Dismissal due to breach of contract

When an employee agrees to work with an employer, there is an acceptance of contractual duties upon both parties. The most common agreement in every contract for employment will consist of an exchange of services by the employee in return for a form of compensation such as an annual salary.

What exactly is a breach of contract?

The terms and circumstances defining the working relationship between the employer and employee, as well as their respective rights and obligations, are laid out in an employment contract, which is a legally enforceable document. This means that either the employer or the employee can breach the terms of the employment contract.

Breaches of contract can either be express or an implied breach of the agreed terms. An express breach is a straightforward breach of a term that has specifically been mentioned in the final agreement. Implied terms are more complex as there are 3 ways in which terms can be implied into a contract: by the courts, statute and by tradition/custom. Let us deal with each of these in order.

Terms implied by courts

It is possible for the courts to imply a term into a contract if it was clear and obvious that the parties had intended for the term to be part of their agreement. However, for any term to be implied by the courts, 5 conditions must be satisfied. The term:

1. Must be reasonable and equitable
2. Is necessary to give business efficacy to the contract – the contract wouldn’t work without it
3. Is so obvious that it goes without mentioning
4. Is capable of clear expression
5. Must not be an express term of the contract

Examples of terms that can be implied into employment contracts are terms related to the employee’s health and safety, acts of gross misconduct or acting dishonestly.

Terms implied by statute

Some statutes imply terms into particular contracts. An example of this would be the legal requirement for employers to provide employees a minimum of 5.6 weeks, or 28 days, paid holiday per year for employees who work a full 5-day week. This is known as statutory or annual leave. This statutory right can be found under The Employment Rights (Employment Particulars and Paid Annual Leave) (Amendment) Regulations 2018.

Terms implied by custom

Where there is an established practice or custom, the courts will imply terms into a contract, but the custom must be certain, reasonable and known to the public. If the custom is inconsistent with any express contractual terms, this can prevent it from being implied into the contract.

What actions can employers take following an employee breach of contract?

Employers may seek to resolve a contractual breach made by an employee by seeking the intervention of the court or, more commonly, an employment tribunal. Of course, there is also the option to settle outside of the court through an alternative dispute resolution. Realistically, the action of the employer depends on the level of seriousness of the breach. Lenient acts of misconduct or breaches of ancillary terms such as lateness can be dealt with internally with verbal warnings or disciplinary proceedings. The employer may treat an employee’s employment as having ended due to a fundamental breach of the employment contract if the breach has made it impossible for the working relationship to continue. This would provide the employer with grounds to dismiss the employee.

Dismissal due to a fundamental breach of contract

In any instance where an employer alleges that one of their employees are liable for a fundamental breach of contract, the matter must always be investigated before any decision of dismissal is awarded. This is to avoid the employer providing an unfair dismissal; therefore, the appropriate disciplinary procedures must be followed to give the employee a chance to defend or explain their actions. Usually, larger businesses and corporations have their own unique code of conduct detailing their non-binding rules regarding how to operate in the course of employment. 

Additionally, there is the Advisory, Conciliation and Arbitration Service (ACAS) which is the parliamentary approved code of practice that includes behaviour guidelines for employers and employees. Employers are expected to take this into consideration before making any dismissals.  Under this code employers must:

• Investigate the employee’s breach within a reasonable time including an interview with any relevant witnesses and review of evidence
• Decide if there’s sufficient evidence indicating that the employee is liable of a breach. If so, the matter can proceed to a disciplinary hearing
• Provide notice in writing to the employee of a hearing to decide the outcome. This notice should include the time, date and place of hearing
• Provide evidence to the employee of their breach along with an explanation of the case against them with sufficient time to prepare a defending response 
• Allow the employee to put forward their defence by adducing their own evidence and cross-examining witnesses.
• Make a decision in the hearing regarding any disciplinary action and provide notice of this to the employee in writing