BAG on blanket release from duties after termination
The Bundesarbeitsgericht (BAG, Federal Labour Court) commented in its judgment of 25 March 2026 – 5 AZR 108/25 – on the validity of a standard-form release clause and on the revocation of private use of a company car. The decision was published by the BAG in press release No. 14/26 of 25 March 2026 under the title “Validity of a release clause – Revocation of company car use”.
According to the court’s guiding principle, a standard business term unreasonably disadvantages the employee if it grants the employer a blanket right, in the event of termination, to release the employee from the duty to work until the end of the notice period. Such a clause is invalid.
The proceedings also concerned the question of whether the revocation of private use of a company car was effective. This depended on whether the employee had been validly released from duties or whether there was no viable basis for the revocation.
Starting point of the legal dispute
The claimant’s role and the company car arrangement
The claimant was employed by the defendant as a regional manager in field sales. Under the employment contract, he was entitled to a company car, which he was also permitted to use privately. According to supplementary information, the company car was the only vehicle available to the claimant.
In addition to the employment contract, there was a separate company car agreement. This provided that permission for business and private use could be revoked if there was an objective reason, subject to one month’s notice. One objective reason mentioned was, among others, the case in which “the employee is released from the obligation to perform work”.
The standard-form employment contract also contained a clause under which the defendant was to be entitled to release the claimant “from the duty to work upon or after notice of termination has been given – regardless of by which party – while continuing to pay remuneration”.
Employee’s resignation and return of the company car
The claimant himself terminated the employment relationship with effect as of 30 November 2024. The defendant released him from the duty to work on 31 May 2024 and demanded the return of the company car as of 30 June 2024.
The claimant returned the vehicle. However, he claimed compensation for loss of use. Originally, he sought compensation for the period from July to November 2024; most recently, the dispute concerned compensation for loss of use for August to November 2024 in the amount of EUR 510.00 gross per month.
The Arbeitsgericht (Labour Court) dismissed the claim in this respect. The Landesarbeitsgericht Niedersachsen (Lower Saxony Higher Labour Court), by judgment of 22 May 2025 – 5 SLa 249/25 –, ruled in favour of the claimant and ordered the defendant to pay.
Decision of the Bundesarbeitsgericht
Defendant’s appeal on points of law successful
The defendant’s appeal on points of law was successful before the Fifth Senate of the Bundesarbeitsgericht. The operative part of the judgment stated that the judgment of the Landesarbeitsgericht Niedersachsen of 22 May 2025 was set aside and that the matter was remitted to the Landesarbeitsgericht for a new hearing and decision – including on the costs of the appeal on points of law.
The BAG did confirm the view of the Landesarbeitsgericht that the defendant could not base the release from duties solely on the release clause in the employment contract. However, the decision of the Landesarbeitsgericht did not withstand scrutiny in all respects because it had not made sufficient findings as to whether, in the specific case, overriding legitimate interests of the defendant precluded the claimant’s continued employment.
Substantive review of the release clause
The Bundesarbeitsgericht reviewed the standard-form release clause as a standard business term within the framework of substantive review under § 307 para. 3 sentence 1 BGB (German Civil Code). The decisive provision was § 307 para. 1 sentence 1 BGB.
In the BAG’s view, the clause unreasonably disadvantaged the employee contrary to the requirements of good faith. This was because, in the event of any termination – irrespective of which party gave notice – it gave the employer a unilateral right to release the employee from duties until the notice period expired, without providing for any balancing of interests.
The BAG emphasised that, in an existing employment relationship, the employee generally has a right to contractual employment. This right to work is based on § 611a para. 1 sentence 1, § 613 BGB in conjunction with the case law of the Großer Senat (Grand Senate) of 27 February 1985 – GS 1/84. As a matter of principle, the employee should be able actually to perform their work; this also affects their personality rights and their right to personal development.
Interest in employment in a terminated employment relationship
Termination does not automatically eliminate the right to work
According to the BAG’s decision, the giving of notice of termination does not automatically mean that the employee’s right to work ceases to exist. This also applies during the notice period and therefore in the terminated employment relationship.
The employee’s interest in actual employment may continue to exist. The disputed clause did not take this into account. According to the BAG’s assessment, it deprived the employee of the opportunity to assert an increased interest in employment in the individual case.
Under the decision, release from duties is possible only if the employer’s interests prevail. A blanket contractual reservation of the right to release the employee from duties, replacing this assessment, does not meet the requirements.
Possible employer interests
At the same time, the BAG clarified that release from duties does not necessarily require an effective contractual release clause. Even without such a clause, the employer may be entitled to release the employee from duties if corresponding reasons exist.
According to the decision, legitimate interests of the employer may in particular be considered, for example in connection with:
- trade and business secrets,
- possible competitive activity,
- customer relationships or comparable operational concerns.
In the BAG’s view, the Landesarbeitsgericht had not sufficiently established whether such interests existed in the specific case and outweighed the claimant’s interest in employment. The matter was therefore remitted.
Revocation of private use of the company car
Revocation clause in the company car agreement
The BAG distinguished the revocation provision in the company car agreement from the invalid release clause. This provision was likewise subject to review under the law on standard business terms, but the Senate considered it valid with regard to its formal requirements.
A reservation of the right to revoke, which eliminates a contractually promised benefit, must be transparent, clear and comprehensible. It is necessary that the employee can at least identify the direction from which the revocation may arise. This may be done, for example, by reference to economic reasons, performance-related reasons or conduct-related reasons.
According to the decision, the reference to release from duties as a ground for revocation satisfied these requirements. The employee could recognise the situation in which he would have to expect the withdrawal of the possibility of using the company car privately.
Substantive requirements for revocation
The BAG also considered the substantive requirements of § 308 No. 4 BGB to be met with regard to the revocation clause. Under that provision, a revocation must not be made available without cause. Rather, it must be necessary as an adjustment mechanism due to the uncertain development of circumstances.
Such a need for adjustment may exist in the case of release from duties. This is because the employee then no longer performs any work; in particular, business trips no longer take place. Against this background, revocation of private use of the company car may be considered in the event of a valid release from duties.
In this respect, the decision follows the BAG’s case law of 12 February 2025 – 5 AZR 171/24. According to that case law, revocation of private use of a company car during the notice period may be permissible without compensation if the employee has been validly released from duties.
Significance of the remittal
Open assessment in the individual case
The Bundesarbeitsgericht was unable to make a final assessment as to whether the requirements for revocation were actually met in the present case. The decisive issue was whether the claimant had been validly released from duties.
The release clause in the employment contract could not support the release from duties. Nevertheless, it remained necessary to examine whether, independently of that clause, the defendant had a specific, overriding interest in releasing the claimant from duties. It was precisely this assessment which, in the BAG’s view, the Landesarbeitsgericht had not carried out without legal error.
If there is no valid basis for the release from duties, the ground for revocation of private use of the company car stipulated in the company car agreement also generally ceases to apply. If, on the other hand, there is a valid release from duties based on overriding employer interests, the contractually provided revocation of the possibility of private use may be permissible without separate compensation.
No final decision on the payment claim
The BAG’s decision therefore does not finally determine whether the claimant is entitled to the claimed compensation for loss of use. The proceedings were remitted to the Landesarbeitsgericht so that the still necessary findings can be made.
For the renewed decision, it will be particularly decisive whether overriding legitimate interests of the defendant precluded the claimant’s employment during the specific period. Only if this is answered in the affirmative may the release from duties have been justified independently of the invalid contractual clause.
Classification for employment contracts and company car arrangements
Limits of standard-form reservations of the right to release employees from duties
The decision makes clear that blanket release clauses in standard-form employment contracts are subject to stringent requirements. According to the BAG, a provision that grants the employer a right to release the employee from duties in the event of any termination without an assessment of the individual case is invalid.
A release from duties may be valid only if the conflicting interests are taken into account. This also applies in the terminated employment relationship and even where the employee has given notice themselves. The mere fact of termination is not sufficient to make the right to work cease to apply.
At the same time, the BAG confirms that release from duties remains possible where the employer has overriding legitimate interests. The decision therefore clearly separates the invalidity of a blanket contractual clause from the possibility of releasing an employee from duties based on the specific circumstances of the individual case.
Withdrawal of company car dependent on valid release from duties
For company car arrangements, the decision shows that a revocation clause linked to release from duties may be permissible. However, the prerequisite is that the release from duties itself is effective.
If the release from duties is not validly justified, the revocation of private company car use based on it may likewise lack a viable basis. If, however, the release from duties is valid due to overriding employer interests, the contractually stipulated revocation of the possibility of private use without compensation for loss of use may be considered.
The decision thus demonstrates the close connection between the right to work, the authority to release an employee from duties and the revocation of company car use.
Employment law advice from MTR Legal
The BAG’s decision of 25 March 2026 concerns key issues of contract drafting, release from duties during the notice period and the revocation of company car arrangements. For companies, corporate officers, investors and high-net-worth private individuals, such arrangements may have considerable economic significance, particularly where remuneration components, variable benefits or private-use advantages are concerned.
MTR Legal Rechtsanwälte advises clients on employment law issues in a corporate and private context. Anyone requiring a legal assessment of release clauses, company car arrangements or employment contract structures can find further information at Legal advice in employment law.
