There are various ways in which an employer may breach the terms of an employee’s contract of employment. Depending upon the circumstances, this may leave the individual with no choice but to commence legal proceedings. When it comes to breach of contract claims against their employer, an employee has a choice whether to do so by bringing a claim in the employment tribunal or the ordinary courts. We consider the pros, cons and requirements of each type of legal claim.

Breach of contract in the employment tribunal

The employment tribunal’s power to deal with breach of contract claims is subject to certain restrictions. It is therefore important to be aware of these when assessing whether bringing a claim in the employment tribunal will be possible and/or desirable.

What are the conditions for bringing a breach of contract case?

There are several conditions to bringing a breach of contract claim in the employment tribunal. Only employees (those working under a contract of employment) and apprentices (those working under a contract of apprenticeship) can bring a claim. Those who are self-employed, workers or agency workers cannot bring a claim.

A claim can only be brought against the claimant’s actual employer. Claims cannot be brought against any associated companies or trade unions.

Employees cannot bring legal claims for personal injury in the employment tribunal; these must be heard in the ordinary courts.

One key issue to consider is that the employee’s employment must have terminated (for whatever reason) in order to bring a claim. Employees who are still employed cannot bring a claim. This will severely limit the usefulness of such claims for many, who do not wish to resign before bringing a claim.

The claimant should also note that a claim must be brought within 3 months of the termination of employment (subject to any extension as a result of the early conciliation requirement).

Claims can only be brought for sums which were outstanding or arise on the termination of employment e.g. for unpaid wages or payment in lieu.

Tribunal case fees

There is no longer a fee to pay for a claim made in the tribunal. Generally, each party to a claim in the tribunal only pays their own legal costs, regardless of who wins.

How much can I be awarded in compensation?

A tribunal can only award compensation of up to a limit of £25,000 for each breach of contract claim.

The Acas Code of Practice on disciplinary and grievance procedures applies in the tribunal (the Code). If it appears to the tribunal that the claim concerns a matter to which the Code applies, and the employer has unreasonably failed to comply, any compensation awarded to an employee may be increased by up to 25%.

Conversely, this rule also works the other way around. The tribunal may also reduce any award it makes to the employee by no more than 25% if it appears to the tribunal that the employee unreasonably failed to comply with any relevant part of the Code.

Can an employer make a counter claim?

When an employee has made a breach of contract claim in the tribunal, it is then possible for an employer to make a counterclaim against the employee in respect of an alleged breach. By doing so, employers can avoid the legal fees and costs risk of commencing proceedings in the civil courts against the employee.

Should I bring my claim in the employment tribunal or ordinary courts?

If losses are likely to exceed £25,000 (i.e. the amount you are looking to recover from your employer is more than this) then the only way to ensure full recovery is by bringing a claim in the ordinary courts. This may very well be the case for higher earners. It is not possible to bring part of the claim in the tribunal and then sue for the balance of any amount over £25,000 in the ordinary courts

How does the claim process in an ordinary court?

Unlike in the employment tribunal, The Code does not apply to claims in the ordinary courts. This means there will be no possibility of any uplift/reduction to any damages awarded to such claims.

The time limit for a breach of contract in the civil courts is generally six years from the date of the breach of contract. This is obviously far longer than for tribunal claims.

Unlike in the tribunal, a fee is payable for bringing a claim in the ordinary court (based on the amount being claimed). Further legal fees are payable at various stages of the court proceedings.

The losing party in a court claim will usually have to pay the winner’s legal costs so there is significant financial risk of a weak claim in the ordinary courts.

Potential breach of contract claims

There are many possible ways in which an employer might breach an employee’s contract which causes them financial loss. Examples include:

• not paying salary due (in part, or full)
• not paying commission earned
• not paying pension contributions
• not paying a bonus in accordance with the rules of the scheme
• dismissing without notice or payment in lieu of notice when there has not been any gross misconduct by the employee
• not paying the correct amount of notice lieu of notice
• withdrawing contractual benefits where there is no right to do so
• varying other terms and conditions without agreement

Deduction from wages in the tribunal claims as an alternative

As explained above, an employee can only sue their employer for breach of contract in the employment tribunal once their employment has terminated. If the employee’s claim concerns unpaid wages, but they are still employed and do not wish to resign then they may instead be able to bring a statutory claim for unlawful deduction from wages in the tribunal.

There is no legal limit on the amount of unpaid wages an employer can be ordered to pay. In addition, a worker can claim for consequential financial loss suffered as a result of the unlawful deduction such as bank charges.

However, claims must be brought within three months of the date of the deduction. The deduction happens on the day on which the worker was paid their wages (or the date the worker expected to be paid). If there has been an on-going series of deductions, a worker has three months from the date of the last of them.

Unfair dismissal claims as an alternative

Provided that an employee has two years’ service, they may be able to rely on a claim for unfair dismissal in the employment tribunal to defeat the £25,000 cap on breach of contract damages.

Where an employer has failed to pay in lieu of notice, an employee may seek to recover this financial loss as part of an unfair dismissal claim. Compensation for such claims is capped at the lesser of 52 weeks’ salary and £86,444.

For further legal rights on how to make a claim against a breach of contract, and which route will best suit your circumstances, do not hesitate to get in touch with our employment law specialists.