Local case law has confirmed on multiple occasions the remunerative nature of the use of the automobile granted by the companies to their employees when used, on a part-time basis, for personal purposes. Notwithstanding this, companies still grant (and in some cases allow in their policies) the use of corporate automobiles for their employees for personal purposes (for example, during holidays and weekends or exceptional circumstances).

The current situation increase the companies exposure to unwanted consequences such as claims based on salary incorrect registration, application of fines against the company, responsibility for car accidents occurred during the employee’s holidays and contingencies raised from the return of the company’s automobile upon termination of the labor relationship, among others.

In that context, when companies analyze alternatives to mitigate their exposure, they can consider different options. Among them, we can mention the partial recognition of the remunerative nature of the automobile provided by the company or the grant of loans to the employees so that they can acquire an automobile. In the first scenario, labor costs would increase immediately while in the second case, taking into account that local labor law prohibits the retention, compensation or deduction of amounts of money from the employees’ remuneration, contingencies may emerge at the time of collecting the employees’ loans payment.

A recent judgment of the Court Room II of the National Labour Court of Appeals (hereinafter “Court of Appeals”) makes us think about relevant aspects to consider at the time of implementing corporative policies on the provision of loans to the employees so that they can afford to acquire an automobile to be used for personal and labor purposes.

Although the case is related to a position that necessary needed the usage of an automobile, considerations may be applicable to the loans’ provisions for managers or officers that do not necessarily need an automobile to comply with their job.

THE FACTS: THE LABOR RELATIONSHIP AND THE CORPORATE LOANS POLICY
The case was between a medical advertising agent (hereinafter “the MAA”), who also helds an official position at the applicable labor union, and his employer, Abbot Laboratories Argentina S.A. (hereinafter “the company”).
According to decision of the Court of Appeals, since the beginning of the labour relationship in 1991, the company (and its predecessor) established as a condition to the MAAs to have their “own mobility” (it means that the employee must have an automobile to be used for labour purposes).

Also, from the beginning of the labour relationship, the MAA was benefited from the loan provision policy of the company for MAAs or travelling salesmen in order to help them in the acquisition of a brand new automobile to be used for personal and labor purposes. In that way, the company would maintain an updated fleet, with new cars.

The loans were granted under a contract establishing that the company would provide an amount of money that the employee should return in a total payment divided in 60 monthly fees (5 years). What really happened, provided that the labor relationships lasted, was that the employees did not return the money from the loans and the company registered those sums as a compensation for the automobile’s depreciation and the usage of the personal automobile for labor purposes. As long as the labor relationships lasted, the company took care of certain car expenses (insurance, taxes, fees, among others), but if the relationship was interrupted, the MAA was supposed to pay all the remaining monthly fees immediately.

On September 2004, the company granted a loan to the MAA equal to the 55% of the value of an automobile Chevrolet Meriva brand new on the terms detailed above.
THE DISPUTE BETWEEN THE PARTIES: THE NOT GRANTING OF THE LOAN IN 2009
After five years since the granting of the last loan, in September 2009 the company refused to grant a new loan to the MAA. As a result, the MAA claimed before court the amount of money in concept of “actual amount of the non granted loan” and “impairment of the unit and other expenses”, stating that the loans were granted every five years.

The company maintained that they were not obligated to grant an automobile or a loan to the employees whether it is for the acquisition or its renewal. Instead, the company explained that, according to its policy, it granted loans to the employees to purchase new cars, after their requests and in the cases where the company considered it convenient.

The company explained that, in order to determine whether it was convenient or not to grant a loan, different circumstances were considered, such as the potential and the productivity of the zone, the results and the performance of the employee and the financial and economic situation of the company, locally and worldwide,

The company explained that, in this particular case, the evaluation of these aspects had determined the inconvenience of granting a loan to the MAA. The refusal to provide the loan would not imply a “union reprisal”, since other employees affiliated or active did receive the company’s loans. Finally, the company stated that the corresponding amounts to the loan monthly fees did not have to be considered part of the employee’s remuneration because the value of the monthly fees was the payment that the company recognises to the employee that used the automobile for business purposes.

THE JUDGEMENT OF THE COURT OF APPEALS
The Court of Appeals clarified that the amounts granted under the company’s loan policy did not correspond to the contract established by section 2240 of the Civil Code, because the parties agreed that there was no obligation in returning the amounts (provided that the labor relationship lasted for 5 years).

Also, the Court of Appeals evaluated the evidence provided, among others: (i) the terms of the loan granted to the MAA in 2004, (ii) the expert accountant’s report, who stated that, since 2004, only a few MAAs employees did not get the loan, and (iii) the testimonies of witnesses, who affirmed that (a) one of the requirements of being an MAA was to have self-mobility, (b) although it was not an express condition, in practice, the loans were renewed after five years or 120,000 km, whatever occurred first, (c) all the MAAs received the loan policy under the same conditions, (d) the MAAs did not pay back the loan; instead, the value of the monthly fees was compensated with the vehicle’s depreciation, (e) if the labor relationship was extinguished, then the MAA had to pay the remaining installments.
The Court of Appeals resolved to partially consider the MAA claim, condemning the company to the payment of sums of money in concept of “actual amount of mutual not granted”, plus interest and costs, and rejected the origin of the concept “impairment of the unit and higher expenses”. In order to do so, the Court of Appeals considered that:
– The loans were granted periodically, every 5 years. In order to exclude the MAA, the conditions of the policy should have been duly implemented and notified to the MAA.

– The company did not prove that the MAA knew the conditions of the company’s loan policy, or that there were objective reasons for the non-granting the loan to the MAA.
– The loss caused to the MAA because of not granting him the loan was evidenced by the lack of compensation on the automobile’s impairment due to the use for work purposes.
– The MAA used the car for personal purposes, so a part of the value of the monthly fees could be considered remunerative. The fact that it could be considered as non-remunerative does not prevent the claim for this issue.
– The grant of the loan is mandatory to the company due to the generalized and periodically granting. It is an obligation of conventional origin at the individual level, and it is included in the terms of the employment contract of the MAA, what makes it enforceable.
– The amount of money that the company must pay to the MAA in concept of “actual amount of mutual not granted” in 2009 must not be considered as a waiver for the company in relation to the compliance with its obligations, since 10 years have passed from the date of the last loan granted until the day of the judgment.

– The MAA did not prove the making of the cliamed expenses, as well as not proving objective and ascertainable rules that could lead to determine the obligation of the payment in concept of “impairment of the unit and higher expenses”.

CONCLUSION
The Court of Appeals has made a decision regarding the MAA’s claims in a non-finalized labor relationship. This mens the Court of Appeals stated whether it corresponds to condemn the company to pay the amounts in concept of “actual amount of mutual not granted” and “impairment of the unit and higher expenses”.
However, considering the terms in which the Court of Appeals described the denial to grant the loan and the loss caused to the MAA, the unfulfillment of the company could have caused:
(i) Constructive dismissal since the employee could consider that essential labor conditions were modified affecting his acquired rights,

(ii) a claim of the partial remunerative nature of the amounts of the monthly fees that were compensated by the company with the depreciation of the car because of its use for labor purposes, and

(iii) Eventually, a claim of the remunerative nature of the difference between the conditions of the loan granted by the company and the market situation, as they could represent a profit opportunity for the MAA.
In addition to the judgment of the Court of Appeals, it is possible to infer that the condemn of payment corresponds to the loan not granted in 2009 but, after 5 years passed, a payment could also correspond for a non granted loan in 2014.

In order to avoid or minimize these labor risks, it is clear the need to: analyze in detail the terms of the corporate loan policies for employees, state clearly the conditions to be included in the loans policies, notify the policies to the employees, implement the granting of the loans, and employ the policies in a consistent way, so the company’s needs and the employees rights remain equal.

* National Labour Court of Appeal, Court Room II, “Bellos, Orlando O. vs/ Abbot Laboratories Argentina S.A.”, 09.10.2014