16 APRIL 2024
7 MIN
READ
What is an employment contract?
An employment contract is a legally binding agreement between an employer and an employee. It outlines the terms of their working relationship, including:
Job role and responsibilities
Employment conditions
Working hours
Salary
Employee rights
Policies
These are what are known as the ‘terms’ of the contract. Contracts can be written or verbal, but written agreements are generally preferred for clarity and to avoid misunderstandings.
What is considered a breach of employment contract?
A breach of contract occurs when either the employer or employee fails to fulfil their obligations as outlined in the agreement. If this occurs, it’s a good idea to seek legal advice, but remember that open communication can often resolve issues amicably before escalating to legal action.
Types of contract breach
Under UK law, employee contract breaches are categorised based on type and severity of the breach.
Minor Breaches
These are less serious violations, such as timekeeping issues or minor performance hiccups, which usually lead to informal warnings rather than legal action. This allows employees the opportunity to correct their behaviour without facing severe repercussions.
Fundamental Breaches
These are serious violations that undermine the contract’s main terms, such as failing to perform essential duties or disclosing confidential information. Such breaches may result in disciplinary action, including dismissal, and could lead to legal claims for damages.
Breaches can also be classified as:
Actual Breach
When a party fails to fulfil a contractual obligation as agreed.
Anticipatory
Breach When one party indicates they will not fulfil future obligations.
These categories help clarify the rights and responsibilities of both employers and employees.
What happens if you breach a contract of employment
Legal action
Since employment contracts are legally binding, failing to adhere to the agreed terms may lead to legal action. The best way to handle a breach depends on a few key factors, such as the type of breach and its impact on both parties.
Employment Tribunals
Employment tribunals are used when employees believe their rights have been violated, such as in cases of unfair dismissal or discrimination. From using tribunals, employees may seek remedies like reinstatement or compensation.
Civil Courts
Civil courts may be used for breaches that fall outside the jurisdiction of employment tribunals or involve complex legal matters.
Risks of employers breaching contracts
When employers breach contracts, they face significant risks that can impact both the business and employee morale. These risks can result in legal issues, financial losses, and damage to the company’s reputation.
Constructive Dismissal
This occurs when an employee feels forced to leave due to the employer’s conduct.
If proven, employers can face legal claims and compensation demands.
Monetary Damages
Employers may be liable for monetary damages resulting from a breach, including lost wages and benefits.
Loss of trust
A breach of an employee contract can damage the trust between employers and employees, leading to low morale, decreased productivity, and high turnover.
How can employers avoid breaches?
As an employer, it’s natural to want to avoid contract breaches. While it’s true that there’s no foolproof method to prevent breaches altogether, there are internal strategies you can implement to reduce the risk:
Clear contracts
Ensure employment contracts are clear and comprehensive, capturing all terms of employment, including responsibilities and policies.
Regular reviews
Regularly review and update contracts to reflect current laws and best practices.
Open communication
Create an environment where employees feel comfortable voicing any concerns about their responsibilities.
Efficient training
Provide regular training to ensure employees understand their rights and obligations.
Documentation
Maintain thorough records of communications and training sessions.
Legal guidance
Seek professional legal advice for any areas of employee contracts that you’re unsure of.
Penalties for breach of employment contract
Is there a penalty for employees who breach their contract?
The potential consequences can vary depending on the severity of the breach. They may include disciplinary action, termination, or legal action if damages are incurred. Taking the time to evaluate the situation can help you make informed decisions moving forward.
What are the consequences for employees who breach their contract?
As a self-employed business owner, it’s important to approach the topic of employee contracts with care. While you typically wouldn’t make a breach claim against an employee in the same way an employer might, if you do have an employment contract in place and an employee breaches its terms, you may have valid grounds to take action.
Here are a few key points to consider:
1. The severity of the breach
Review the breach in terms of its impact. Is this a minor breach that can be discussed internally, or is it something more significant? Understanding the nature of the breach will guide you in determining the most appropriate response.
2. Potential resolutions
When it comes to addressing breaches, there are options depending on the circumstances. For example, you could seek compensation for any losses or work with the employee to find a solution that benefits both parties. This might include adjusting their roles or creating a performance improvement plan to help them improve performance.
Every situation is unique, so it’s worthwhile seeking legal advice to understand your rights and appropriate next steps.
Examples of employee contract breaches
Neglecting job duties as specified in the employment contract.
Taking time off work without proper approval or notice.
Consistently failing to meet performance standards or objectives set.
Not providing the agreed notice when resigning.
What to do if an employee claims for breach of contract?
Start by reviewing the claim and any related evidence to ensure you have a complete understanding of the situation.
Next, seek legal guidance on the best way to address the claim. If appropriate, discuss the issue with the employee to explore an amicable resolution.
If internal efforts to resolve the matter fail, it may be time to consult an employment lawyer for advice on the next steps.
It’s important to inform your insurance provider about the claim, as having the right coverage can help protect your business during challenging situations.
FAQs
What types of compensation can you receive from a breach of contract?
Compensation for real losses caused by the breach, such as lost wages or expenses.
Compensation for foreseeable losses not directly linked to the contract, like lost profits.
A court order that requires the breaching party to complete their contractual obligations.
What can an employee do if their employer breaches the contract?
Employees can address the issue directly with their employer, seek mediation, or consider legal action if no resolution is reached.
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