Seizure of Vehicle without Compensation?
**Company Car Withdrawal During Merger: Employee Has No General Precedent Claim, But Specific Rights May Be Protected**
In a recent ruling (Case No. 6 Sa 519/23) by the Cologne Higher Labor Court, the legal rights of an employee regarding compensation when a company car, which was previously provided with private usage rights, is withdrawn during a company merger have been addressed.
The employee, who had a contractual or customary right to use a company car also for private purposes, challenged the withdrawal of this benefit during the merger and asserted a compensation claim. However, the court's decision does not establish a general precedent for all cases involving the loss of a company car with private usage rights.
The court confirmed that if the private use of a company car had become an established part of the employee’s compensation package—either through contract, collective agreement, or long-standing practice—it constitutes a non-wage benefit component. Such a benefit cannot be withdrawn unilaterally without consequence. Withdrawal amounts to a reduction in compensation, which is subject to legal scrutiny.
Upon the withdrawal of the company car’s private usage rights, the employee generally has a right to compensation equivalent to the monetary value of this benefit as part of their overall remuneration or damages for loss of benefits. The company merger itself does not negate the employee’s rights unless explicitly agreed otherwise. The employer inheriting obligations (successor employer) must respect existing benefit rights or compensate for their withdrawal.
The monetary value may be assessed based on the customary private usage value of the vehicle, taking into account factors such as market value, tax effects, and usage frequency. However, the specific circumstances of each case will continue to be evaluated on an individual basis.
In a specific case, an employee had a company car with private usage rights since 1996, which was recalled during a company merger in 2021. The new employer's works agreement stated that the employee no longer had a claim to the car, according to Volker Görzel, a specialist in labor law. The ruling could potentially affect other employees who have lost their claim to a company car with private usage rights.
The case is currently pending at the Federal Labor Court, and the Cologne Higher Labor Court ruled that an employer does not have to compensate an employee for the loss of a company car with private usage rights, if the works agreement regulates it differently. The ruling emphasizes that changes in works agreements can alter existing rights to a company car.
The case highlights the importance of clear regulations in employment contracts and company car regulations regarding the return of company cars. If the employment contract or the company car regulation clearly states when the car must be returned, this is legally justified.
It is essential to note that the specific circumstances of each case will continue to be evaluated on an individual basis. Employees who have experienced a similar situation are advised to seek legal advice to understand their rights and potential compensation claims.
In the context of company mergers, employees who have a contractual or customary right to use a company car for private purposes may have a right to compensation when the company car's private usage rights are withdrawn. However, the court's ruling in a recent case does not set a general precedent; instead, each case will be evaluated individually, taking into account factors such as the customary private usage value of the vehicle, market value, tax effects, and usage frequency. For instance, an employee who had a company car with private usage rights since 1996 and lost the car during a company merger in 2021 might have a potential compensation claim, depending on the specific circumstances and the terms of the works agreement.
