Breach of Contract: A Guide to Your Rights

Your employment contract is a legally binding agreement between you and your employer. When either party fails to honour its terms, it is known as a "breach of contract." While minor issues can often be resolved informally, a serious breach can give you the right to take legal action to recover any financial losses you have suffered.

This guide explains what constitutes a breach of contract in the workplace, the most common types of claim, and the legal processes involved.

1. What is a Breach of Contract?

A breach of contract occurs when your employer fails to do something they are required to do under your contract, or does something they are not allowed to do. The terms of your contract are not just what is written down; they also include terms that are verbally agreed, or are "implied" by law.

  • Express Terms: These are the terms that are explicitly written in your contract document, such as your rate of pay, job title, and notice period.

  • Implied Terms: These are terms that are not written down but are considered to be part of the contract by law. The most important is the implied term of mutual trust and confidence, which means your employer must not act in a way that is likely to destroy or seriously damage your working relationship.

2. Common Types of Breach of Contract Claims

While many issues can be a breach of contract, some are more common than others.

  • Failure to Pay Notice Pay (Wrongful Dismissal)

    • What it is: This is the most frequent type of claim. If your employer dismisses you without giving you the full notice period set out in your contract (or the statutory minimum, if longer), this is a breach of contract known as wrongful dismissal.

    • Example: Your contract states you are entitled to three months' notice, but your employer dismisses you with immediate effect and only pays you one week's notice. You can claim for the remaining unpaid notice period as a debt.

  • Unlawful Deductions from Wages

    • What it is: Your employer makes a deduction from your pay that is not authorised by law or by a specific clause in your contract.

    • Example: Your employer deducts money from your final salary for alleged damage to company property, but your contract does not give them the right to do so.

  • Failure to Pay a Contractual Bonus

    • What it is: Your contract states you are entitled to a specific bonus if you meet certain targets, but your employer refuses to pay it even though you have met the conditions.

    • Important Note: If your bonus is described as "discretionary," it is much harder to claim, but the employer must still exercise their discretion rationally and in good faith.

  • Unilateral Change to Your Terms and Conditions

    • What it is: Your employer changes a fundamental part of your contract without your agreement, for example by cutting your pay or changing your place of work. This can also be grounds for a constructive dismissal claim.

3. The Legal Process: Employment Tribunal vs. County Court

You can bring a breach of contract claim in either the Employment Tribunal or the County Court, but there are important differences.

  • The Employment Tribunal (ET)

    • When to use it: You can only bring a breach of contract claim in the ET if your employment has ended. The ET is usually quicker and less formal.

    • Claim Limit: The maximum amount you can be awarded for a breach of contract claim in the Employment Tribunal is £25,000.

    • Costs: In the ET, each side usually pays their own legal costs, regardless of who wins.

  • The County Court (or High Court)

    • When to use it: You must use the County Court if your claim is for more than £25,000. You can also use it if you are still employed.

    • Claim Limit: There is no upper limit on the value of a claim.

    • Costs: This is the biggest risk. In the County Court, the losing party is usually ordered to pay a significant portion of the winning party's legal costs.

What to Do Next

If you believe your employer has breached your contract, it is essential to act.