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.

Suggestions For Drafting Vehicle Policies

Here are a few suggestions for drafting vehicle policies that meet your needs. For more general information on drafting policies, please read communicating work rules:

• 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 something like: "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..."

• Have a flexible policy in place. 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."
• Prohibit illegal use. Be sure to prohibit vehicle use by employees who are under the influence of alcohol or illegal drugs.
• Require notice of legal drug use. 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.
• Enforce your policies. Be prepared to enforce your vehicle policies by disciplining your workers.