Belgium Constitutional Court Annuls Employee ‘Cash for Cars’ Mobility Allowance

The mobility allowance (or “cash for cars”) is a cash amount that an employee receives in exchange for handing in their company car. The generous allowance was introduced on January 1, 2018 as a “green” alternative to the company car.

However, in a judgment on January 23, 2020, the Constitutional Court of Belgium ruled that the mobility allowance is contrary to the constitutional principle of equality. The court ruled that there is no reasonable justification for the unequal treatment between employees who receive a freely spendable and generous salary because they have handed in their company car on the one hand, and employees who never had a company car and whose salary does not benefit from the “cash for cars” benefit on the other. Moreover, the regulation does not guarantee a solution to mobility problems or a better climate.

Therefore, the mobility allowance law has been annulled, but only as of December 31, 2020. Until then, the law remains in effect.

What does this mean in practice for employees who have a mobility allowance?

First, few employers and employees have made use of the mobility allowance so far. Those that have can still receive it until December 31, 2020. After that, it will no longer be payable.

Employers impacted by the court’s annulment may want to:

1. Make timely arrangements with the employees concerned about the granting of an alternative benefit to replace the mobility allowance. In our opinion, the following alternatives may be possible:

• Provide a mobility budget. This is an alternative system to the company car, but differs substantially from the mobility allowance. With the mobility budget, the employee who exchanges his or her company car receives a budget that he or she can spend in different ways (the so-called pillars). In the first pillar, the employee can opt for an environmentally friendly car; in the second pillar, the employee can opt for sustainable means of transport and housing costs (such as a train pass, a subscription for a shared bicycle, an intervention in rent); and only if a budget remains, as a third pillar, the allowance can be paid out;
• Provide a company car.
• Grant gross cash compensation, from which the normal social security and tax contributions are deducted.

2. Provide a so-called cafeteria plan so that an employee who wishes to hand in his or her company car, can spend the released budget on other alternative employee benefits.
3. Do not start granting a mobility allowance to employees who would like to enter into the system.
4. Keep an eye on legislation, because the legislature may be able to add other alternatives by providing for new legislation before the end of 2020.

Written by Isabel Plets and Alexander Vandenbergen of Lydian and Roger James of Ogletree Deakins

© 2020 Lydian and Ogletree, Deakins, Nash, Smoak & Stewart, P.C.