Breach of Employment Contract Tribunal Claims

A breach of employment contract occurs when an employer or employee fails to comply with one or more terms of an employment contract, resulting in loss to the other party. In England and Wales, many of these disputes can be brought before an employment tribunal, although the tribunal's jurisdiction is limited and subject to specific statutory conditions.

Employment tribunals do not hear all contract disputes. Their authority is derived mainly from the Employment Tribunals Act 1996 and the Employment Tribunals Extension of Jurisdiction (England and Wales) Order 1994, which allows certain contractual claims to be heard where they arise from employment relationships and meet strict criteria.

This article explains when breach of contract claims can be brought in an employment tribunal, how the process works, what compensation may be available, and the key legal limitations involved.

What Is a Breach of Employment Contract Claim?

A breach of contract claim arises where one party fails to perform obligations set out in an employment contract. Common examples include:

• Non-payment of wages or salary
• Failure to pay notice pay
• Non-payment of contractual bonuses or commission
• Failure to pay contractual holiday entitlement
• Breach of express contractual terms (for example, pay rates or working hours)

Tribunals can only consider claims that are financially measurable, meaning the claim must usually relate to a specific sum of money owed under the contract.

Legal Basis for Employment Tribunal Jurisdiction

Employment tribunals have a limited contractual jurisdiction, meaning they can only hear certain types of breach of contract claims.

This jurisdiction is primarily based on:

• Employment Tribunals Act 1996
• Employment Tribunals Extension of Jurisdiction (England and Wales) Order 1994

Under this framework, tribunals may hear claims for:

• Damages for breach of an employment contract
• Recovery of sums due under an employment contract

However, this jurisdiction is restricted to claims that arise on termination of employment or remain outstanding at the point employment ends.

When Can You Bring a Breach of Contract Claim in a Tribunal?

An employment tribunal will generally only accept a breach of contract claim if:

1. The claim arises on termination of employment

This includes situations such as:

• Final salary not paid after dismissal
• Notice pay disputes following termination
• Outstanding bonuses due on leaving employment

2. The claim is outstanding at termination

This includes contractual entitlements already accrued but unpaid at the point employment ends.

3. The claim falls within tribunal jurisdiction

Certain claims are excluded, even if they arise from employment.

Claims That Cannot Be Heard in the Employment Tribunal

Employment tribunals cannot hear all contractual disputes. Excluded claims typically include:

• Personal injury claims
• Intellectual property disputes
• Restrictive covenant enforcement (usually handled in the High Court)
• Ongoing employment contract disputes that do not arise at termination

These matters must generally be pursued in the civil courts (County Court or High Court).

£25,000 Financial Limit on Tribunal Contract Claims

A key limitation is the statutory financial cap.

Employment tribunals can only award up to £25,000 for breach of contract claims brought under their extended jurisdiction.

If a claim exceeds this amount:

• The excess must be pursued in the civil courts
• The claimant may need to choose the most appropriate forum

This limit is a major factor in deciding whether to bring a claim in a tribunal or a court.

Time Limits for Bringing a Claim

The time limit for breach of contract claims in employment tribunals is generally:

• 3 months less 1 day from the date of termination or breach

There is limited discretion for extension in exceptional circumstances, but tribunals apply strict standards.

Unlike civil courts, the 6-year limitation period for contract claims does not apply in employment tribunals.

Tribunal vs Civil Court: Choosing the Right Forum

A breach of employment contract claim may sometimes be brought in either:

Employment Tribunal

Advantages:

• Lower or no issue fees
• Informal procedure
• Faster resolution in many cases

Limitations:

• £25,000 cap
• Limited jurisdiction
• Restricted claim types

County Court / High Court

Advantages:

• No £25,000 cap
• Wider jurisdiction
• Can combine broader contractual disputes

Limitations:

• Court fees
• Potential exposure to costs orders
• More formal litigation process

The appropriate forum depends on the value and type of claim.

Typical Tribunal Procedure for Contract Claims

The process generally follows these stages:

1. Early Conciliation (ACAS)

Most claimants must notify ACAS before submitting a tribunal claim. This aims to encourage settlement.

2. Submission of ET1 Claim Form

The claimant sets out:

• Employment details
• Nature of breach
• Financial loss claimed

3. Employer Response (ET3 Form)

The employer responds with:

• Denial or admission of breach
• Legal defence
• Counterclaims (if applicable)

4. Preliminary Hearings

The tribunal may decide:

• Jurisdiction issues
• Time limits
• Case management directions

5. Final Hearing

Both parties present evidence, including:

• Contracts
• Payslips
• Emails and HR records
• Witness testimony

The tribunal then determines liability and compensation.

Remedies and Compensation

If a breach is proven, remedies may include:

• Payment of unpaid wages or contractual sums
• Notice pay
• Holiday pay arrears
• Damages for financial loss caused by breach

Tribunals generally aim to place the claimant in the position they would have been in if the contract had been properly performed.

Employer Counterclaims

Employers may also bring counterclaims in tribunal proceedings, such as:

• Overpayment recovery
• Breach of contract by employee
• Damage to property or financial loss

These are considered alongside the main claim.

Common Issues in Breach of Contract Tribunal Claims

Common disputes include:

• Whether a contractual bonus is discretionary or enforceable
• Whether notice pay is contractually due
• Whether deductions from wages were lawful
• Whether policies form part of the contract
• Whether termination terms were properly applied

Tribunals closely examine the written contract and how it operated in practice.

Key Legal Principles

Several principles guide tribunal decision-making:

• Contractual terms must be clearly established
• Written contracts are important but not always decisive
• Evidence of workplace practice is relevant
• Claims must be financially quantifiable
• Jurisdictional limits must be strictly applied

Key Takeaways

Breach of employment contract claims in employment tribunals are limited but important legal remedies for unpaid contractual entitlements arising at or after termination of employment. Tribunals can award compensation up to £25,000 and only deal with specific categories of claims under the Employment Tribunals Extension of Jurisdiction Order 1994. Claimants must act within strict time limits and ensure the claim falls within tribunal jurisdiction, otherwise proceedings may need to be issued in the civil courts.