Extending the limitation period in the Employment Tribunal for breach of contract

Unlawful deductions from wages

Under the provisions of the Employment Rights Act 1996, workers are protected from unlawful deductions from wages.

Wages are defined under Section 27 of the Employment Rights Act to include any sums payable to the worker in connection with their employment.

In an ideal world any discrepancies can be dealt with informally and an employer will be able to resolve the matter without the employee having to escalate the matter or take formal action to recover any sums due.

However, in cases where the discrepancy cannot be resolved by way of internal grievance, the employee may consider issuing a claim in the Employment Tribunal for unlawful deduction of wages.

Unlike other claims in the Employment Tribunal, an employee does not have to carry the qualifying 2 years’ service to pursue this claim. The right to not have unlawful deductions from wages is a day 1 employment right.

A claim for unlawful deductions from wages must be issued within three months minus one day from the date on which the payment was due. If it is a series of payments this period will begin from the date of the most recent payment.

In a claim for unlawful deductions of wages the employee can claim up to 2 years back as long as either of the following apply:

• There is less than 3 months between deductions
• The deductions are linked – for example, they might be linked if they are caused by the same error

If there is a gap of more than three months between underpayment of wages, this will break the series of deductions for the purpose of bringing an unlawful deduction from wages claim.

Whilst a claim for unlawful deductions from wages can be pursued in the Employment Tribunal, it can also be pursued in the civil courts under breach of contract.

Breach of contract

Some employees may find pursuing the matter in the civil courts to be favourable due to the extended limitations for doing so.

Whilst the Employment Tribunal imposes the deadline outlined above, under section 5 of the Limitation Act 1980, a claim for breach of contract in the civil courts has a time limit of six years from the date of the breach.

However, this limitation remains a disputed point of law and currently two conflicting Employment Tribunal judgments provide differing opinions as to whether this limitation period should be extended.

In the 2012 case of Taylor v Central Manchester University Hospitals NHS Foundation Trust the Employment Tribunal made the decision that in accordance with the six-year restriction in civil cases, a breach of contract claim in an ET must be bought within the time specified.

As a result of this decision, Tribunals would not be permitted to hear claims for breaches more than six years old. 

However, in the 2015 case of Grisanti v NBC News Worldwide Inc, it was held that the six-year time limit applying to contract claims in the civil courts, does not also apply to contract claims brought in the Employment Tribunal under the Employment Tribunals Extension of Jurisdiction (England and Wales) Order 1994.

The Employment Tribunals Extension of Jurisdiction (England and Wales) Order 1994.

This Order enables an employee to bring a claim for damages for breach of contract of employment, or for a sum due under that contract, before an industrial tribunal (now known as Employment Tribunal) if the claim arises or is outstanding on the termination of his employment.

In the case of Grisanti, the employee, on termination of her employment, was informed by HMRC that no national insurance payments had been made on her behalf between 1996 and 2003.

The employee lodged her claim for breach of contract against her employer in the Employment Tribunal within 3 months from the termination of her employment.

 Given the historic nature of the breach, the employer sought to rely on the decision in Taylor and that her claim, as for breaches more than 6 years old, was out of time. The tribunal however found that the purpose of the Employment Tribunals Extension of Jurisdiction (England and Wales) Order 1994 was to extend the ETs jurisdiction beyond that of the civil courts.

Given that the decisions on this point of law have been few and far between since the implementation of the Order in 1994, this difference in position has not presented serious concerns. It does however remain a disputed issue.

Our team are able to assist with a range of enquiries and HR support. If you have concerns in respect of unlawful deductions from your wages and are considering action in the Employment Tribunal for breach of contract and would like any support, please contact us on 01983 897003.