Employment Law2026-10-14

Can my employer simply put me on garden leave after dismissal – and take back the company car?

Dismissed, put on garden leave, and the company car has to go back straight away? What a garden-leave clause is actually worth, when you can keep the car, and when you're entitled to compensation.

The dismissal is barely a week old, and already the next message lands: you are “released from work until the end of your notice period” – and would you please return the company car by Friday. It may even say almost exactly that in your employment contract. The question you are now asking yourself: do I simply have to accept this?

In short

No, not automatically. Garden leave needs a legal basis – either a valid contractual provision or an employer interest that outweighs yours on the facts of your particular case. Standard-form employment contracts often contain a blanket garden-leave clause (“upon or after notice of termination is given, from whichever side”). As a rule, such a clause does not survive the fairness review of standard terms under § 307 BGB and is therefore invalid. Whether you have to hand back the company car follows directly from the garden leave itself. If the garden leave was unlawful, you are entitled to compensation for the private use you were deprived of.

How I can help

I check your specific garden-leave clause for validity.
I assess whether, on the facts, there is an overriding employer interest.
I enforce either your continued employment or compensation for the loss of use of the company car.
I coordinate all of this with any parallel unfair dismissal claim, so that no deadline is missed.

When is the employer even allowed to put you on garden leave?

In principle, you have a right to actually be employed – this flows from the employment contract (§ 611a BGB) and from the principle of good faith (§ 242 BGB). You are not merely to be paid; you are also entitled to work. Unilateral garden leave is the exception to this and requires justification. Two routes come into play:

A valid contractual garden-leave clause. Like any standard-form clause in an employment contract, it must survive the fairness review under § 307 Abs. 1 Satz 1 BGB. It must not place you at an unreasonable disadvantage.
An employer interest that, on the facts, outweighs yours, even without a valid clause. This may apply, for example, where you are moving to a direct competitor. It may also apply where you have access to sensitive trade secrets, or where your continued presence poses a concrete threat to workplace harmony. What always matters is a balancing exercise on the specific facts. A blanket assumption that garden leave is simply “customary” after a dismissal is not enough.

If neither applies, you may insist on being employed and do not have to accept the garden leave.

The blanket clause: why it is probably worthless

The clause in question is precisely the one found in a great many standard-form employment contracts. It allows the employer to put you on garden leave “upon or after notice of termination is given – from whichever side”. Pay continues throughout.

A clause like this places you at an unreasonable disadvantage under § 307 Abs. 1 Satz 1 BGB. The reason: it deprives you from the outset of the chance to assert, on the facts of your particular case, a heightened interest in continuing to work. Perhaps you want to keep your skills current, maintain contacts or build up references. In the balancing exercise, your interest in being employed will generally outweigh the employer’s blanket interest in garden leave. That holds for as long as the employer gives no concrete reasons of its own on the facts.

For your situation this means: if your contract contains a similarly blanket wording, your employer cannot simply rely on it. It must then set out independently why, in your particular case, there is an overriding interest in placing you on garden leave. More narrowly drafted clauses, tailored to specific situations, may be unaffected by this. The point is not settled definitively. It turns on the precise wording.

The company car: its fate hangs on the garden leave

Can you keep the company car? That depends decisively on whether the garden leave was valid:

Garden leave valid (because, on the facts, there is an overriding employer interest): in that case a valid and transparent contractual clause may provide that you must return the privately usable company car without compensation. The Federal Labour Court (Bundesarbeitsgericht) has approved this in principle in an earlier decision. That said, even such a clause is subject, on the facts, to a review of its exercise for fairness under § 315 BGB. Where private use is taxed on a flat-rate basis, only a withdrawal effective at the end of the month will generally be equitable. Immediate return mid-month does not meet that standard.
Garden leave invalid (because it rests solely on an impermissible blanket clause and no independent overriding interest has been set out): in that case the withdrawal of the company car also lacks any basis. A company car available for private use forms part of your remuneration (a benefit in kind). If it is taken from you unlawfully, you can claim damages in lieu of performance under §§ 280 Abs. 1, 283 BGB. Unlike wages, the lost use cannot be made good after the event. You then receive compensation for loss of use for the period during which you were wrongly unable to use the car.

In practical terms: do not simply hand the car back without comment. Object to the garden leave in writing if it lacks a proper basis. Also have the condition and mileage recorded at handover. That secures any later claims.

Earnings from a new job during garden leave

If you take up a new post during your garden leave, or earn money elsewhere, that income is set off against your remuneration under § 615 Satz 2 BGB. The same applies to earnings you maliciously fail to obtain – for instance, where you turn down a reasonable offer without good reason. Thinking of starting somewhere else while on garden leave? Clarify beforehand how that affects your ongoing pay claims. There is no blanket answer. It depends on the precise terms of your contract and the nature of the garden leave.

A typical case from practice

A field sales employee receives ordinary notice of dismissal from her employer. That same day comes the message: garden leave until the end of the notice period, company car to be returned within three days. Her employment contract contains the familiar blanket clause “upon or after notice of termination is given, from whichever side”. She hands the car back at first. Because the whole thing strikes her as not quite right, she then gets in touch with me. I review the case: the clause is unlikely to survive a fairness review under § 307 BGB. On top of that, the employer has set out no concrete interest of its own in placing her on garden leave. The result: she is entitled to compensation for loss of use of the company car for the remainder of the notice period. In addition, I continue to review the dismissal itself.

Common mistakes

Handing the company car back without comment and without objecting in writing, even though the garden-leave clause is open to challenge.
Becoming so focused on the garden leave and the company car that the three-week deadline for an unfair dismissal claim quietly slips by in parallel.
Failing to document the condition of the vehicle and the mileage on return.
Rushing to start a new job without bearing in mind that the earnings are set off against the garden-leave pay.
Assuming a clause is automatically valid simply because “every employer does it this way”.

Frequently asked questions

Do I have to object to the garden leave expressly?

Yes – if you actually want to be employed, you should object to the garden leave promptly and in writing. Without an objection you run the risk that your conduct will be treated as tacit consent.

Do I continue to receive my full salary during the garden leave?

With garden leave – whether valid or invalid – your remuneration in principle continues for as long as the employment relationship exists. If you earn elsewhere in the meantime, that income is set off under § 615 Satz 2 BGB.

Do I have to return the company car immediately if my employer demands it?

Not necessarily immediately, and not without review. If the garden leave is invalid, the demand to return the car also lacks any basis. If it is valid, it turns on the precise return clause. Where private use is taxed on a flat-rate basis, only a return effective at the end of the month is often appropriate.

Does this also apply if I resigned myself?

Yes – the issue typically concerns clauses that expressly cover both directions, dismissal by the employer as well as resignation by the employee. It is precisely the blanket “from whichever side” that tells against such a clause being valid.

What if my contract contains a different, narrower garden-leave clause?

Then I review the specific wording individually. Not every garden-leave provision is automatically invalid. What matters is whether it deprives you of the chance to bring forward a heightened interest in continued employment on the facts of your particular case.

Your next step

While you are busy dealing with garden leave and the company car, another clock is ticking in the background. It concerns the deadline for challenging the dismissal itself. Do not lose sight of that deadline while you sort out the company car. Find out now about the three-week deadline for an unfair dismissal claim, so that neither deadline slips through your fingers. I would be glad to review your garden-leave clause, the company car question and the dismissal itself together in an initial consultation in the field of employment law.

This article provides general information and is no substitute for legal advice in an individual case. Last updated: 2026-10-14.

Christian Czirnich, Rechtsanwalt (attorney at law), Kirchseeon near Munich

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