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Breach of contract
If the employee does not agree to proposed changes and the employer goes ahead and changes them unilaterally, this is generally a breach of contract. The employee can do a number of things in response:
• accept the change;
• refuse to work under the new terms, it is then up to the employer to decide what to do;
• object to the new terms but carry on working under them while taking legal action;
• carry on working but treat themself as dismissed and claim unfair dismissal (only if there is a substantial difference in terms);
• resign and claim constructive dismissal (if there is a fundamental breach); or
• consider whether the change is valid under TUPE (see Chapter 12).
For more information see Chapter 10: Dismissal.
Employees who continue working following a breach of contract may be taken to have accepted the change and therefore waived their right to pursue a breach of contract claim. If they wish to challenge the breach, it is important for them to make it clear that they do not accept the changes, and to act quickly in getting legal advice and in pursuing a claim. If they are not immediately aware that there has been a change, they should protest as soon as they become aware of it.
An employee cannot bring a breach of contract claim in an employment tribunal unless the employment has ended. In most cases, while an employee is still employed, any claim for breach of contract can only be brought in the civil courts (Small Claims Court, County Court or High Court, depending on the value of the claim).
Contract claims in the employment tribunal are capped at £25,000, so employees whose claim is worth more than this may opt for the civil courts, even if the contract has ended. In civil court claims, the losing party pays the costs of the winning party. This means that a contract claim in the civil court carries a very high risk of being forced to pay the employer’s legal costs, which are likely to be substantial. Legal advice is essential before bringing this kind of claim.
Another reason why employees choose the civil courts instead of the employment tribunal is if they are past the tribunal time limit. The time limit for breach of contract claims in the civil courts is six years (as opposed to the three-month limit in most employment tribunals). For example, in Birmingham City Council v Abdullah ([2012] UKSC 47), the Supreme Court confirmed that 174 former dinner ladies could bring equal pay claims as breach of contract claims in the civil courts after they missed the deadline for a claim in the employment tribunal.
A court has the power to order the employer to restore the contract to its original provisions, and to award damages (losses). For example, see the following case where the employer had imposed a pay reduction:
As a result of a financial crisis, the employer proposed a pay cut of around £30 per week. This was not agreed, but was introduced anyway. The employer’s engineering workers continued to work but sued for breach of contract. The House of Lords (now Supreme Court) upheld their claim and awarded damages for the difference in pay. They refused to accept the employer’s argument that damages should be limited to the 12-week notice period because this is how long it would have taken to lawfully end the contract and replace it with another on different terms. The Lords said it was clear that the employer had intended the contract to continue, albeit on different terms.
Rigby v Ferodo Ltd [1987] IRLR 516
It is important to note that in these circumstances, it is normally much more straightforward to bring a claim in the employment tribunal for unlawful deduction from wages. (See Chapter 4: Unlawful deduction of wages). An unlawful deduction of wages claim is also better if there is a risk of the employer trying to counter-claim for breach of contract by the employee.