The question
In 2003, the company set mileage rates at 15p per mile for certain employees who drove their own cars.
In 2007, the firm was bought out and became part of a larger group. The current head of the company resigned and a new manager was recruited to take over.
In January 2008, this manager (who is the operational head of the company) changed the mileage rates for employees using their own cars from 15p to 20p per mile due to increases in fuel costs.
Again in April 2010, he increased the mileage rate to 40p for the first 10,000 miles and 25p thereafter in line with Inland Revenue rates. Both changes were confirmed in writing by the manager to the affected employees.
But on 31 October, they received an email from the same manager stating that, as of 1 January, all mileage rates would revert to 15p per mile as the previous changes were not sanctioned by the group board. The manager made the changes in good faith based on a belief that he had the right to make them in his position as head of the company.
What options do employees have to respond to the situation as the 15p per mile rate does not even cover the cost of fuel for some people, who are obliged under their contract of employment to drive on company business (average annual mileage ranges from 2,000 to 45,000)?
Those affected have voiced their initial disagreement subject to reviewing their options and have also elected a representative to act as a liaison and request a meeting to review/negotiate the situation.
So far, the director concerned has refused to hold a meeting until all employees agree to the 15p per mile rate. He also said that, while the board would review the situation, the rate may still not increase beyond 15p per mile.
What is the legal situation here and what options do the affected employees have? Can they be forced to drive thousands of miles on company business at a cost to themselves?
The legal verdict
Esther Smith, a partner at Thomas Eggar
Employees do not have a legal right to be reimbursed for their fuel expenses unless there is a contractual right by way of an express clause in their employment contract, or possibly if payments have been made consistently in the past, thus creating an implied contractual term through custom and practice.
In this situation, the decision to pay employees 40p per mile for the first 10,000 miles and 25p thereafter was made in April 2010 and was in practice for 18 months before being changed (assuming it is October 2011 being referred to in the question). Therefore, affected employees have a good argument to say that they are entitled to recover mileage at these rates.
In theory, any change to the terms of an employee’s contract must be agreed freely between the parties concerned. If agreement cannot be reached, the company has two options if it wishes to continue with the change.
The first is to impose the change unilaterally and see how staff react. This will amount to a breach of contract by the company. Affected employees who still do not agree to the change could resign as a result of this breach and claim unfair (constructive) dismissal.
Alternatively, they could continue to work under protest (and by protest I mean that they could make clear they do not accept the changes rather than taking part in any formal type of protest) and pursue a claim for breach of contract in the civil courts or an unlawful deduction of wages claim in an Employment Tribunal.
Any employees who continue to work without protest may be deemed to have accepted the change and waived any breach of contract issues. Therefore, it is imperative that any affected personnel who continue to work after the change has taken place confirms, preferably in writing, that they are doing so under protest.
The second option is for the company to terminate their staff’s contracts and issue new ones on the new terms. This is a rather draconian step and could result in claims for unfair dismissal.
In light of the above, it is difficult to see why the manager will not agree to a meeting to discuss and negotiate rates as coming to an agreement would certainly be the simplest option.
In the event that he continues to refuse a meeting and the workforce continue to reject the change, it really is just a case of waiting to see which of the above two options the company decides to take (assuming that it does not simply abandon the change altogether) and then acting accordingly.
Esther Smith is a partner in Thomas Eggar‘s Employment Law Unit.
Martin Brewer, a partner at Mills & Reeve
This is a difficult situation for employees. Where an employer unilaterally varies a term of the contract, workers’ response to such a change can be to:
- work with the new term under protest and bring a claim for breach of contract each time there is, for example, a shortfall in expenses
- resign and claim constructive dismissal if the change is a fundamental breach (seek advice before doing this)
- in theory, refuse to work under the new term (not a viable option in this particular case).
To work under protest, the employees must make it clear that they refuse to accept the new rates. If they don’t do this, continue to put in mileage claims and accept the lower rate, they will quite quickly be deemed to have accepted the new term.
To resign is a very big step and not one to be taken lightly. Of course, employers rely on this dilemma to force through their changes to the terms so each affected employee will have to take a view about their own position.
As a result, the first question is whether the mileage rate, or any particular rate, is contractual. If it is, then the options set out above are open to staff.
Of course, if the mileage rate does not form a term of their employment, or if the employer has retained the contractual right to vary the rate, essentially employees have no contractual complaint and can do very little about the situation. This means that understanding the contractual position is critical.
The final option is to negotiate a rate which both employer and employees can live with, although this may require concerted action by staff members who are required to use their vehicle for work. One option might be to tell their employer that it is uneconomical to use their own vehicles and so, henceforth, they will use public transport and claim the cost on expenses.
Martin Brewer is a partner at Mills & Reeve LLP.
