Thousands of Lancashire employers exposed to breach of contract claims

Thousands of employers in Lancashire are likely to have expensive legal claims made against them in 2020 and 2021 as it comes to light that a huge number are in breach of their contract with their employees after engaging with the Coronavirus Job Retention Scheme.  

While those companies who have an in-house HR or legal representative at hand may be protected, the greatest risk is to micro businesses who are likely to have DIY-ed their legal and HR processes at the start of the pandemic.

It was assumed by many, that the CJRS simply replaced the employment contract they had with their employees, but this is simply not the case. Where an employment contract was in situ a fixed number of hours, for a fixed level of pay – employers will find themselves in breach of contract where they have paid 80% of their employees salary without mutual agreement to amend the employment contract.

As many employers will have simply told their workforce to ‘stay at home’ and receive 80% pay for doing so, they have neglected to understand that the original employment contract is still legally binding if no formal changes are made and agreed, and this exposes them to claims being made against them for the remaining 20% of their pay.

Victoria Hodkinson, from the Commercial Department at TEN Legal Solicitors says, “We are already seeing employees who have been made redundant, who are not entitled to much or any redundancy pay due to a short service with their employer and the prospects of finding a new job looking bleak, that are making legal enquiries as to whether their employer still owes them anything.

We are also receiving a high number of enquiries from smaller organisations, sometimes with just one or two employees, who realise that they have unknowingly exposed themselves to expensive claims for breach of contract. A lot of our recent work has been around Compromise Agreements, which pay the employee a severance payment in order to waive their entitlement to a future claim, in order to mitigate that future risk”

It is not unlikely that some law firms will start to advertise, in the same way they do for personal injury and mis sold PPI, asking employees whether they agreed to change their employment contract when they were furloughed and offering them compensation if they did not – making this type of claim a very lucrative industry over the coming months and years.