Law guide: Workplace

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Breach of contract

Breach of contract

Contents

Both employers and employees can be in breach of a contract of employment - so it's important to know what this is and what you should do if either you or your employer breaches your contract.

What is a breach of contract?

A contract of employment is a legally binding agreement between you and your employer. A breach of contract happens when either you or your employer breaks one of the terms (for example, if your employer doesn't pay your wages, or you don't work the agreed hours).

Not all the terms of a contract are written down. A breach may be of a verbally agreed term, a written term, or an 'implied' term of a contract.

Your pay has extra protection and in some situations your employer may be prevented from taking money out of your pay even if this wouldn't be breaching the contract.

Breach of contract by your employer

If you think there's been a breach of contract, check the terms of your contract to make sure. If there has, you should try to sort out the problem directly with your employer first of all.

Mediation

Before taking legal action, you could try other ways of resolving the dispute if your employer agrees. For example, you might try mediation through the Advisory, Conciliation and Arbitration Service (Acas), or, in Northern Ireland, the Labour Relations.

Early Conciliation

Acas offer a scheme called 'Early Conciliation' (EC). This is a free service designed to resolve workplace disputes.

This scheme is available in England, Wales and Scotland.

For more details see the section 'Before making a claim' under Employment Tribunals. You can also see the Acas website for more information.

Legal action

If you can't sort the problem out with your employer, you can decide to take legal action. Think carefully before taking any legal action against your employer. Ask yourself what you want to achieve and how much it will cost.

Remember that you'll only get compensation (called 'damages') if you can prove real financial loss (for example, if your employer doesn't pay your wages) - there's no compensation for distress or hurt feelings. Because damages will only reflect your actual loss, they're based on net pay (that is, after tax), not gross pay (before tax). Also remember that taking legal action might prompt your employer to take out a counter claim against you if they feel they have one.

If you are a member of a trade union, it would be a good idea to speak with them before taking any legal action, as some unions provide a legal advice service for their members. Otherwise, you could talk to a solicitor, or discuss your case with a Citizens Advice Bureau adviser.

If you do decide to take legal action, it can either be through an Employment Tribunal (in England, Wales or Scotland) or an Industrial Tribunal (in Northern Ireland) or through a civil court.

Employment Tribunals/Industrial Tribunals

To make a breach of contract claim through an Employment Tribunal (or Industrial Tribunal in Northern Ireland), your employment must have ended. There is a cap of £25,000 on what a tribunal can award and restrictions on the types of claim that can be made (for example, you cannot make a personal injury claim through the tribunal). In addition, you must make your claim within three months of the breach happening.

Note that Acas must offer their Early Conciliation service (see above) before you can lodge a claim at an Employment Tribunal.

Civil courts

To make a claim while you are still employed, you will normally go through the small claims track of the county court or other civil court, or (in Scotland) the sheriff court or the Court of Session. There is a longer time limit than for an Employment Tribunal (Industrial Tribunal in Northern Ireland), but there will normally be court fees to be paid.

Breach of contract by an employee

If you breach your contract, your employer should try to settle the matter with you informally, but they can sue you for damages in the same way you can sue them.

Damages are only awarded for financial loss (for example, if you don't give enough notice, damages might be for the extra cost of hiring temporary staff to do your work, or for lost revenue. You would still have the right to wages you earned before you left, plus pay for untaken statutory holiday).

The most common breaches of contract by an employee are when you quit without giving (or working) proper notice, or when you go to work for a competitor when your contract doesn't allow it.

Frequently asked questions about breaches of contract

Most questions about breaches of contract can be answered by checking the terms of your contract.

Is it breach of contract to dock your pay for being persistently late?

You won't necessarily get paid for time that you're not at work, but your employer should be careful about imposing extra penalties on top of this. If there's nothing in your contract that allows your employer to do so, they must pay you what you've earned and then decide whether to sue for any money they've lost because of your lateness.

Your employer always pays you late – is this breach of contract?

Not paying at the agreed time will often be a breach of contract. If you can prove you suffered a financial loss (for example, having to pay overdraft fees), you can claim this back as damages. Talk to your employer first. If it keeps happening, you could try to get a court injunction to stop them repeating this breach.

What is wrongful dismissal?

This is a breach of contract in the way you were dismissed (for example, without being given proper notice or without following the procedures in your contract). You can take action in the same way as for any breach of contract.

Is it breach of contract to withdraw a job offer, or to turn it down, after it has been accepted?

Yes. The contract is made as soon as you accept the offer, and both sides are bound by the terms until the contract is terminated.

Can the terms of your contract be changed?

Some contracts allow the employer to make changes. If yours doesn't, you and your employer must agree any change. Making changes without agreement is a breach of contract.