Wetherill and ors v Birmingham City Council (IDS 836)
Some employees are contractually entitled to a car user allowance, but what are their rights if the employer decides to downgrade it?
In Wetherill and ors v Birmingham City Council (IDS 836), the Court of Appeal said that the local authority had the power to make unilateral changes under the terms of a national scheme, as long as it introduced adequate transitional arrangements.
Basic facts
Birmingham City Council employees were contractually entitled to claim allowances, under its car user scheme, as either essential or casual car users. The amount of the allowances was decided by reference to four bands of engine size, set down in a national agreement.
Prior to 1993, the council incorporated the terms of the national scheme into the terms and conditions of their employees. Up until that date, the council paid the allowance dependent on the size of the car the employee used, but had not, until that point, considered whether the user actually needed a car that size.
In order to encourage employees to use smaller-engined cars, the council therefore decided in April 1993 (having sent a circular to staff in March 1993 alerting them to the proposed changes), to allow essential users to claim allowances only at the lower two bands.
Council employees who felt they had lost out brought claims for breach of contract. The county court agreed with them, saying that the council’s withdrawal of two of the four bands constituted a continuing breach of their contracts.
National agreement
The general conditions attaching to car user status in the national agreement specified that officers who needed to use their cars “for the efficient performance of their duties” were eligible to receive allowances “in accordance with such grading as the local authority may determine, e.g. by reference to the nature of the user, or cubic capacity of car considered appropriate.”
The agreement also stipulated that an employee deemed to be an essential user “shall be permitted to use his private car in carrying out his official duties [and] shall be entitled to receive the lump sum allowance and mileage rates set out” elsewhere.
Court of Appeal decision
The Court of Appeal agreed that, prior to April 1993, the claimants had acquired a contractual right to payment of the car user allowance in accordance with the engine capacity of the car they actually chose to use.
However, the wording of the scheme clearly allowed the council to “decide, from time to time and on proper notice, that the grading which was appropriate to the duties which were to be performed by an officer (or class of officers) should be altered.” By the same token, it was open to a local authority “who had made no determination, on appointment and designation of an officer as an essential user, as to the band or grading into which that officer was to be placed for the purposes of the Scheme to make such a determination at some later time during the employment.”
The Court therefore concluded that the council had a right to vary the scheme unilaterally, but it had to make proper transitional arrangements to protect employees’ existing rights. As it had not done so, it was in breach of contract when it changed the scheme in April 1993.
That did not mean the employees were entitled to compensation, however, because although the circular put out by the council was inadequate, it effectively conveyed the change of practice to essential car users. As any transitional arrangements would not have lasted longer than five years from March 1993, these would have ended before the start of the six year limitation period applicable to the employees’ county court claim.