Breach of Contract

When entering into an employment contract, the parties agree to terms which they are legally obliged to comply with. However, where one party fails to meet those obligations, it can place the compliant party in a difficult position where they may need to seek a legal remedy.

What is an employment contract?

An employment contract can be a written or oral agreement that is binding between an employer and an employee and sets out the duties and responsibilities of both parties. The employer must provide some basic contract details as a 'statutory statement of particulars of employment' under the Employment Rights Act 1996.

There are different types of employment contracts, such as:

• Full-time and part-time;
• Fixed-term – for example, a three-month contract;
• Term-time only – such as working in a school;
• Zero hours – for example, ad hoc work over the busier Christmas period;
• Apprenticeship agreements.

Some contracts may be between a 'worker' and the employer rather than an 'employee' when required to undertake work personally. 

All employment relationships are subject to a legal contract, even if not in written form.

What is a breach of contract?

Generally speaking, a party has breached their contract if they have failed to comply with its terms. A fundamental breach, such as non-payment of salary, may destroy the contract and give rise to a claim.

There are two types of contractual terms: express and implied.

Express terms - Express terms are those in the employment contract which have been expressly stated. These typically include:

• Hours of work;
• Salary;
• Holiday entitlement;
• Job title.

In addition, there will typically be other terms that form part of an individual's employment, such as compliance with policies and procedures set out in the staff handbook.  

Implied terms - Implied terms are those that have not been expressly set out or agreed upon but are implied in the contract.

This includes terms that are:

• Too obvious to be written, such as not stealing from your employer;
• Statutory – for example, an employee's notice period must meet the statutory requirements and the right to Equal pay, and;
• Implied through custom and practice – the term must be reasonable, notorious (well-known in the business or industry) and certain and be followed because there is a sense of legal obligation to do so. For example, a longstanding bonus scheme may become contractual if provided consistently over a period of time.

Potential claims for breach of contract

Claims that an employee may bring if their employer is in breach of contract include:

• Wrongful dismissal;
• Unlawful deductions from wages;
• Unpaid pension contributions;
• Unpaid bonus or commission.

Workers can also bring claims in the Employment Tribunal for breach of contract, such as a failure to pay holiday pay.  

Remedies for successful claims

In an Employment Tribunal, damages are the only remedy available for wrongful dismissal claims. However, in the civil courts, an employee may obtain damages or an injunction in the most severe and high-value cases.

The purpose of damages is to place the employee in the position they would have been in had the employer not breached the contract. For example, if an employer did not give sufficient notice of termination or pay a bonus when due, the employee would receive damages that reflect the notice or bonus they should have received.

Injunctions are not generally used in employment cases but are most common in disputes surrounding post-termination restrictive covenants. This is a complex area of law and requires urgent specialist legal advice if you are currently subject to enforcement action by a former employer.

Get in touch

For further information and legal advice about contract breaches, please contact our Employment Litigation team on 023 8063 9311 or email enquiries@warnergoodman.co.uk.