What Happens If Your Employer Breaches Contract?

An employment contract is a legally binding agreement between you and your employer. It sets out your rights and obligations at work, such as pay, working hours, notice periods, and benefits. When an employer fails to uphold the terms of this contract, this can amount to a breach of contract, with potential legal consequences. Understanding what constitutes a breach, when you might take action, and the remedies available - including tribunal and court claims - is essential for employees and employers in England and Wales.

This article explains the types of employer breaches, legal processes to consider, time limits, potential risks, and the options available to employees if their employer breaches their contract.

What Is a Breach of Employment Contract?

A breach of contract occurs when one party fails to perform obligations agreed in the employment contract. Not all breaches are serious, but some can significantly affect your legal rights.

Types of Breaches

• Express Terms: Written terms in your contract such as salary, hours, job title or notice period.
• Implied Terms: Not written down but automatically part of the contract, such as the duty of mutual trust and confidence or statutory minimum notice rights.
• Actual Breach: A failure to meet a contractual obligation already due.
• Anticipatory Breach: When the employer indicates they will not honour future contractual obligations.

Examples of employer breaches might include failing to pay wages on time, not providing contractual notice on termination, making unilateral changes to pay or hours, or failing to pay holiday pay.

Common Examples of Employer Breach

Non‑Payment or Late Payment of Wages

If your employer does not pay your contractual salary or agreed benefits when due, this can be a breach of contract. Depending on circumstances, you may pursue claims for unpaid wages or unlawful deductions.

Wrongful Dismissal

Terminating a contract without giving the proper notice - as set out in the contract or implied by law - is a breach known as wrongful dismissal. Remedies focus on compensation for losses tied to notice or procedural failures.

Changes to Contractual Terms Without Agreement

Employers cannot usually make significant changes to terms such as pay, working hours, job role or location without agreement. Unilateral changes can be a breach, although tribunals may consider whether contractual clauses or consultation processes legitimise some changes.

Failure to Honour Statutory Rights

Where a contract incorporates statutory rights - for example, the right to statutory notice - failure to respect these can be a breach of an implied term of the contract.

What You Can Do If Your Employer Breaches Your Contract

If you believe your employer has breached your contract, there are several steps you could consider, depending on the nature and severity of the breach:

1. Raise the Issue Internally

Often the first step is to raise the issue informally with your manager or HR department. Minor breaches, such as a late wage payment, may be resolved quickly without formal procedures.

2. Formal Grievance

If informal discussions do not resolve the problem, you could use your employer's grievance procedure - a formal complaint process guided by the ACAS Code of Practice - to notify your employer of the breach and seek resolution.

3. Work “Under Protest”

To protect your rights, you could continue working but state in writing that you are working “under protest” and reserve the right to claim for the breach later. This helps avoid arguments that you accepted the breach by continuing to work.

4. Settlement Negotiations

Sometimes it may be possible to negotiate a settlement agreement with your employer to resolve the breach, potentially with compensation, without tribunal or court proceedings.

5. Employment Tribunal Claim

For some breaches, including unlawful deduction of wages, breach of contractual notice on dismissal or constructive dismissal where you resign in response to a serious breach, you can make a claim to an employment tribunal. Claims must generally be lodged within three months less one day of the breach or job end date.

6. Civil Court Claim

For other breaches, particularly where you are still employed or the claim value is high, it might be appropriate to bring a civil claim for breach of contract in the County Court or High Court. Unlike tribunals, courts can award damages without statutory limits and have longer time limits (typically up to six years).

Constructive Dismissal: When Breach Ends the Employment Relationship

In serious cases, an employer's breach may be so fundamental that it destroys trust and confidence, leaving you feeling you have no choice but to resign. This is known as constructive dismissal.

To pursue a constructive dismissal claim, you generally must have at least two years' continuous service and prove that:

• The employer's conduct amounted to a fundamental breach of contract.
• You resigned in response to that breach.
• You did not accept the breach by continuing to work without reserving your rights.

Constructive dismissal claims can be difficult to win, and proof of the link between the breach and your resignation is crucial.

Remedies and Compensation

Employment Tribunal Remedies

If your tribunal claim succeeds, remedies may include:

• Compensation for financial losses, including unpaid wages or benefits.
• Awards for constructive unfair dismissal, subject to statutory caps.

Civil Court Remedies

In a civil breach of contract claim, courts can award:

• Damages to put you in the position you would have been in had the breach not occurred.
• Interest on damages and in some cases legal costs.

Time limits differ: tribunals generally require early claims, while courts allow actions within six years for contractual breaches.

Risks and Challenges

Proving the Contractual Term

Not all terms you believe are part of your contract may be enforceable. Employers may argue that disputed terms are not contractual or are governed by policies that do not form part of the contract.

Accepting the Breach

If you continue working without raising concerns in a timely manner, you might be deemed to have accepted the breach, which could weaken your claim.

Tribunal vs Court Forum

Choosing the right forum for your claim is important. Tribunals have strict time limits and caps on compensation. Courts have longer time limits and unlimited awards but can be more complex and costly.

Key Takeaways

When your employer breaches your employment contract, you have legal rights and options. You might start with informal resolution or a formal grievance, but serious breaches can lead to employment tribunal or civil court claims. Remedies can include compensation for financial loss, awards for constructive dismissal or damages awarded by courts. The right path depends on the breach's nature, your length of service, and the losses incurred.

Understanding your contractual rights, acting promptly, and seeking appropriate advice helps protect your interests and improves your chances of a successful outcome.