SLCC News & Events

Gratuities Update

Published 12th January 2012

1. The Court of Appeal case of Nicholls v London Borough of Greenwich [2003] EWCA Civ 416 held that a contract for a retirement gratuity, if lawful and valid at the time it was made, is not made unlawful retrospectively by subsequent restrictions on the amount or validity of a gratuity payment.

2. Applying the argument in Nicholls, “The Regulations in force at the relevant time” will be those which applied at the time the contract was made, not those which may apply at the time of the employee’s retirement. Therefore, a gratuity term in a pre-2012 contract survives the revocation of the 1996 Regulations.

3. The DCLG believes that it will be unlawful for Local Councils to enter into new gratuity contracts after 2011. (That may be correct, but there is a small amount of legal doubt.)

4. The January 2012 issue of The Clerk includes an article about gratuities, written by Debbie Ashton and Nicholas Hancox. They make reference in it to NALC’s Legal Topic Note 79. Since our article was written, NALC have published a new Employment Briefing (E07 – 11, 20 December 2011). Whereas the SLCC’s lawyers did not agree with the views expressed in NALC’s LTN 79, the SLCC’s lawyers do agree with what NALC says in the 2011 Briefing Note: that ‘local councils may still fulfil any extant contractual obligations which relate to the payment of gratuities’.

5. Some doubt has been expressed as to whether or not a contract term, which states “may…pay… a gratuity” (as in clause 19.2 of the 2007 model contract of employment, issued jointly by NALC and SLCC), is an “extant contractual obligation”. It is the view of the SLCC that this term is an “extant contractual obligation” to consider at the time of the clerk’s retirement whether a gratuity should now be paid. If the Clerk has served the Council well (and particularly if there is also a Fund set aside), that contractual obligation should be honoured and the gratuity should be paid.

6. Conclusion: SLCC’s advice to clerks is that existing contracts of employment need not be altered as a result of the repeal of the 1996 Regulations.


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