Question: When an employee has the use of a company car as part of his employment, should the value of this benefit be included in the calculation of his compensation when determining the appropriate amount of pay in lieu of notice?
Answer: This will depend on whether the employee’s use of the car was for business purposes only or if it was also for personal use. Where a company vehicle is provided to an employee exclusively in order to carry out company business, such as driving between plant locations or to do deliveries, then the employer is not required to include the value of the use of the company car as part of the employee’s compensation upon termination of employment.
On the other hand, where an employee is provided with a company car for unlimited use, or the use of the car makes up part of the employee’s remuneration, the employee should receive compensation for this benefit as part of his pay in lieu of notice.
The problem is that while it is arguable the employee should only receive compensation for the personal benefit he derives from use of the company car, the courts have not taken consistent positions on this issue.
In order to determine the appropriate value for this benefit, a good indicator will be the amount of the taxable benefit stated on the employee’s T4. Where an employee has represented to CCRA he has not received a taxable benefit with respect to the company car, it may be difficult for him to take a contrary position vis-a-vis the employer.
Peter Israel is counsel to Goodman and Carr LLP in Toronto and is head of the firm’s Human Resource Management Group. Peter can be reached at (416) 595-2323.
Answer: This will depend on whether the employee’s use of the car was for business purposes only or if it was also for personal use. Where a company vehicle is provided to an employee exclusively in order to carry out company business, such as driving between plant locations or to do deliveries, then the employer is not required to include the value of the use of the company car as part of the employee’s compensation upon termination of employment.
On the other hand, where an employee is provided with a company car for unlimited use, or the use of the car makes up part of the employee’s remuneration, the employee should receive compensation for this benefit as part of his pay in lieu of notice.
The problem is that while it is arguable the employee should only receive compensation for the personal benefit he derives from use of the company car, the courts have not taken consistent positions on this issue.
In order to determine the appropriate value for this benefit, a good indicator will be the amount of the taxable benefit stated on the employee’s T4. Where an employee has represented to CCRA he has not received a taxable benefit with respect to the company car, it may be difficult for him to take a contrary position vis-a-vis the employer.
Peter Israel is counsel to Goodman and Carr LLP in Toronto and is head of the firm’s Human Resource Management Group. Peter can be reached at (416) 595-2323.
