The Audit Commission, which brought the original test case in the High Court, argued that North Tyneside Council could only make the statutory minimum payment. The council contested the judgment and the case was referred to the Court of Appeal in June, where the verdict was upheld. The court refused the council leave to appeal and councillors have decided not to contest the ruling further because of the costs.
The unlawful payments totalled pounds 1.8m and were paid to 396 workers. The ruling means that the council must now seek ways of retrieving the extra payments from former employees, many of whom are unemployed.
The Audit Commission successfully argued that under the 1972 Local Government Act the council could offer workers only minimum statutory redundancy settlements and had no authority to make any enhanced payments.
Council officials said that the payments, which ranged between pounds 500 and pounds 15,000, were not excessive and were considerably lower than would have been paid in the private sector.
However, the court ruled that as the council had no powers to make enhanced payments, the additional monies could be recovered.
An Audit Commission spokesman said: 'The ruling has clarified the levels of severance payments which councils are legally entitled to make. North Tyneside payments were clearly outside the provision of the legislation.'
Brian Flood, leader of the Labour-controlled council, said last night: 'What the council is being asked to do is absolute nonsense. Enhanced severance schemes are widely accepted practices in both the private and public sectors. North Tyneside has been singled out as a test case.'Reuse content