In the civil courts a claim for breach of contract must be brought within 6 years of when the breach occurred. 

Employees can also bring to the employment tribunal breach of contract claims arising from their contract of employment, within 3 months of the termination of the employment contract. 

The Limitation Act 1980 sets out the limitation period in civil cases and the Employment Tribunal’s Extension of Jurisdiction (England and Wales) Order 1994 sets out the limitation period regarding breach of contract claims in the tribunal.

In a recent case, a long serving employee left employment and claimed a state pension.  HMRC advised her that her employer had not paid any National Insurance payments on her behalf for the 7 years between 1996 and 2003.  The employee’s payslips for that period showed that her employer had made such deductions from her salary.  There was confusion as to why the money had not been paid to HMRC, and HMRC commenced an investigation.

In March 2015, the employee lodged a breach of contract claim against her employer in the employment tribunal, within 3 months from the time her contract of employment had ended. 

However, as this claim dated back to 2003 and over 6 years had elapsed since the actual breach of contract, the employer argued that the employment tribunal did not have jurisdiction to hear the claim because the Extension of Jurisdiction Order had to be read in the light of the Limitation Act 1980 and as the employee’s claim was more than 6 years old, it was out of time.  The employer relied on an employment tribunal case decided in 2012, where an employment judge had held that the Limitation Act 1980 should be read into the Extension of Jurisdiction Order 1994. 

The employer said the employee’s claim did not satisfy the legal requirements because the tribunal only had jurisdiction to hear the claim if it was one “which a court in England and Wales would, under the law for the time being in force, have jurisdiction to hear and determine”.  It argued that because the claim was more than 6 years old, a civil court did not have jurisdiction to hear the claim and, therefore, the tribunal did not have jurisdiction to hear the claim either. 

The tribunal rejected the employer’s arguments.  It said that it was not necessary to interpret the Extension of Jurisdiction Order by importing the Limitation Act provisions into it, because the purpose of the Extension of Jurisdiction Order was to extend the tribunal’s jurisdiction to hear breach of contract claims beyond that of the civil courts.  It said that if the Limitation Act provisions were to be read into the Extension of Jurisdiction Order, parties would be prevented from seeking redress for any contractual matters which were more than 6 years old on termination of the employment contract and that this would give rise to the rather odd position of narrowing, rather than extending, the tribunal’s jurisdiction, and that would be contrary to the purpose of the legislation. 

At the moment there are conflicting employment tribunal decisions on this point and unless the case above goes to appeal, it will remain an issue of some confusion.

In this case, it is likely that if the employee had only become aware of the 2003 breach when she applied for her state pension she may well have persuaded a civil court that the time limit should be extended.  However, she may have issued a claim in the tribunal because the fee was £250 and the procedure simpler.  Her claim was almost certainly more than £500 and the issue fee in the county court for that sum would be £455.  If her claim was for £10,000 or more, the issue fee would be 5% of the value of her claim.

This decision is important for employers because if followed, it means that any claim from an employee arising out of a breach of their employment contract (such as for holiday pay, wages, bonus, etc.) can sit in abeyance until the employment contract terminates.  The employee is, at that time, entitled to make a claim dating back to the time that the employment commenced.  It is worth noting that claims for breach of contract in the employment tribunal are capped at £25,000.