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Can the door be closed on an employer's counterclaim at tribunal once opened?

As you may already be aware, a breach of contract claim is the only type of claim within an employment tribunal that permits the employer to counterclaim against the employee.  This means that the employer can claim damages from the employee for any monies outstanding in relation to their employment as well as defending the employee’s claim against them.

The latest case of Cortel Telecom Ltd v Shah confirmed that, once a breach of contract claim is brought by a Claimant, an employer is entitled to counterclaim even if the original claim from the employee doesn’t then proceed.

In this case, the Claimant brought a number of claims in the employment tribunal including for unfair dismissal, wrongful dismissal, breach of contract and referred to various payments being owed.  The employer issued a counterclaim alleging that the Claimant had been overpaid salary and it also claimed the value of lost business.

When the matter reached a hearing at the first instance tribunal, the Claimant withdrew a number of claims including their breach of contract claim and in doing so limited their claim to a claim for unlawful deduction of wages. As a result, the tribunal held that the employer’s counterclaim could not proceed.

The employer appealed to the Employment Appeals Tribunal (“EAT”).  The EAT disagreed with the first instance tribunal’s decision that the employer’s contract claim could not proceed - it noted that, when the tribunal reached its decision, reference was made to the Claimant’s claim now being limited to one for unauthorised deduction of wages. The EAT held that the Claimant’s claim had not in fact been limited to this.  In addition, the EAT found that the employer’s entitlement to bring a contract claim against the Claimant would have been unaffected by any abandonment or withdrawal of that claim by the Claimant.

For employers, this decision is very useful because it illustrates that once a Claimant has issued a breach of contract claim the employer is entitled to have their counterclaim heard even if the Claimant’s breach of contract claim is withdrawn. This means that Claimants will now have to think even more carefully before pursuing a breach of contract claim.

This bulletin is for general guidance only and should not be used for any other purpose. It does not constitute, and should not be relied upon as legal advice.

JMW Solicitors is a Limited Liability Partnership.