29th November, 2022

Six-Year Time Limit for Breach of Contract Claims in the Employment Tribunal

Background

1. Claims for breach of contract relating to employment can be brought in the Employment Tribunal by virtue of the Employment Tribunals Extension of Jurisdiction (England and Wales) Order 1994/1623 (“the Order”). Article 7 of the Order provides that such claims must be brought within three months beginning with the effective date of termination (Article 7(a)-(b)).

2. Section 5 of the Limitation Act 1980 (“the Act”) provides that an action founded on simple contract must be brought within 6 years from the date on which the cause of action accrued.

3. In Taylor v Central Manchester University Hospitals NHS Foundation Trust ET/2405066/12 (“Taylor”), the ET found that section 5 of the Limitation Act applied and therefore it only had jurisdiction to consider claims for breach of contract brought within 3 months beginning with the effective date of termination and within 6 years of the cause of action accruing, so long as limitation was pleaded. The ET found in that case that the Order is subordinate legislation designed to extend the jurisdiction of the ET such that it could hear claims that could be heard civil courts, not to extend the rights of employees beyond what is otherwise recoverable in civil proceedings. The ET found no reason to depart from the presumption that the limitation period applied unless otherwise stated. It also found no conflict between the procedural limitation period in the Limitation Act and the Jurisdictional limits in the Order.

4. In Grisanti v NBC News Worldwide Inc ET/2200964/15 (“Grisanti”), the ET did not follow Taylor, finding that the purpose of the Order was to extend the ETs jurisdiction to hear breach of contract claims beyond that of the civil courts. The ET reasoned that, were the Limitation Act provisions to be read into Article 7, parties would be prevented from seeking redress for any contractual matters which were more than six years old on termination of the employment contract. It is suggested that this would restrict rather than extend the ET’s jurisdiction, contrary to the purpose of the Order. It also found that, as time limits are procedural under the Limitation Act, civil courts do have jurisdiction to consider a claim brought out of time.

Facts

5. The Claimant had brought claims relating to various alleged deductions from wages dating back beyond 6 years. This claim was brought as both an unlawful deduction from wages claim and a breach of contract claim. A preliminary hearing was arranged to determine, among other things, whether the tribunal could hear claims relating to breaches more than 6 years after the claim has been brought.

Decision

6. The Tribunal found that the Claimant was not permitted to pursue any breach of contract claims where the breach complained of was more than six years before the date that the ET1 was presented by the Claimant to the Tribunal. EJ Whittaker considered there to be good reasons to depart from the decision in Grisanti and follow the decision in Taylor. Primarily, the judge rejected the claim in Grisanti that such a finding would leave employees without redress. In the first instance, such claimants can bring unlawful deductions from wages claims in the for regular reductions over a two-year period, provided that the last reduction is brought within 3 months. In the alternative, an employee can bring a small claim for any breaches within 6 years, such claims mirroring the informality and speed of address as the tribunal. As such, the judge found that employees at all times have suitable means of addressing complaints.

7. EJ Whittaker also considered that there was no evidence that:
Parliament genuinely intended to have a different limitation period for claims for breach of contract in the Employment Tribunal by contrast to claims in the County Court for breach of contract where the relevant six year limitation period would apply (at [8]).

8. He also found there to be a public policy justification to his decision:
Memories fade with time. Documents are not necessarily maintained for years and years and years. Employers are entitled to have some degree of certainty as to the length of time that they remain at risk of claims being brought against them by their employees. I believe that there is a significant public policy element in such reasonable expectations. ([9])

9. In summary, EJ Whittaker states:
I cannot accept that there is any or sufficient evidence to demonstrate that the limitation period imposed by the Limitation Act does not apply to breach of contract claims under the 1994 Extension Order.

Comment

10. In submissions, I argued that the difference in approach between Taylor and Grisanti appears to be the starting point: in the former, it was the presumption that the Act applies; in the latter, it was that it does not. Given the Order’s silence on the matter, this starting point should also be the end point. I submitted that the correct approach is found in Taylor, which is to say that primary legislation is not superseded by subordinate Orders in the absence of that being the clear intention of Parliament.

11. In this case, EJ Whittaker agreed that Taylor has it right. It is implicit in his judgment that the presumption was that the Act should apply unless it was intended otherwise. In the absence of any such authority, literature or suggestion to the contrary, the Act would apply to such claims, as stated in paragraph 11.

12. Given that there appear to have been three tribunal decisions on this matter since the Order came into force in 1994, this is not an issue that has caused serious concern. However, it remains an issue without binding authority. Now that there are two cases in support of the Act's application, employers and employees may be able to rely on this with a greater degree of assurance.

Link to the Judgment can be found here.



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