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Breach of contract

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What is a breach of contract?

A breach of contract happens when either you or your Employer breaks one of the terms of the employment contract.  For example, if your Employer doesn’t pay your wages, or you share your Employer’s trade secrets with third parties, this could constitute a breach of contract.  There is no qualifying period of continuous employment for you to make a breach of contract claim. This means that you can sue at any time during your employment but within three months less one day of the breach.

The Employment Contract

Your employment contract is a legally binding document in which you and your Employer agree on the work that you are going to do, how you will do it and when. Your Employer agrees to pay you an amount of money in exchange for the agreed work. You have a number of rights given to you by statute, but the basic relationship between you and your Employer is covered by the terms and conditions of the employment contract. Your contract can be made up of any or all of the following terms;

  • express terms
  • implied terms
  • imposed terms
  • incorporated terms

You and your Employer are both parties to the employment contract. These terms can be changed if you both agree, and there is some form of payment for the change. Where a change is agreed, your Employer must give you a revised statement of your employment particulars within a month after any change under section 4 of the Employment Rights Act 1996 (ERA 1996).

Making a claim in the Employment Tribunal

Breach of contract claims in the Employment Tribunal are enabled under section 3 of the Employment Tribunals Act 1996 (ETA 1996) and the Employment Tribunals Extension of Jurisdiction (England and Wales) Order 1994 (the 1994 Order), but only after you have left the job. The time-limit for you to take your case to the Employment Tribunal is 3 months less one day from the effective date of termination.  If you are still working for your Employer, you can make an unauthorised deduction of wages claim in the Employment Tribunal or a breach of contract claim in the County or High Court.

Your Employer does not have an independent right to bring a breach of contract claim against you in the Employment Tribunal. However, if you bring a breach of contract claim against your Employer in the Employment Tribunal, then under Article 4 of the 1994 Order and Rule 23 of The Employment Tribunals Rules of Procedure (the Rules), your Employer can in turn bring a claim against you in the Employment Tribunal. This is called a counter-claim. Your Employer can bring an independent claim for breach of contract against you in the County or High court.

Amount of compensation

The maximum amount that the Employment Tribunal can award you for a breach of contract claim is £25,000 gross. This has been the compensation limit since 1994. It is an aggregate upper limit, so even if you make several claims under the same employment contract, you are still limited to the £25,000 cap.

If your claim is for more than £25,000, you should use the High Court otherwise you will lose any money in excess of the £25,000. You can’t split your case into two parts and do half in the Employment Tribunal and the other half in the High Court. You can also not start your claim in the Employment Tribunal and reserve your right to take your case to the High Court. It’s one or the other.

In Fraser v HLMAD Limited [2006] the Court of Appeal said that the excess over £25,000 can’t be granted in the civil courts. This is because once the Employment Tribunal makes a ruling, the case is over. The smart thing to do is that if you discover during Employment Tribunal proceedings that your claim is likely to exceed £25,000 you should abandon the Employment Tribunal case and proceed to the High Court.

Types of claim

Section 3(2) ETA 1996 says that your claim must be one of the following types;

  • a claim for damages for breach of an employment contract, or other contract connected with employment;
  • a claim for a sum due under such a contract.
  • a claim for recovery of a sum in pursuance of any enactment relating to the terms of performance of such a contract

Repudiatory breach

A repudiatory breach of contract is a breach by your Employer which allows you to choose either to end the employment contract or to affirm the breach by continuing to work under the breached conditions. An employment contract may also be repudiated before you even start the job, for example where your prospective Employer changes the agreed terms and conditions before your start date. In all cases you can claim damages. If your Employer commits a breach of contract which is so bad that it causes you to resign, it is a constructive unfair dismissal. If your Employer terminates your employment in breach of contract, it would amount to a wrongful dismissal.

Failure to provide work

In Besong v Connex Bus (UK) Ltd [2004], the Employment Appeal Tribunal said that if an Employee brings a claim for loss of pay due to the Employer’s failure to provide work, the appropriate claim is for breach of contract rather than unlawful deductions from wages. In that case Mr. Besong was paid hourly and was only entitled to wages for the days on which he worked. His claim was not that he had not been paid for work he did, but that Connex Bus did not make work available to him and that this amounted to a breach of his contract.

Payment of money due

Payment of any money that is due to you under your contract; or payment of an amount of money relating to the terms and conditions or the performance of your contract such as;

  • non-payment of wages (alternatively make a claim for unauthorised deduction of wages)
  • non-payment of bonuses and incentive schemes
  • non-payment of holiday pay (alternatively make a claim for unauthorised deduction of wages)
  • non-payment of contractual sick pay (alternatively make a claim for unauthorised deduction of wages)
  • not being paid during your notice period
  • not receiving payment in lieu of notice
  • equal pay claims

Settlement Agreements

The Employment Tribunal can deal with the breach of a settlement agreement which is connected to your employment. In such a case it is a “contract connected with employment”, and therefore falls under the jurisdiction of the Employment Tribunal. In Rock-It Cargo Ltd. v Green [1997], Mrs. Green had a settlement agreement under which her employment would terminate on a specified date and she would receive a sum of money. Rock-It Cargo said that Mrs. Green had breached a confidentiality clause after her employment terminated, and refused to pay her the agreed sum. Mrs. Green sued them for breach of contract in the Employment Tribunal who agreed with her because the settlement agreement was an agreement about how Mrs. Green’s employment would end.

If the settlement agreement was entered into after the termination of your employment, then it cannot be brought before the Employment Tribunal and must be heard in the county or high court. In Miller Bros and F P Butler Ltd. v Johnston [2002]  the Employment Appeal Tribunal (Employment Appeal Tribunal) said that the Employment Tribunal had no jurisdiction to hear Mr. Johnston’s breach of settlement agreement claim because it was made after his employment had ended.

Excluded Claims

Certain types of claims are excluded from the Employment Tribunal and must instead be brought in the county or high court including;

  • terms and conditions concerning staff accommodation
  • terms and conditions concerning intellectual property (including copyright, rights in performances, moral rights, design rights, registered designs, patents and trademarks).
  • terms and conditions imposing an obligation of confidence
  • covenants in restraint of trade
  • damages for personal injury – section 3(3) ETA 1996, 3 1994 Order

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Citizens Advice – Employment Tribunals; Claims for breach of contract

Updated: 21/02/2020



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