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Breach of contract claims in the Tribunal aren’t caught by the six year time limit

21 September 2015

The non-payment of salary or bonus can result in a breach of contract claim which can be issued in either the civil courts (County or High Court) or the Employment Tribunal. However the legislative regime which governs how long a prospective claimant has to issue a breach of contract claim depends on the choice of venue.

In the civil courts, the Limitation Act 1980 applies which provides that breach of contract claims must be issued within 6 years of the cause of action.

Breach of contract claims in the Employment Tribunal are governed by Articles 3 and 4 of the Employment Tribunals Extension of Jurisdiction Order (the “Order”). The Order provides that contract claims may only be issued after the termination of an employee’s employment and must relate to losses arising out of the contract of employment or another contract connected with employment (the latter being subject to some further exclusions). An employee’s breach of contract brought in the Employment Tribunal must be issued within 3 months of the employee’s termination date.

One practical consequence of the Order appears to be that a breach of contract claim could still be issued in the Employment Tribunal even though it could not in the civil courts because time starts to run from the termination date not the cause of action. If that is the correct interpretation, an employee, for example, could not bring a breach of contract claim in the County Court where the failure to pay an annual bonus took place more than 6 years ago, but could bring that claim in the Employment Tribunal if it was presented within 3 months of the employment terminating.

An Employment Tribunal in 2012 decided that that interpretation was not correct and that the Limitation Act 1980 had to be “read in” to the Order (Taylor v Central Manchester University Hospitals).

However, Taylor is a first instance decision and therefore not binding on any subsequent Employment Tribunal case. The tension caused by the ambiguous relationship between the Limitation Act and the Order was brought into focus again in the recent case of Grisanti v NBC New Worldwide Inc.

In Grisanti, the employer had failed to pay the employee’s national insurance contributions to HMRC between 1996-2003. In 2015, an Employment Tribunal ruled that the Limitation Act should not be read into the Order as that would defeat the purpose for which the Order was introduced. In other words, the Order extends employees’ rights and the Tribunal had jurisdiction to hear a claim where the cause of action occurred over 12 years ago. The Tribunal further highlighted that the 6 year rule under the Act is not absolute as the civil courts have the discretion to hear claims out of time.

Whilst this decision is no doubt welcomed by Ms Grisanti, it leaves the law in an unsatisfactory position with two contradictory decisions at first instance. Moreover, with such a low number of cases on this issue having reached the Employment Appeal Tribunal or Court of Appeal, unless an appeal is lodged, the uncertainty is set to continue.