MilesBuzz! - German Court Ruling - Employers own miles

Employers not staff own frequent flier points
12 Apr 2006
The FT reports a court in Germany has ruled employees may use air miles earned while travelling on business for personal use only if their employer agrees.
The German Federal Labour Court in Erfurt found against a sales manager who wanted, against his employer’s wishes, to redeem €9,700-worth (£6,708) of Lufthansa frequent flyer points on personal travel. The judge ruled air miles earned on business trips belonged to the company that paid for the trip and could be used privately only with its permission.

Employment law specialist Hanno Timmer of Berlin firm Hogan & Hartson told the FT the case could change the way companies treated air miles, with many recognising ‘the potential to lower costs’ by forcing staff to use them for business travel.

According to Lufthansa, its passengers currently hold Miles & More frequent flyer points, worth nearly €600m (£415m).

Employers not staff own frequent flier points
12 Apr 2006
The FT reports a court in Germany has ruled employees may use air miles earned while travelling on business for personal use only if their employer agrees.
The German Federal Labour Court in Erfurt found against a sales manager who wanted, against his employer’s wishes, to redeem €9,700-worth (£6,708) of Lufthansa frequent flyer points on personal travel. The judge ruled air miles earned on business trips belonged to the company that paid for the trip and could be used privately only with its permission.

Employment law specialist Hanno Timmer of Berlin firm Hogan & Hartson told the FT the case could change the way companies treated air miles, with many recognising ‘the potential to lower costs’ by forcing staff to use them for business travel.

According to Lufthansa, its passengers currently hold Miles & More frequent flyer points, worth nearly €600m (£415m).


I think this judgement is hillarious....

A few years ago the federal TAX court decided that miles earned through business travel are PRIVATE and owned by the employee as BENEFITS. So LH decided to pay the persona lincome TAXES on the german M&M accounts assuming they have a monetary value for the EMPLOYEE of €2000.

So now TWO FEDERAL courts have issued completely opposing judgements ??????

I don't know about German FF programs, but in the U.S., I think most FF programs' terms and conditions specify that the airline owns the miles.

Can you say independent contractor, anyone? :D

Company: we keep your miles.

Spiff: Nein danke!

I think this judgement is hillarious....

A few years ago the federal TAX court decided that miles earned through business travel are PRIVATE and owned by the employee as BENEFITS. So LH decided to pay the persona lincome TAXES on the german M&M accounts assuming they have a monetary value for the EMPLOYEE of €2000.

So now TWO FEDERAL courts have issued completely opposing judgements ??????

But this ruling was by a German court, not a U.S. Federal Court. The U.S. Federal Tax Court's holding still stands here.

Hilarious!

What if you earn elite status on company miles? Do they own that too? So if I get an upgrade on a personal flight, I then have to pay my company for the upgrade since they own it after all! :-)

...and you earn status, partly through personal travel, so you now get a 100 percent (or whatever) mileage bonus on a business trip. Who owns the bonus miles? The situation rapidly becomes impossible to administer, unless one takes the minimalist approach that a business owns employees' base miles earned through business travel, employees own everything else. That, in turn, requires the company to track mileage flown on business travel, since available miles in an FF account includes other miles too.

When I was CEO of a small company we decided that, whatever anyone thinks of the ethics of the situation or any court rules on its legalities, the hassle of keeping everything straight was enough reason by itself to leave employees' miles alone.

There is quite a discussion on the LH Forum:

Link (http://flyertalk.com/forum/showthread.php?t=472496)

David

But this ruling was by a German court, not a U.S. Federal Court. The U.S. Federal Tax Court's holding still stands here.

So far as I know, there is no "U.S. Federal Tax Court" holding that "miles earned through business travel are PRIVATE and owned by the employee as BENEFITS". You may be thinking of either (a) the IRS determination that if the employee gets the use of the miles and if that employee actually uses the miles (as opposed to selling or bartering them), then the employee need not treat those miles as income for tax purposes, or (b) the law passed by Congress in 2001 that allows Federal employees to keep miles they earn on official travel and use them for personal (as opposed to official) purposes.

To the extent there is a rule in the US that applies to private (as contrasted to government) employees, it is that there is no rule; rather, it is up to each employer to determine (unilaterally or in negotiation with the employee) who gets to use the miles earned from employer-funded travel.

There have been a number of threads on this in the past ("search" should bring up a bunch), but the prevailing practice (not true for all companies; I seem to recall Wal-Mart being mentioned as an exception) seems to be that the employer lets the employee keep the miles. The reasons are varied; some employers simply don't care, others are concerned about employee morale or resistance (see Spiff's post on this thread), others (see Efrem's post on this thread) find the hassle of separating them out to be inordinately burdensome,* and others find the concept to be morally messy (if you say the person who pays for the flight owns the miles and that's why they belong to the employer, what happens when the company passes the cost directly along to its client as a reimbursable expense? Does the client now "own" the miles since he is the one who paid for the ticket?).

As mentioned, though, some US companies still take the position that miles earned on employer-paid travel inhere to the company.

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*The "accounting" nightmare mentioned by Efrem is very real. Prior to the Federal law, Federal employees were expected to keep track of (administratively segregate) miles earned on official travel and not redeem them except on official travel. The government regulations said that it was the employee's obligation to do so, and if the employee could not or would not do so, all miles in the employee's "commingled" Frequent Flyer account were presumed to belong to the government. Questions would arise about "ownership" of bonus miles earned because of status that was based on combined official and personal travel (e.g., United's 100% bonus for Premier Executives, or the older "level bonuses" where you got 10,000 bonus miles when you earned {say} 35,000 miles in the year), etc.

I think the existence of frequent flyer programs have already saved companies a lot of money. Everyone is eager to cut costs and thus company travel policies have changed and are continuing to change more and more towards cheap fares and less business class travel. They can enforce that to stay competitive and employees are more likely to accept those rules, since they still have "other" measures to upgrade. In other words, the airlines already "suffer" from the existence of miles if it comes to "paid" business travel.

Such a court ruling opens the door for the next round of cost cutting, which - if enforced on a large scale - will eventually make airlines getting even less "paid" business travel.

What is still missing is any feedback from the airlines on this issue. Even LH is quiet so far. They are the bank that makes the rules. So, can't they hire a smart lawyer to fix this in a mutual benefit for the airlines and the travelers - assuming that we all want to keep control over "our" miles. I think the required Saturday night stay was actually a very effective measure to make miles a lot less useful for business travel. LH's statement that they do not care about the case (before the ruling was out) is ignoring the fact that it will eventually hit their revenue.

I think that this is not something that will really catch on. Employers will soon realise that policing, accounting for and controlling these miles, when airlines are likely to refuse to cooperate both on administrative and privacy grounds, will not be worth the effort. Also, the massive demotivational factor that this behaviour would introduce might well be a lot higher than any potential cost savings offset, given that miles accumulate so slowly relative to the initial spend.

The privacy issue is certainly real - in the UK, in particular, any airline that divulges any details of a person's airmiles account might be in breach of privacy law, and such divulgence would be necessary for employers to be able to take advantage.

Nonetheless, the mere thought of it is pretty outrageous. :mad: :mad: :mad: :mad: :mad:

An organisation, which will remain nameless, I used to work for in the UK took a stingent view. It decided that all earned miles belonged to the organisation if it paid for the travel.
Of course, of there were issues seperating business and personal miles...

A rather severe compromise was worked out: You had to turn in boarding cards with your expenses. If there was a FF number on the card there was all sorts of difficulties in getting the expenses approved... In the end, everybody gave up collecting miles on business travel!

At the time it didn't affect me as I was rather junior and only allowed to design the databases and make the tea. :D

Jason

An organisation, which will remain nameless, I used to work for in the UK took a stingent view. It decided that all earned miles belonged to the organisation if it paid for the travel.
Of course, of there were issues seperating business and personal miles...

A rather severe compromise was worked out: You had to turn in boarding cards with your expenses. If there was a FF number on the card there was all sorts of difficulties in getting the expenses approved... In the end, everybody gave up collecting miles on business travel!

At the time it didn't affect me as I was rather junior and only allowed to design the databases and make the tea. :D

Jason

This severe "compromise" is easy to circumvent: Add your FF account to the tix after the boarding pass is printed. I infer that your story is from some years ago, but it's even easier to do these days, with 24-hr advance OLCI.