Setting Vehicle Policies
We can think of at least two good reasons for having a vehicle policy if you
have employees using your vehicles:
- Good vehicle policies help you reduce
respondeat superior liability. The term "respondeat superior"
is a lawyer's way of saying, "As long as your employee is using your
vehicle to perform work for you, I'm holding you responsible if the employee
gets into an accident with that vehicle." If your policy prohibits
employees from using your company's vehicles for personal use and an
employee gets into an accident with one while transporting some flowers the
employee was going to plant in his or her garden, it's easier to argue that
you are not responsible for the accident.
- Good vehicle policies help limit the tax
consequences of having employees use vehicles. The IRS is wary of people
who try to lower their income and payroll taxes by negotiating with their
employers for fringe benefits — which these people assume are
non-taxable — instead of higher salaries. One example is people who ask
for full-time use of a company car. These folks figure, "give me a car
that would cost me $300 a month to lease instead of an extra $300 in salary,
and I can avoid paying income tax on that $300."
For this reason, the IRS has special rules requiring employers to report the
fringe benefit associated with having a company car as taxable compensation.
If it is practical for you to establish vehicle policies that restrict
personal use of your vehicles by employees, it may save you the hassles of
withholding the value of vehicular fringe benefits from employee paychecks,
and sending that money to the IRS.
Here are a few suggestions for drafting vehicle policies that meet your
needs. For more general information on drafting policies, please read communicating
- Be restrictive, but practical, about use of your vehicles. The less
your employees use your vehicles for personal use, the better. Less personal
use usually means less mileage put on your vehicles. Less personal
use also makes it less likely that you'll end up liable for accidents that
your employees could get into while doing things, like moving their
furniture, that don't generate profits for your company.
On the other hand, a certain amount of personal use may be inevitable. One
example is the employee who stops by McDonald's for lunch between work jobs.
Another example is where an employee's home is closer to a work site than
your company office. In such a case it may be more practical to let the
employee commute to work in your vehicle.
- Use firm, but positive, language. Unless your employees take your
policy seriously, it doesn't do any good. When you draft a vehicle policy,
therefore, it usually helps to indicate what may happen to employees who
violate the policy. Because different violations of the policy may call for
different consequences, don't be too specific unless you need to be. For
example, your policy could use phrases like, "Unauthorized personal use
of a company vehicle may result in loss of vehicle privileges, or more
serious discipline up to and including discharge..." and "Use of
company vehicles while under the influence of alcohol or illegal drugs will
result in immediate termination." Remember that even if your policy
describes serious consequences for employees who violate the policy, you can
still present the policy in a positive way.
You could include an introduction to the policy that says
"Our company vehicles cost a lot of money to purchase,
maintain, and insure. When employees use company vehicles for
unauthorized purposes, this drives up our vehicle costs in many
ways, and it hurts the company's bottom line. This hurts us all
because it means less money for such things as salaries,
benefits, and product development. Therefore, please help us by
observing the following vehicle rules..."
- Make your policy flexible enough to cover a variety of situations. If you
list vehicle uses that are prohibited, use terms like "including, but
not limited to."
- Be sure to prohibit vehicle use by employees who are under the influence
of alcohol or illegal drugs.
- To reduce the chances of a successful negligent
lending of a vehicle claim being made against you, consider a provision
in the policy that will alert you when an employee is under the influence of
a legal drug that impairs driving. (For example, an allergy medicine
that causes drowsiness.) Be careful about having employees tell you about
such things unless you are prepared to have someone drive in their place.
The worst thing you can do is let an employee take the wheel after the
employee has specifically told you that he or she is unfit to drive.
prepared to enforce your vehicle policies by disciplining your workers.