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A recent judgment in the Employment Tribunal[1] could lead to employers facing future claims for historic breaches of contract.

Following a breach of any contract a claim can be brought in the County or High Court for compensation. However there are limits in relation to how far back a claim can go. In England and Wales compensation can only be awarded for up to 6 years. So even if the court finds that a party has been in breach of contract for the last 10 years the claimant will not receive compensation for the losses that resulted from the breach in the first 4 years.

However employers can also face claims of breach of contract in the Employment Tribunal brought by former employees. It had generally been thought that these claims were subject to the same 6 year limit on compensation as applied in the civil courts. At least one previous Tribunal had concluded as much.

Doubts though have now been raised as to whether this restriction does apply. It follows a case in which a former employee brought a claim in respect of a shortfall in national insurance contributions that dated back to between 1996 and 2003. She left employment in January 2015 and sought to bring a claim for breach of contract. If the 6 year limitation had applied no compensation could be awarded. The Employment Tribunal considered that as claims could only be brought after the employment had ended it did not consider that employees should also be bound by a further 6 year limitation as this might mean they could never bring a claim in the Tribunal if they remained employed. It awarded the compensation despite the breach dating back over 15 years.

The practical implications are that employers may face claims in relation to historic breaches whenever the employment comes to an end. So for example if an employee considered that they should have been paid a bonus in their first year of employment that could be the subject of a claim when they leave some 20 years later. It could be more costly too. If the bonus was due every year then the eventual award could reflect the total bonus that would have accumulated over the last 20 years. Whilst the maximum compensation an Employment Tribunal can award in a contract claim is still £25,000 this may mean that this maximum will be achieved in many more cases going forward.

This blog post was edited by Fran Read. For more information, email blogs@gateleyplc.com.

[1] Grisanti v NBC News Worldwide Inc


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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.