Breach of Contract

Employees can, when their employment has ended, issue breach of contract claims in the Employment Tribunals (ET). Such a claim may be for wages, notice pay or other sums due under a contract of employment i.e. pension contributions. Employers cannot bring a free-standing breach of contract claim against a former employee in the ET; however, they are able to issue a counter claim (known as an employer’s contract claim) against a claim filed by the employee, for example for breach of a training fees agreement. Issuing a counter claim will incur a fee of £160.

Now, the EAT has given employers an alternative way of reducing sums claimed by (ex-)employees. In the case of Ridge v HM Land Registry, the Claimant had a valid claim for breach of contract because the Respondent had not paid him a figure for loss of pension rights during his notice period. This figure appears to have been agreed in the net sum of £1,170.29. The Respondent had raised a counterclaim for an amount of overpaid wages which would exceed the sum of £1,170.29. However, the ET found the counterclaim was issued out of time. On the face of it that would appear to suggest that the employee would get his money but the employer would not get his (unless he then launched proceedings in the county court).

However, the EAT concluded that an employer is not required to bring an employer’s contract claim in order to resist payment of an employee’s contract claim. It rules that, if both have a valid claim, the two sums can be set off against each other so, in this case, the employer had nothing to pay.

This is a striking decision opening up a new way of defending contractual claims by employees in an Employment Tribunal and saving the £160 fee! A counter-claim (employer’s contract claim) is a better route though if the employee owes you more than you owe him/her.