extinguished. The provision of a company car for private use is considered remuneration and is therefore owed as long as the employer is obligated to pay remuneration.
A claim to a company car could only be lost through a validly agreed condition subsequent or a valid right of revocation. The Higher Labor Court (LAG) in Hamm determined that the plaintiff's claim had not expired due to a condition subsequent pursuant to Section 158 (2) of the German Civil Code (BGB). The relevant clause regarding "permanently high mobility" was non-transparent and therefore ineffective. It remained unclear under which circumstances "permanently high mobility" is not present, how the 50% quota of working days is calculated, and which trips should be taken into account.
The court also deemed the cancellation clause invalid. This allowed the defendant to reclaim the company car for reasons that were unreasonable for the plaintiff. Although the employer has a legitimate interest in flexibility, the economic risk cannot be shifted onto the employees. The clause permitted cancellation for organizational reasons, such as changes to contractual duties. However, not every change in job duties justifies the withdrawal of use of the company car.
In addition, the defendant failed to comply with the contractually stipulated two-year review period. Therefore, the Hamm Labor Court ruled in favor of the plaintiff and confirmed his right to the company car for private use as well.
Practical tips: Company car provision for private use
Contractual arrangements regarding the provision of company cars, including for private use, are frequently the subject of labor court disputes. The Hamm Higher Labor Court ruling demonstrates that cancellation clauses must meet strict requirements for effectiveness. Employers should therefore exercise particular care when drafting such clauses.
It is advisable to agree on a right of revocation in connection with the provision of a company car for private use. In doing so, it should be ensured that the employer's legitimate interest in being able to revoke the provision of the company car during the ongoing employment relationship is clearly and legally soundly formulated. The contractual provisions must comply with the requirements of general terms and conditions law.
The trend in labor courts shows that the provisions of Sections 305 et seq. of the German Civil Code (BGB), in particular the transparency requirement (Section 307 (1) sentence 2 BGB), continue to be strictly applied. Employers should therefore ensure transparency and clarity in their contractual clauses to avoid legal conflicts.
Disputing with your employer over the use of a company car? Our employment law attorneys are happy to assist you!
