Norman Grosman of Grosman, Grosman, & Gale LLP maintains that vehicle allowances are typically treated as a form of compensation and not usually as a reimbursement from the employer for the business use of an employee’s vehicle. Many employers argue that their vehicle allowance obligations cease on termination since the employee is no longer using their vehicle for business purposes. In the absence of a written term in the employment contract (e.g. a termination clause that makes it clear that the vehicle allowance is not part of the severance entitlement), this argument tends to be rejected by the Courts since most vehicle allowances are treated as part of an employee′s overall compensation. In other words, vehicle allowance should be included in an employee′s severance package in most cases (e.g. absent a contract to the contrary).
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