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Employer Counterclaims

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Can an employer's counterclaim continue even if the employee has withdrawn their breach of contract claim?

Yes, held the EAT, in Cortel Telecom Ltd v Shah.

The Claimant (a sales consultant) brought a number of claims following his dismissal, including unfair and wrongful dismissal, arrears of pay, and claims for other payments. The Respondent brought a contractual claim for overpaid salary and the value of lost business. At the hearing, the Claimant withdrew most of these including a breach of contract claim, limiting his claim to unlawful deduction from wages. On that basis, the tribunal held that the Respondent's contractual claim could not proceed. However, it went on to uphold his wrongful dismissal claim and award the Claimant his notice pay.

The EAT held that the tribunal had overlooked that, following Delaney v Staples, a claim for notice pay cannot be brought as an unlawful deduction from wages. The claim for wrongful dismissal was properly brought but this meant that the Respondent was still entitled to have its contractual claim heard, whether or not the Claimant withdrew or abandoned his claim.

This case is a useful warning to Claimants (and their representatives) to think carefully before bringing a contractual claim as once the door is opened to a counterclaim it won't be closed if that initial claim doesn't proceed.

Thanks to James English of Ward Hadaway for preparing this case summary.