Employer counterclaims

19 July 2019

The Employment Appeal Tribunal has held that an employer's counterclaim can continue even if the employee has withdrawn their breach of contract claim.


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.


Daniel Barnett’s employment law bulletin summarises the case of Cortel Telecom Ltd v Shah.

The Respondent brought a contractual claim for overpaid salary and the value of the lost business. At the hearing, the Claimant withdrew most of these including a breach of contract claim, limiting his claim to an 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.