HEUKING defends revocation of privately used company car during notice period before Federal Labor Court

A HEUKING team consisting of Düsseldorf-based Partner Christoph Hexel and Senior Associate Anna Schenke successfully represented the operator of several senior care facilities in a legal dispute concerning the withdrawal of a company car that was also authorized for private use. The team prevailed across all three instances before the labor courts. In the case at issue, the employee’s right to use the vehicle was revoked following termination and during the period of leave granted through the end of the notice period (Federal Labor Court, February 12, 2025 – 5 AZR 171/24, NZA 2025, 646).

Following the termination of the employment relationship effective August 31, 2023, by letter dated May 8, 2023, the employer revoked the employee’s right to use the company car for private purposes for the remainder of the notice period. This action was taken in accordance with the revocation clause in the employment contract. The employer also demanded the immediate return of the vehicle in May 2023. While the employee complied, compensation was subsequently sought for loss of use, pro-rated for May and in full for the months of June through August 2023. The dispute over the claimed compensation for the loss of private use during the period of exemption from work continued through the appeal before the Federal Labor Court in Erfurt.

In its February 12, 2025 ruling, the Federal Labor Court again addressed the permissibility of revoking the right to use a company car for private purposes. The decision offers practical guidance for drafting and exercising revocation clauses: such clauses must explicitly reference a “justified” or “effective” exemption. The court clarified that the justification or effectiveness of the leave of absence must be assessed based on the principles governing the general employment obligation. Furthermore, the court reaffirmed, more clearly than in previous decisions, that revoking private use of a company car without compensation is only permissible at the end of a calendar month. This safeguard is intended to prevent financial disadvantages for employees due to the tax implications associated with the private use benefit.

Counsel to employer
HEUKING:
Christoph Hexel (Lead),
Anna Schenke (both Employment), both Düsseldorf