If you’re an employer, there may be situations where you consider giving employees a company car, but if they’re in an accident, you might quickly find yourself in a situation where you’re seeking competent legal advice.
There are advantages for employers and employees to company cars, but there are also some considerations, such as what happens if an employee gets into a wreck in a company car.
The following is a guide that can be useful for both employers and employees as far as company cars and what to know, particularly if an accident does happen.
Should You Give Employees a Company Car?
First, if you’re an employer and you’re on the fence about company cars, one of the biggest perks is that it can be tax-deductible, however that’s only the case when the car is being used for business. You’ll have to keep some pretty stringent records, or else your employee will to show the business use for tax purposes.
If you are going to use a vehicle as a tax deduction, you need to show the business purpose, the dates it’s used, the location and the mileage.
If you do decide to give a company car to one of your employees you’ll need to not only keep detailed records but regardless of who drives the car, the lease is in the name of the business so it’s deductible as a business expense to an extent. If you buy a car and let an employee use it, the depreciation is tax-deductible.
On the employer-side, if you have a company car and you can also use it outside of work, it’s known as Benefit in Kind. Basically, this means that it’s a perk that your employer pays for on top of your salary, so therefore it has a financial benefit for you. You’ll have to consider that as far as taxes.
So, with those things in mind, back to the original question—what happens if you crash a company car?
First, Who’s Responsible?
If you get in a car accident in a company car, one of the most pressing issues following that accident is figuring out who’s responsible. Different terms may be thrown around including:
- Negligence: This occurs when the driver of a vehicle doesn’t act responsibly or does something that no responsible driver would do.
- Liability: This is just a term for responsibility.
- Third-party: This term is something you might hear if you’re in an accident and it refers to someone other than you as a driver and your employer.
Usually, an employer is responsible if an employer is driving a company vehicle under something called respondent superior. This essentially means that an employer has legal responsibility for the actions of their employees when they’re operating within the scope of employment.
If you’re in an accident while you’re working, your employer’s liability insurance should protect you against third-party actions. Your employer’s insurance should mean that you don’t have to pay for damages that resulted from an accident personally.
There may be instances where an employer has to pay their employee back, though, depending on terms of their contract with their employer.
The biggest gray area in all of this is figuring out whether or not an employee was operating under the scope of employment when they got into an accident.
The standard is usually that if you were doing work-related tasks while driving the car and you got in an accident, your employer and thereby their insurance is responsible.
Your company may have some sort of policy or contract they had you sign saying that if you are driving a company car, they as your employer are either explicitly liable if there’s an accident, or excluded from liability.
The state where you live factors in as well because every company has a different set of laws as far as determining liability.
Another issue at hand is whether your employer has collision coverage that extends to employees. Before accepting or driving a company car, you should clarify insurance coverage with your employer.
If you’re out and about and drinking on your lunch break and then get behind the wheel of a company car, the situation can look very different. That would go outside the boundaries of your work tasks and would also represent illegal activity. No matter what, it’s not going to be within your scope of duty to break the law, so an employer isn’t responsible.
Another exception outside of legal or criminal activities would occur if you were using a vehicle for personal reasons, perhaps even though you were doing so during work hours.
If you’re running personal errands, you may not have personal liability protection if you’re in an accident. You’re doing something on your own and not at the instruction of your employer, so your employer might not be legally required to pay for injuries or damages if an accident occurs.
Even if your employer lets you use a company car outside of work hours for personal use, if you get into an accident during that time, or even when you’re on your way to or from work, you may not be able to avoid personal responsibility.
There’s something else to consider with all of this as well. If you get in an accident driving a company car and it’s found you were acting recklessly or you violated company rules, you can be fired as long as you live in an at-will state.
At-will means that an employee can quit but also be fired at any time.
If you’re an employer or you’re an employee, there are pros and cons to company cars and some things to consider before issuing one or driving one. As an employee, it can seem like a great perk but go over the fine print with your employer before doing so because otherwise, you might find that you’re the one who pays if you’re in an accident.