How to correctly hand over a car to someone employed by your company?

This article covers Polish regulations and market practice. The principles apply elsewhere, but check the rules in your country.

Business owners who employ various people within their organisation often face the dilemma of how to correctly entrust property, such as a car, to an employee or contractor so that it is safe and compliant with the law. In this article you will find the answer to that question.

Legislation governing the entrustment of property

First, a distinction must be drawn between the categories of staff to whom the company intends to entrust its property.

As is well known, an organisation may include both people employed under an employment contract and those engaged under a civil-law contract (in particular a contract for the provision of services, which is most widely used in B2B arrangements). These relationships are governed by different pieces of legislation:

1. for people who perform their duties under an employment contract – we apply the provisions of the Polish Labour Code together with its implementing regulations;
2. for people who perform their duties under a civil-law contract (e.g. a contract for the provision of services) – we apply the provisions of the Polish Civil Code.

This is of key importance for what follows, because the two pieces of legislation contain different rules on the transfer of property.

Entrusting property to a person employed under an employment contract

Where an employer intends to hand over a company car to a person employed under an employment contract, it should take into account the provisions of labour law concerning the employee's liability for entrusted property.

Under Article 124 § 1 of the Labour Code, an employee who has been entrusted, with an obligation to return or account for them:

1. money, securities or valuables,
2. tools and instruments or similar items, as well as personal protective equipment and work clothing and footwear,
3. is liable in full for any damage to that property.

Where several employees are to accept joint material liability for property handed over by the employer, Article 125 § 1 of the Labour Code applies. Under this provision, employees may accept joint material liability for property entrusted to them jointly with an obligation to account for it. The basis for joint entrustment of property is a joint material liability agreement, concluded by the employees with the employer in writing on pain of nullity.

Implementing regulations clarifying the statutory rules have also been issued with regard to employees' joint material liability. These are:

1. the Regulation of the Council of Ministers of 10 October 1975 on the conditions of employees' material liability for damage to entrusted property;
2. the Regulation of the Council of Ministers of 4 October 1974 on employees' joint material liability for entrusted property.

These implementing provisions apply only where at least 2 employees jointly accept liability for entrusted property. They therefore do not apply when property is entrusted to a single person.

Another clear difference should also be stressed here: with regard to employees' joint liability for entrusted property, the legislator expressly states that a joint material liability agreement must be concluded – in writing on pain of nullity. So if the employer fails to observe this form, the obligation is entirely void, because that is precisely the effect the Labour Code provides for.

None of the provisions on an employee's individual liability for entrusted property contains a similar stipulation. In Article 124 of the Labour Code you will look in vain for a sentence saying that the employer may entrust property to an individual employee only after concluding a material liability agreement, let alone on pain of nullity. Hence both legal literature and case law accept that property may in fact be handed over to an employee in any manner – as long as it can be shown that the employee actually received the property and was obliged to take care of it.

A few court rulings are worth quoting in confirmation:

The conclusion of a material liability agreement is in no case a precondition for liability for entrusted property. Concluding a material liability agreement has evidentiary significance only and does not constitute a precondition for finding that the property was correctly entrusted and that liability for it exists.
(judgment of the Court of Appeal in Katowice of 2 February 2017, case no. III APa 70/16)

An employee's consent to accept liability for entrusted property may result either from the conclusion of an employment contract for a position with which material liability for entrusted property is associated, or from the acceptance of a specific item of the employer's property for use and safekeeping (Celeda Ryszard, Florek Ludwik, Gonera Katarzyna, Goździewicz Grzegorz, Hintz Anna, Kijowski Andrzej, Pisarczyk Łukasz, Skoczyński Jacek, Wagner Barbara, Zieliński Tadeusz, Commentary on Article 124 of the Labour Code). Since the manner of entrusting property has not been specified by law, it may therefore take place by handing it over directly (giving possession) or by authorising the employee to take possession of it from third parties. The only requirement for property to be correctly entrusted is that its type and/or value is known and that the employee is able to take care of it. What matters is not so much the formal act of "entrusting" specific property as the actual handover of the property to the employee and the employee taking custody of it (see: judgment of the Supreme Court of 26 March 2009, II PK 241/08).
(judgment of the Court of Appeal in Szczecin of 31 October 2018, case no. III APa 7/18)

In view of the above, an employer who does not conclude individual material liability agreements for entrusted property does not in any way breach labour law – it is enough for it to have evidence that the employee received a given asset and was obliged to take care of it. The evidence can really be anything: from a paper declaration by the employee, through the content of the contract concluded, to the testimony of witnesses who work at the same company.

Of course, every employer has the right to introduce additional internal procedures setting out the rules for entrusting property to employees, e.g. in the form of company fleet management procedures. Such procedures may introduce their own forms of confirmation that a given asset has reached a specific person, e.g. by requiring a written declaration, completion of an electronic form, or ticking the appropriate consent in an IT system. It all depends on the employer's organisational culture. These are not, however, universal requirements rigidly imposed by labour law.

Entrusting property to a person engaged under a civil-law contract

The situation is somewhat different for people engaged under a civil-law contract, in particular a contract for the provision of services (sometimes also called a cooperation agreement or B2B contract). For such contractors, the provisions of the Civil Code, which govern the rules for entering into various obligations, generally apply.

When we look at the Civil Code, we will easily notice that among the provisions on contracts for the provision of services there is none that directly addresses the entrustment of property to the service provider with the client's consent (although there is no shortage of provisions concerning things and money, e.g. Article 741 of the Civil Code states that The mandatary may not use the mandator's things and money in their own interest. On sums of money retained beyond the needs arising from the performance of the mandate, they must pay the mandator statutory interest).

Does this mean that handing over property to a person engaged under a civil-law contract is prohibited by law…?

Not at all. In this situation the general rules on freedom of contract simply apply, under which the parties to a contract may arrange their legal relationship as they see fit, provided that its content or purpose does not contradict the nature of the relationship, the law or the principles of social coexistence. So if the entity engaging a contractor wants to hand over specific items to them for the purpose of providing the services (e.g. the tools needed to perform them), it may certainly do so within the contract being concluded.

At this point a perfectly reasonable question arises about the form of such a contract and any confirmation that specific property has been handed over to the contractor.

The issue of legal forms under civil law is itself fairly complicated: not only are there specific types of form (e.g. written, documentary or electronic), but they may be required by law or by the will of the parties, and, as if that were not complicated enough, a breach of form is sometimes subject to nullity… or not.

Without going into detailed considerations that might interest only second-year law students, it should be stated that a contract for the provision of services may, as a rule, be concluded in any form, including orally. There is no provision imposing a specific form on this particular contract – unlike, for example, a copyright transfer agreement, which requires written form, since without it the transfer of rights is void.

In practice, however, the parties most often choose to conclude a contract for the provision of services in one of three standard forms:

1. in written form – a traditional paper document bearing the parties' handwritten signatures;
2. in electronic form – a digital file bearing the parties' qualified electronic signatures;
3. in documentary form – a digital file (e.g. a PDF) or another digital medium (e.g. an e-mail, an instant message) that does not have the characteristics of either of the forms listed above.

This is hardly surprising, since in the event of a dispute it is easier to reach for a signed document than to laboriously reconstruct what the parties actually agreed orally.

Given the general freedom to shape the terms of cooperation, the parties may provide in the contract from the outset that the service provider will receive specified property from the client (e.g. a car or a computer). In that case, the handover of the item, its return and liability for its destruction or loss should be included in the main body of the contract.

If the parties did not provide for the possibility of handing over property when signing the contract, all is not lost – they may either amend the existing contract or conclude a new one relating to the handover of the property. Or even agree orally to hand over a specific item for use and confirm this with a declaration by the person taking it for use, e.g. in written or documentary form, as needed.

If the parties forget all these formalities and the service provider nevertheless receives some property from the entity engaging them to provide services, the act of handing over the item will not itself be void in law – the parties will simply make life harder for themselves in the event of a dispute, lacking the appropriate evidence to support their claims regarding the entrustment of that property.

Must a car always be handed over to a worker on the basis of a written handover report?

Handing over a car undoubtedly constitutes a form of entrusting property to a worker, regardless of the basis of their engagement. As explained above, the law does not impose many rigid rules on handing over a specific asset for use by an employee or contractor, and in particular does not impose an obligation to draw up written handover reports.

Signing paper handover reports is an established practice that developed, among other things, for evidentiary purposes: when the employer or client has such a document, it is easier to show that a specific person received a vehicle from it for use on a specific day and for a specific purpose. Sometimes the obligation to draw up handover reports is introduced into internal fleet management procedures, but this is the sovereign decision of the entity that establishes and implements such procedures, not a legally mandated obligation.