I wonder how I can handle a breach of contract by an employee?

Employee contracts set clear expectations about duties, conduct, confidentiality and notice. When an employee breaches these terms, it can disrupt operations, damage customer relationships or compromise confidential information.

UK-wide figures show these disputes are common and can escalate quickly if not handled carefully. Tribunal Statistics Quarterly 2026 identifies breach of contract as one of the leading tribunal claims, while Acas Early Conciliation data highlights the wider number of workplace disputes raised before they reach tribunal. This reinforces the importance of employers taking concerns seriously from the outset and making careful decisions around investigation, pay and the appropriate process.

What does the law say about employee breaches?

A breach of contract occurs when an employee fails to do something their contract requires or does something it prohibits. Common examples include breaching confidentiality, working for a competitor while employed, or failing to give the required notice when resigning.

Minor or one-off breaches may be treated as misconduct under your disciplinary process. Serious breaches may justify dismissal, provided a fair process is followed, and dismissal is a reasonable response.

Not every mistake is a breach of contract. Performance shortfalls are usually capability issues and should be managed through performance procedures, unless the contract contains clear measurable obligations that have not been met and the employee is at fault. Always check the contract, relevant policies and any collective agreements.

Key Employer Obligations

If the Employer suspects a breach of contract, they must act lawfully and fairly.
In practice, this means:

• Carry out a fair process - Investigate the facts, allow the employee to respond, consider mitigation and take proportionate action. A fair process is particularly important where dismissal is contemplated. Ensure that the relevant evidence is secured.
   
• Assess seriousness and intent - Consider whether the conduct was deliberate or accidental, its impact and risk, the employee’s seniority and history, and whether trust and confidence has been damaged.
   
• Decide and confirm the outcome - Consider the evidence, seriousness, mitigation and consistency when deciding the sanction. Confirm the decision and reasons in writing, including any warning, training, conditions or pay and notice position.
   
• Avoid knee-jerk decisions - Consider summary dismissal only where gross misconduct has fundamentally damaged trust and confidence. For less serious breaches, consider warnings, training or reassignment.
   
• Pay and notice - Do not withhold pay or notice unless legally or contractually entitled to do so. Ensure any summary dismissal is supported by a finding of gross misconduct and a fair process.
   
• Settlement options - Where relationships have broken down, consider a protected conversation and settlement agreement, ensuring you meet legal requirements and the employee receives independent legal advice.
   
• Offer an appeal - Provide appeal rights and, where possible, have a different impartial manager hear the appeal.

What are the risks of getting this wrong?

If an employer handles the situation incorrectly, they could expose the business to a range of legal, operational and reputational risks.

• Unfair and wrongful dismissal - Dismissing without fair grounds or process may result in an unfair dismissal claim. Wrongful dismissal can arise where contractual notice or pay is withheld without lawful justification.
   
• Breach of contract and constructive dismissal - Heavy-handed or inconsistent treatment may breach the implied term of mutual trust and confidence, potentially leading to a constructive dismissal claim.
   
• Discrimination and whistleblowing detriment - If action is influenced by a protected characteristic or because an employee raised protected concerns, you may face discrimination or whistleblowing claims. Ensure decisions are evidence-based and documented.
   
• Injunction and evidence risks - Mishandling confidential information or devices, or failing to preserve evidence, can weaken your position if an injunction is later required or the process is challenged.
   
• Data protection and privacy - Over-collecting or mishandling personal data during an investigation can create data protection risks and complaints.
   
• Business impact - Delays, poor communication and inconsistent outcomes can damage morale and trust, while customer or supplier relationships may also suffer.

Sense-check proportionality before deciding on dismissal. Where the facts are unclear, or the risks are high, seek legal advice early and consider alternatives such as warnings, training or changes to duties.

Summary

A measured, fair and well-documented approach is the best way to deal with an employee breach of contract. Act quickly to contain risk and preserve evidence, follow your procedures and ensure action is proportionate.

Where dismissal is contemplated, ensure the investigation, hearing and reasoning would withstand scrutiny. Protect confidential information and business relationships throughout, and seek advice early where the position is unclear.

Further Advice

If you have any questions about a potential breach of contract or need advice on any other employment law matter, our Peace of Mind Team is here to provide expert guidance. Our Document Audit Team can also help draft relevant workplace policies.

Contact our Employment Team by emailing employment@warnergoodman.co.uk or calling 023 8071 7717.