Breach of Employment Contract

Your employment contracts are legally binding agreements between you (the Employer) and your staff member (the Employee).

An employment contract does not need to be a physical document, albeit this is best practice. It can be a verbal or physical agreement. As well as recognising the rights of all parties, it also enforces their duties in relation to the agreement.

Statement of main terms which sets out the main terms and conditions of employment must be provided to all employees and workers by the time that they start working for the employer.

As an employer, you will no doubt experience a breach of employment contract. Remember, of course, that a breach can be from your employee or from you. Breaches of contract can occur even if your contractual terms aren’t written down.

Breach of contract is an area of employment law where many employers need support. In this article, we’ll discuss employment contract breaches. We’ll look at recognising a contract breach, avoiding a breach of contract yourself and how best to handle the situation if it arises.

If you need more immediate support on a breach of employment contract, contact our award-winning advice team.

What is an employment contract?

An employment contract is a legal agreement between yourself and your employee. It includes details on their job description, responsibilities, pay and benefits. Although a physical contract is not required by law, you need to ensure that you provide your employees with a written statement of the main terms under section 1 of the employment rights act, this needs to be issues by the time that they start working for you. In most cases, these terms are included in a contract.

By law, employees have a number of employment rights which are called “statutory rights”. These are a right whether they are included in a contract or not, and an employer cannot agree less than the statutory minimum e.g. employee must receive at least national minimum wage.

There are several different types of employment contracts, including:

• Full-time.
• Part-time.
• Fixed-term contracts.
• Apprentice agreements.

If you’re looking to produce an employment contract then download our free employment contract template?

What is a breach of contract in employment?

A breach of employment contract occurs when either you or your employee fails to adhere to the agreed terms. There are two types of terms in relation to employment contracts, which are:

Express terms

These are terms that have been explicitly agreed upon by both parties. This agreement is solidified in a contract of employment.

On the part of the employee, the contract of employment typically details their:

• Working conditions.
• Working hours.
• Dress code.

For your organisation, the contract typically details your obligations including

• Duty of care.
• Notice periods.
• Adhering to health and safety regulations.
• Avoiding discrimination.

Failure to uphold your express terms could lead to breach of contract claims that land you in an employment tribunal, so it's vitally important to get right.

Implied terms

A breach of implied terms of an employment contract, on the other hand, relates to breaking other obligations that weren’t explicitly set out in the contract.

For example, while there’s no wording referring to the theft of office equipment, the implied agreement is employees shouldn’t steal from you.

There are also implied terms of mutual trust and confidence. Meaning, both parties can't act in a way that could 'destroy or seriously damage' the relationship of mutual trust and confidence they have in each other.

A breach of this contract may lead to you dismissing the staff member. Employer breaches, on the other hand, might mean the employee resigning and claiming constructive dismissal.(If they have over two years’ service, Labour have said that they intend to make it a day one right for all workers to have protection from unfair dismissal)

Again, this type of breach of contract claim would land you in an employment tribunal or civil court.

On your part, the implied agreement is you’ll provide a safe and secure working environment for your staff. For example, a failure to prevent an employee from being bullied at work could be seen as a breach of the implied duty of mutual trust and confidence.

If you're looking for legal representation for a breach of employment contract claim or constructive dismissal situation then why not consider our total employment law support?

What happens if employees breach employment contracts?

An employment contract, whether verbal or written, lays out the legally enforceable terms and conditions of your working relationship. This is for both express and implied terms. If your employee breaks one or more of those terms then this can be considered a breach of contract.

There is a legal system in place to pursue claims against your employee for breach of contract. This can be done via the civil courts.

It is worth stating that before you go down this route you should always try to address any alleged breach of contract. Legal proceedings are generally considered to be a last resort.

This does, of course, depend on what action your employee took to breach their contract. Normal disciplinary rules apply here.

Can a contract claim arise from employer breaches of contract?

In short, yes. Every employer wants to avoid an employment tribunal claim or being dragged through the civil courts, and a breach of contract claim could do exactly that.

If you breach an employment contract the repercussions generally depend on the nature of the breach. In the case of a minor breach, for example, failure to pay wages on time once, this could be resolved quickly and informally. In many cases, this type of contractual breach is just a simple mistake on your part.

Timing is important. Your employee cannot wait too long to raise a grievance as this may be seen as acceptance of the breach.

If you have consistently breached the terms of your employee's contract, or for more a serious breach, employees will normally raise a formal grievance in writing. This might involve workplace mediation or HR support.

Put simply, where a breach of the employment contract has occurred on your part, either express or implied terms, then the employee has two options. If they can prove they have suffered financial loss then they can sue and have damages awarded. In some cases, this claim will be heard at an employment tribunal, in others, before the civil courts.

What are examples of a breach of employment contract?

There are various examples of both employers and employee breaching their employment contracts. The following may be helpful for anyone trying to ascertain exactly what constitutes a breach of contract claim.

Common examples of an employer breach of contract

We've discussed what can happen to you if you breach your contractual terms, so let's explore some scenarios:

• Unlawful reduction of staff pay.
• Wrongful dismissal.
• Changes to working hours and other terms of the employment contract without proper notice and fair procedure, this is a new statutory Code of Practice on Dismissal and Re-engagement must now be followed.
• Not paying for travel expenses, holiday entitlements and contractual sick pay.
• Failure to pay national minimum wage.
• Withdrawing unconditional job offer after the candidate has accepted.
• Failure to follow appropriate procedures for grievances, disciplinary actions, and dismissals.
• Failure to pay your employee pay in lieu of notice of termination.

This is by no means an exhaustive list. If you're an employer who has made mistakes in your employment relationship, from an unlawful deduction to a fundamental breach, get in touch with our employment law solicitors for support.

Common examples of an employee breach of contract

We've looked at an employer's breach, now let's consider your employees. Here are some typical examples of employee contract breaches.

Breaches of express terms

Your employee could breach the express terms of their employment contract by doing any of the following:

• Failing to carry out the duties for which they've been employed to do. For example, not carrying out their job role or daily responsibilities as part of that role.
• Failing to give proper notice periods for resignations, which would be contrary to express contract terms. For example, many contracts outline a set number of weeks or months' notice period having resigned.
• Breaking the terms of any restrictive covenants and going to work for a competitor.
• Setting up as self-employed in direct competition with you, breaching restrictive covenants and post-termination negotiations.

Breaches of implied terms

Your employee could breach the implied terms of their employment contract by doing any of the following:

• Any gross misconduct, for example, physical violence, serious insubordination, serious breaches of health and safety requirements, intoxication or possession of alcohol and drugs, discrimination or harassment, theft or fraud, and misuse of company property.
• Behaving dishonestly, for example, falsification of personal or workplace records.
• Taking advantage of their employment position for their own personal advantage or gain.
• Working for another business at the same time as working for you.
• Carrying on a business in competition with your organisation whilst still employed by you.
• Disclosing confidential information or trade secrets obtained during their employment with you.

Can an employer sue an employee for breach of contract?

The short answer is yes. However, it shouldn’t be your first course of action.

If you believe an employee breached a term of their contract, the first step should be to try to settle the matter informally.

You may receive damages, but only if you can prove the business suffered financial losses from the actions of the employee.

So for example, if an employee quits their job without working their notice period and it leads to financial losses, you can sue for the losses.

Alternatively, if an employee breaches their restrictive covenants by accepting a job with a competitor or establishing a similar business to yours, you could apply to the courts for an injunction to stop them.

Is a breach of employment contract a crime?

Our advisors take thousands of questions every year from employers like you who are dealing with breach of employment contract situations. One of the more prevalent questions is whether or not a breach of contract can be prosecuted as a crime. On this, breach of contract is not itself a criminal concern.

That isn't to say that the action which constitutes a breach of contract can't give rise to criminal proceedings. For example, in the case of theft or physical violence. The actual breach of contract claim itself would be considered a civil matter and would not be classed as a criminal offence.

Does a breach of contract always lead to litigation?

There are many ways to handle a breach of contract before going down the route of litigation. Minor breaches are generally resolved internally via informal meetings, mediation or via your disciplinary policy and procedure.

Cases that lead to an employment tribunal are those that cannot be resolved with your employee.

How to avoid an employment tribunal

As an employer, the first step to avoiding an employment tribunal, county court or civil court is to stop contract breaches from happening in the first place.

If your employee lodges a formal grievance or makes a complaint against you or your business, you should deal with it swiftly, fairly and lawfully.

In terms of a more formal structure, however, you can avoid going to an employment tribunal through a combination of the following:

Disciplinary and grievance procedures

Make sure that your business has a robust disciplinary and grievance procedure.

The majority of employees would expect to find this as part of their employment contract or employee handbook.

Some issues can be resolved through an informal talk or meeting. Other times, it'll need to go through a more formal hearing. Contract breaches are no different.

Alternative dispute resolution

If one of your employees wants to raise a claim in the employment tribunal, they must use early conciliation first.

Early conciliation is usually free of charge and often informal. But final decisions aren’t always legally binding (unless they go through a COT3 process).

Expert support

Here at Croner we have a team of experts on hand to help you handle your employment contracts from the drafting process to ensuring they're updated with the most recent employment law changes.

Get in touch with one of our experts for more advice on handling a breach of employment contract on 0800 141 3920.