Veitch Penny LLP - Exeter | Crediton, Devon

Case

Nichols v Greenwich London Borough Council

Issues

(1) Employment - local government
(2) Section 112 Local Government Act 1972
(3) Section 7 of the Superannuation Act 1972 transfer of undertaking (protection of employment) regulations 1981
(4) Limits - financial caps

Facts

This was an appeal by the Applicant who worked as a cleaner with the Inner London Education Authority in 1982 and then transferred to the Greenwich London Borough Council following a transfer under the Transfer of Undertakings (Protection of Employment) Regulations 1981.

Both the contracts of employment provided that on retirement she would receive a gratuity of 2 weeks pay for each complete year of service.

When she came to retire the Council calculated her gratuity under the regulations made under the Superannuation Act 1972. This gave her a figure of £1,171.94, rather than £4,075.58.

The Applicant therefore claimed a shortfall of £2,903.64 as damages for breach of contract but a claim was rejected as the Tribunal decided the relevant contractual term had become unenforceable, it being unlawful for the Council to agree or make a payment in excess of the limits prescribed by regulations.

It was common ground that the Council, as the local authority, could lawfully do only that which a statute gave it power to do and this applied to entering contracts to make payments and also to making payments themselves.

Decision

It was held that notwithstanding the two weeks for each year was a term of her initial contract and that Section 112 of the Local Government Act 1972 gave the Council the power to agree to such a term, it was unenforceable. Section 7 of the Superannuation Act 1972 gave the Secretary of State complete control of matters falling within its ambit, including gratuities such as that granted to the Applicant. As the Secretary of State had chosen to provide no grant of a gratuity should exceed that prescribed in the regulations, the Council could not lawfully agree to the Applicant's gratuity nor pay it to her as it exceeded the amount that would be allowable. Her position would have been the same even if the agreement had been reached, as it was with the ILEA, before the 1987 regulations came into effect.

Comments

The case shows quite clearly that those involved in local authorities who are in the position of having to make such gratuities to former employees need to consult closely with the appropriate legislation prevailing at the time to ensure that payments are made strictly in accordance with the amounts prescribed within the limits available.