German Regional Labor Court Rules on Company Cars for Works Council Members

Quick Hits

• Providing a company vehicle to works council members in Germany for private use constitutes prohibited preferential treatment within the meaning of Section 78 sentence 2 BetrVG if it is granted solely by reason of their office.
• If the company vehicle is subsequently withdrawn from the works council member, the member cannot claim compensation for the loss of private use, as the underlying vehicle use agreement is void from inception under Section 134 of the German Civil Code (Bürgerliches Gesetzbuch (BGB)) due to the violation of the prohibition against preferential treatment.

The Case—Company Car With Private Use for a Works Council Member

The plaintiff is employed by the defendant as a store manager and has been, as a works council member, on garden leave for several years.

In 2016, the employer introduced a social counseling program and exclusively offered works council members the opportunity to undergo training as social counselors on a voluntary basis and to perform social counseling duties afterwards. The employee completed this training and subsequently worked as a social counselor. The employer then provided the employee with a company vehicle that she was also permitted to use for private purposes pursuant to a vehicle use agreement. Under the employer’s company vehicle policy, store managers are not entitled to a company vehicle for private use. In 2024, the employer outsourced its social counseling program and demanded the return of the company vehicle from the employee. The employee complied with this demand. However, she simultaneously filed suit with the Labor Court of Hanover (Arbeitsgericht Hannover), seeking compensation for the loss of the possibility to use the company vehicle following the withdrawal. After the trial court dismissed her claim, the employee appealed to the LAG.

The Decision—Usage Agreement Void Due to Impermissible Preferential Treatment

The LAG affirmed the decision of the trial court and dismissed the appeal. The court rejected the employee’s claim for compensation for loss of use under Sections 280 paragraph 1 sentence 1 and 283 paragraph 1 Bürgerliches Gesetzbuch (BGB), holding that the vehicle use agreement between the parties was void under Section 134 BGB due to a violation of Section 78 sentence 2 BetrVG.

The court held that providing the company vehicle for private use constituted preferential treatment within the meaning of Section 78 sentence 2 BetrVG because it objectively placed the employee in a more favorable position than employees who were not works council members. It emphasized that an intent to confer a (unlawful) benefit is not required.

The provision of the vehicle for private use was granted solely by reason of the employee’s office because the opportunity to train as a social counselor and perform the inherent activities was made available exclusively to works council members. Furthermore, the social counseling role was not assigned to the employee under a separate contractual arrangement. As a social counselor, she was not subject to any instructions from her employer, nor was she obligated to perform a specific amount of social counseling work. The court also ruled that the provision of the vehicle constituted a compensatory element in the form of a non-cash benefit that exceeded the remuneration owed under Section 37 paragraph 2 BetrVG.

Key Takeaways

The provision of company cars to works council members for private use does not always constitute an impermissible benefit. In particular, if a released works council member would have been entitled to a company car for private use as part of their contractual employment, there is no impermissible benefit. However, if the provision is made solely because of works council activities, this constitutes a violation of the prohibition on preferential treatment under Section 78 sentence 2 of the German Works Constitution Act (BetrVG), with the consequence that the usage agreement is void from the outset under Section 134 of the German Civil Code (BGB).

A distinction must be made regarding the provision of a company car exclusively for business use: This does not constitute a compensation component and is therefore generally permissible without further requirements. The employer may even be obligated to provide one under certain circumstances if a company car is necessary for the effective performance of works council duties (Section 40 paragraph 2 BetrVG).

Ogletree Deakins’ Berlin and Munich offices will continue to monitor developments and will post updates on the Cross-Border and Germany blogs as additional information becomes available.

Bastian Sepp is an associate in the Munich office of Ogletree Deakins.

Niklas Thiel, a law clerk in the Munich office of Ogletree Deakins, contributed to this article.

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