Company car as an employment benefit? Include a unilateral modification clause

Yes, as an employer, you may unilaterally modify or withdraw a lease car that constitutes a term of employment under certain conditions – but only if you have stipulated this in writing beforehand in a unilateral modification clause (Article 7:613 of the Dutch Civil Code) and you have a compelling interest that outweighs the employee's interest. Without such a clause, your legal position is significantly weaker, and in principle, you require the employee's consent. Below, you can read when a lease car is a term of employment, what the law and case law say about this, and how to ensure this is watertight in your employment contracts.

What is a unilateral amendment clause?

A unilateral amendment clause is a clause in the employment contract (or in personnel regulations) granting the employer the right to unilaterally modify certain terms of employment. "Unilateral" means: without the employee having to agree to it each time. The clause is regulated by law in Article 7:613 of the Dutch Civil Code.

That sounds like a carte blanche, but it is not. The law attaches a strict condition to it to protect the employee. Therefore, a modification clause does not give you, as an employer, a blank check; it merely opens the door to a modification that can subsequently be subject to legal review.

When may you invoke the clause?

According to Article 7:613 of the Dutch Civil Code, the employer can only invoke a written agreed modification clause if he has a substantial interest . And not just any interest: that interest must be so significant that the employee's interest, which is harmed by the modification, must yield to it according to standards of reasonableness and fairness. Briefly summarized, it revolves around three elements:

• Recorded in writing: the amendment clause must be in writing, for example in the employment contract or the personnel regulations.
• Substantial interest: you have a serious, demonstrable reason to make a change. In this regard, the legislator primarily has in mind significant business economic circumstances.
• Balancing of interests: your interest as an employer must outweigh the disadvantage for the employee.

The judge takes all the circumstances of the case into account. In this regard, the rule is: the more fundamental the employment condition you wish to challenge, the stronger your interest must be to pass the test. A fair compensation or phase-out scheme and demonstrable consultation with the employee can tip the balance significantly in your favor.

Is a lease car a condition of employment?

In practice, a lease car that an employee is permitted to use privately is often regarded as a condition of employment. This means that you cannot simply withdraw it: returning the lease car infringes upon an acquired right of the employee. This is precisely why a unilateral modification clause is so important if you wish to be able to adjust this arrangement later.

Whether a lease car qualifies as a condition of employment in a specific case depends on the agreements made and the actual course of events. The following, among other things, play a role in this:

• Business versus private use: a car that the employee also uses regularly for private purposes resembles an employment benefit more than a purely business "tool" that serves only for work.
• How it was agreed: is the car mentioned in the employment contract, or is it a benefit that depends on the position?
• Duration and stability: the longer and more self-evident the arrangement runs, the sooner an employee can derive rights from it.

Please note that the car may also have tax implications (such as a taxable benefit for private use). This is separate from the employment law question, but it may be a factor for the employee regarding their interest in retaining the car.

What does case law teach us about the withdrawal of a leased car?

This very issue was at play in a case before the District Court of North Holland. An employer asked an IT employee to return his leased car. The reason: the economy was struggling and savings had to be made. Moreover, the employee drove relatively few business kilometers, meaning the leased car was no longer necessary for work. The employer offered financial compensation, but the employee refused – and so the case ended up in court.

The judge ruled that the unilateral modification clause could be validly invoked in this case to change this employment condition. However, the judge explicitly assessed the change against the requirement of substantial interest and the standards of reasonableness and fairness.

Why was the employer proven right?

The decisive factor was the combination of factors:

• The car policy cost the company a substantial amount annually, and savings could be made by returning non-essential lease vehicles.
• The company was facing economic difficulties, making cost control important for business operations.
• This was offset by a package of compensation measures: including a travel allowance and a phase-out scheme.

That combination led the judge to consider the unilateral modification of this employment condition justified. The lesson: the clause alone is not enough – you must be able to substantiate your interest and mitigate the hardship for the employee. A judge always assesses this on a case-by-case basis, so you cannot derive any guarantee for your situation from a single ruling.

Tips for employers: how to arrange it properly

Do you want to avoid being stuck with commitments you can no longer bear later? With these practical steps, you will be in a stronger position.

1. Include a unilateral amendment clause as standard. Under normal circumstances, you will never need to invoke it, but if you face financial difficulties, it offers you the leeway to intervene.
2. Establish car lease regulations. Include agreements regarding both the use and the return of the leased vehicle. A wording such as "as long as this is desirable for business economic reasons" helps to limit the acquired right character.
3. Substantiate your compelling interest. Gather figures, annual figures, and documents that demonstrate the necessity of the change. A substantiated case carries more weight than a general reference to "the market".
4. Offer compensation and consultation. A phase-out or compensation scheme and demonstrable consultation significantly increase your chances in court.
5. Put agreements in writing beforehand. Experience shows that employees show more understanding for something they have signed in advance.

Are you unsure whether your employment contracts contain a watertight amendment clause? Have them reviewed or have a new employment contract drafted that is structured accordingly. Is an amendment stalled and is a conflict with your employee looming? Our legal experts can assist you further via legal aid for entrepreneurs.

Frequently asked questions about the lease car as an employment benefit

Am I allowed to simply withdraw an employee's lease car?

No. If the lease car is a condition of employment, you cannot unilaterally withdraw it without a written modification clause and a compelling interest that outweighs the employee's interest. Without a clause, you generally require the employee's consent.

What qualifies as a "substantial interest"?

The legislator cites an employer in serious financial difficulties as an example. Particularly significant business economic circumstances can constitute a substantial interest, provided this can be substantiated. The judge assesses this on a case-by-case basis, taking all circumstances into account.

Do I always need a unilateral amendment clause to change something?

Not always, but it makes your position much stronger. Without a clause, an employer can under certain circumstances still fall back on the broader rules regarding changes to employment conditions (such as good employee conduct), but that is legally more difficult and riskier. A written clause provides clarity in advance.

Do I have to compensate the employee when returning the lease car?

Compensation is not legally required, but plays a major role in the balancing of interests. A travel allowance and a phase-out scheme increase the likelihood that a judge will consider the change reasonable.

Does a modification clause need to be included in the employment contract from the start, or can I add it later?

The clause must be agreed upon in writing. If it is not yet included in an existing employment contract, you cannot add it unilaterally: you need the employee's consent for that. Therefore, include it as standard in new employment contracts so that you can refer back to it later.

Does an amendment clause also apply to agreements in a collective labour agreement or personnel regulations?

A unilateral amendment clause pertains to terms and conditions of employment in the employment contract. Separate rules apply to agreements arising from a collective labour agreement. Are you unsure exactly where an agreement falls? Have this assessed on a case-by-case basis, as this determines the course of action to take.

Need help with employment terms and amendment clauses?

Do you want to future-proof your employment contracts or carefully implement a change in terms of employment? The legal experts at MKB Juristen think along with you in a practical, legally sound manner, without any surprises afterwards.

• View our approach to employment law for entrepreneurs.
• Have a suitable employment contract drafted with a watertight amendment clause.
• Would you prefer to discuss your situation? Schedule a no-obligation intake and we will explain everything to you at your leisure.