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Breach of Employment Contract by Employer

By understanding the nature of your employment contract, together with its constituent parts, this will help you to understand the basis and extent of your employer’s contractual obligations towards you. Below we look at the different types of terms that make up an employment contract — both express and implied — and what steps employees can take where there’s been a breach of employment contract by employers.

 

Your employment contract rights

The employment contract is a legally binding agreement between employer and employee, setting out the terms and conditions that govern the working relationship, including the rights and responsibilities of the parties. Under the employment contract both you and your employer will become bound by its terms until it comes to an end. This could be either through resignation or dismissal, or where a contractual variation is agreed.

Typically, an employment contract will be in writing, or at least evidenced by way of a written statement of employment particulars. However, to be legally binding, contractual terms do not need to be contained within any standard format or even written down. The contract can be either verbal, in writing, or a combination of both. That said, the main terms and conditions will typically be set out within a single written document, signed by both parties, so as to provide both you and your employer with a clear record of what has been agreed.

As such, when employees need to determine if there has been any breach of employment contract by employers, the first step is to check the contents of any written contract.

 

What is breach of employment contract?

The employment contract sets out legally enforceable terms and conditions that govern the working relationship between the parties. As such, where either party breaks one of those terms this is known as breach of employment contract for which legal redress can be sought.

However, contractual terms can be both express or implied. This means that in addition to those terms that have been explicitly agreed between employer and employee, either verbally or in writing, other terms will arise by implication in the context of the employment relationship. Express terms typically relate to core contractual matters. These can include things like an employee’s salary, working hours, holiday entitlement and notice periods. In contrast, implied terms are unwritten or unspoken but, for example, are ones which the parties must have intended to include to give business efficacy to the contract.

A term can therefore be implied into the employment contract to either reflect the intention of the parties at the time the contract was entered into or because the contract does not make commercial sense without that term. It could even be where there is clear evidence of previous custom and usage, such as an employee’s entitlement to an annual bonus.

Certain terms of employment can also be implied by operation of law, even where these terms were not necessarily intended by the parties to be included. These are terms that arise automatically as a legal incident from the nature of the employer-employee relationship.

All implied terms, although unwritten and unspoken, are contractually binding — and any employment contract, however comprehensively drafted, will contain certain implied terms.

 

Examples of employer breaches of contract 

Common examples of breach of employment contract by employers in the context of express terms can range from a failure to pay an employee’s stated salary, either on time or at all, to a failure to provide the correct contractual notice period on termination of their employment.

In many cases, however, where the parties have failed to clarify from the outset the basic rights of an employee, either verbally or in writing, certain terms will automatically be implied into the contract by statute as an absolute minimum. As such, where the contract is silent on things like notice periods, but the employer fails, for example, to provide or make payment in lieu for the minimum statutory notice period as set out under the Employment Rights Act 1996, this will be classed as breach of an implied term, ie; a term implied by statute.

Whatever your contract states, your employer must give you at least your statutory minimum employment rights — such as one weeks’ notice if you’ve worked for your employer for between one month and two years — regardless of whether your contract provides for less. Further, if you’ve been granted greater contractual rights than the minimum provided for by statute, you will be entitled to enforce these enhanced rights in the event of any breach.

Terms can also be implied into an employment contract by operation of common law. This is again where the parties did not necessarily intend for the term to be included, but it still arises as a legal incident from the nature of the employment relationship. One of the most common terms implied into all employment contracts is the duty of mutual trust and confidence. This means that both employer and employee are bound not to act, without reasonable and proper cause, in a manner likely to seriously damage or destroy the relationship of mutual trust and confidence between them.

The implied term of mutual trust and confidence is often relied upon by employees in claims for constructive dismissal. This is where an employee has felt forced to resign in consequence of their employer’s conduct, alleging a serious or fundamental breach of trust that has made it impossible for them to continue working for them. This could be, for example, where the employer has been made aware by the employee that they’re being harassed or bullied at work, but the employer has failed to take reasonable steps to prevent this from taking place.

A constructive dismissal claim could also be based on a serious breach of an express term, for example, where an employer significantly changes an employee’s working conditions in the absence of either any express agreement or a suitably drafted flexibility clause within the employment contract permitting them to do so. That said, a breach of the implied duty of trust and confidence will usually still be cited in support, where any significant breach of an express term is also likely to be treated as irreparably damaging the working relationship.

 

What happens if your employer breaches your employment contract?

If an employer breaches the employment contract, how you decide to address this and the best course of action to take will very much depend on the nature and extent of the breach.

You can choose to waive your employer’s breach and affirm the contract as remaining in force. Where you continue to work for your employer without raising any grievance or even delaying too long in taking action, you may be treated as having accepted the breach. As such, doing nothing can sometimes work against you. Alternatively, you can raise the alleged breach with your employer with a view to it being resolved.

In cases of minor breach, for example, where the employer has failed to pay your wages on time, this type of issue can often be resolved quickly and effectively by way of an informal chat with your line manager, or with someone from HR or payroll. Often contractual breaches arise out of a simple mistake or oversight that can be easily rectified.

Where your complaint is not satisfactorily resolved, however, or in the case of more serious breaches, you can instead raise a formal grievance in writing. The employer will then be obliged to investigate the matter, providing you with a written outcome and a right of appeal.

In some cases, even raising a formal grievance will not necessarily resolve the matter. As such, you may then want to consider taking legal action. This may also be the case where you no longer work for your employer and post-termination negotiations have proved futile.

 

What action can you take?

The legal rights and remedies of employees alleging breach of employment contract by employers will primarily depend upon the nature of the breach alleged. However, the type of claim available to you and the manner in which this is pursued will also depend on whether you continue to work for your employer or whether your employment has come to an end.

As a basic premise, where there has been a breach of employment contract, either express or implied, provided that you can prove you’ve suffered a financial loss as a direct consequence of that breach, you may be able to sue your employer for damages. In some cases a claim can be brought before the employment tribunal, in others, before the civil courts.

A claim for breach of employment contract can be lodged with the tribunal, but only if your employment has ended. There’s also a £25,000 limit to the damages that can be awarded in the tribunal for this type of claim, with a three month time limit. If your claim is worth more than the tribunal limit, or you are out of time, you would need to issue proceedings before the courts where there is no damages cap and a much more generous six year time limit.

Common examples of claims based on breach of contract where an employee’s contract has been brought to an end include wrongful dismissal, where an employee has not been provided with the correct statutory or contractual notice period, or constructive dismissal, where an employee has forcibly resigned because of a fundamental breach of contract.

In cases where the employee is still working for their employer, a strict breach of contract claim would normally need to be pursued through the civil courts, rather than before the employment tribunal. However, in many instances, the same claim may also fall to be determined by the tribunal, for example, as a claim for unlawful deduction from wages. This will provide a much easier statutory basis for an existing employee to claim any monies owed, such as non-payment of wages, or non-payment of holiday pay or sick pay.

 

Guidance for employees

If an employer breaches your employment contract, the best course of action to take will not only depend on the nature and extent of the breach, but how this impacts you. In many cases, this will turn on whether or not you are continuing to work for the same employer.

For existing employees, concerns around job security may arise, especially if you’ve not yet acquired any substantive employment protections by reason of continued service, ie; two years for a claim for unfair or constructive dismissal. As such, you may decide to overlook any minor breach rather than rock the employment boat at this stage. However, where a breach has resulted in significant financial losses, you may be forced to take action. There may also be others significant issues involved, such as unlawful and unfair treatment at work.

By seeking expert legal advice to explore all your options, both practically and legally, this can help you to make an informed decision as to how best to deal with the alleged breach. This doesn’t necessarily mean that you will need to issue tribunal or court proceedings, where very often, breaches of contract can be effectively and easily resolved without recourse to litigation.

Your legal advisor can help you to negotiate a settlement with your employer, or simply provide you with some tactical advice on how best to resolve the matter, whilst preserving and protecting your legal rights in the event that a resolution can’t be reached.

 

Breach of employment contract FAQs

What happens if an employer breaches a contract?

If an employer breaches your contract you can either waive the breach, in which case the contract will continue as normal, or you can sue for breach of contract, provided there are financial losses flowing from that breach.

Can an employer break an employment contract?

An employer can break an employment contract in various ways. This could be breach of an express or implied term, for example, a failure to provide either your contractual or statutory minimum notice period on termination of your employment.

How do I sue my employer for breach of contract?

You may be able to sue for breach of contract in either the employment tribunal or civil courts, although much will depend on the nature of the alleged breach, and whether or not you continue to work for your employer.

Last updated: 12 April 2021

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