By judgement dated 21 March 2012 (docket no. 5 AZR 651/10), the BAG classed as fundamentally permissible a clause contained in an employment contract entitling the employer to revoke the use of the company car without compensation in the event of the employee's garden leave. The BAG did, however, stipulate strict requirements for the execution of the right of revocation.

In the underlying factual situation, the employee was put on garden leave after having herself terminated her employment relationship. In reference to a revocation clause contained in the employment contract, the employer simultaneously demanded the return of the company car which the employee had previously also be permitted to use for private travel. The contractual provision stipulated that the provision of the company car could be revoked, inter alia in the event of the employee's paid release from employment duties during her termination notice period. The employee was of the opinion that the revocation invalid and filed a payment claim on grounds of the loss of use of the car until the expiry of the termination notice period. Ultimately, the employee's claim was granted by the BAG.

In established jurisprudence, the BAG subjects revocation clauses to a two-stage examination. During the first stage – the examination of the content – the BAG essentially checks whether the grounds for a revocation are stated in the clause and whether the revoked benefit constitutes no more than 25% of the regular earnings. The disputed clause withstood this examination. At the second stage – the examination of its execution – it subsequently checks whether the execution of the right of revocation in the specific individual case can be considered equitable. The BAG's weighting of the employer's interests in the immediate return of the company car and the employee's interests in the continued private use thereof fell in the employee's favour: for her, the company car was her only car. Furthermore, pursuant to Sec. 6 I no. 4 German Income Tax Act [Einkommenssteuergesetz, EStG] she was obliged to tax the private use at the full monthly flat rate, despite no longer being able to use the car for the remainder of the month after its return on 9 June 2009. This – along with the loss of use – led to a perceptible reduction of her net income and therewith to a prevailing interest in her continued use of the company car.

The judgement shows that, although revocation clauses concerning a company car provided to an employee can be valid in principle, the BAG nevertheless immediately restricts the employer's striven options for action by setting strict requirements for the execution of such right of revocation. Following the BAG's logic, a revocation during an ongoing month is always impermissible because the employee suffers a loss of use without being exempt from the (proportionate) tax burden of the private use. However, a revocation is also only possible to the end of a month if the employer can present cogent reasons. It does not suffice here just to generally indicate the preferential business-related use of the car. Rather, the employer will have to represent a definite need. In my opinion, this exists if the employer transfers the tasks of the employee put on garden leave - tasks which require the use of a company car (for example, field staff) - to another employee who does not have a company car.

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