Blanket Release Clauses Are Invalid (Federal Labour Court, 5 AZR 108/25)

On 25 March 2026 (case no. 5 AZR 108/25), the Federal Labour Court (Bundesarbeitsgericht, BAG) overturned the common practice regarding release from work after a dismissal. A standard-form clause (general terms and conditions) entitling the employer to release employees from work without a specific reason unreasonably disadvantages them within the meaning of § 307 of the German Civil Code (BGB).

Since the right to actual employment is the rule, a release from work is only permissible where the employer has overriding interests worthy of protection. If the release is unlawful because there is no valid contractual clause or no objective reason, the basis for withdrawing the company car also falls away.

Since the private use of the car forms part of the remuneration, an unjustified withdrawal leads to substantial claims for damages (compensation for loss of use). In future, employers will have to demonstrate in each individual case why the employee's interest in being employed must take second place – for example in cases of trade secret protection or a risk of competition.

Merely giving notice of termination is no longer sufficient to withdraw the company car immediately. The BAG thereby strengthens the right to employment in accordance with the contract and protects the salary component "company car" against arbitrary withdrawal.

"Release at any time" clauses in employment contracts are legally worthless. Make sure that your clauses define objective reasons for a release and document these reasons individually in the event of a dismissal in order to avoid the risk of damages in connection with the company car.