Valuing Breach of Employment Contract Claims

What Is an Employment Contract?

An employment contract is an agreement that defines the relationship, duties, obligations and rights between an employer and the employee — essentially, the terms and conditions. This agreement specifies relevant details of their relationship such as duration of employment, wages and salary, benefits, paid time off, confidentiality and many more.

Where the contract does not stipulate the duration of employment, the law presumes the contract to be at will. This means either party may terminate the agreement without any reason, subject to certain exceptions. These include:

Express term in the contract, which defines the duration of employment.
Implied contracts such as provisions in the employee handbook.
Implied covenant of good faith and fair dealing.
Public policy exceptions.

Public policy means any act that is contrary to the public interest. For instance, the Supreme Court of Pennsylvania held in Schick v. Shirey that discharging an employee based on retaliatory grounds for filing a claim under the Workers’ Compensation Act violates public policy.

A contractual agreement may be verbal or written, although oral contracts may be more challenging to establish. The agreement can also be part oral and partly written. The terms of the contract — express or implied — bind both employer and employee.

What Is a Breach of Contract of Employment

Once you sign the employment agreement, it becomes legally binding on you and the employer. A breach of that contract entitles either party to relief or claim against the other. A breach occurs when a party fails to perform an obligation under the agreement, whether express or implied. There are several types of violations in an employment contract, including the following:

Material breach: This is where the employer’s violation is so fundamental that it affects the very essence of the contract. The breach makes it impossible for the employer to perform the obligations under the contract.
Non-material breach: This breach is not substantial and does not go to the root of the contract.
Anticipatory breach: This occurs when one of the parties suggests that they are unwilling to perform their duties under the contract.
Actual breach: This is where the employer disregards the express term of the contract.

The nature of the breach of the employment contract determines how much the lawsuit may award. To successfully prove breach of contract, you must satisfy the following conditions:

There must be an existing valid and enforceable contract
The defendant must breach that contract
The plaintiff must suffer a loss as a result of the breach

A contract must fulfill five elements to be valid. There are offer, acceptance, capacity, consideration and intention to create a legal relationship. You must prove that the loss is reasonably foreseeable to establish loss suffered or damage. This means the loss incurred must be a direct result of the breach. Also, both parties should be able to anticipate the consequences of the violation.

The employer may also have certain defenses against your claim. Some defenses available to the employer are:

Lack of capacity
Fraud
Statute of limitation

What Are Damages for Breach of a Contract of Employment?

There is no fixed amount for determining how much a breach of employment contract case is worth. However, certain factors guide the court. Amongst these are the nature of the violation and the amount you are entitled to — understanding what damages are is a good start because the type of damages determines the amount you claim.

When your employer terminates your employment contract, you may sue to recover any financial loss. The money you ask for is referred to as damages. For example, if your employer reveals confidential information contrary to the agreement, you may sue for damages for the breach.

There are different types of damages that you can sue for:

Nominal Damages

Nominal damages are the trivial sums the court awards to indicate that there is a breach of contract. Usually, the court awards a small amount. The court grants nominal damages when the violation is not substantial.

Compensatory Damages

The court awards compensatory damages to restore the injured party into the position he would have been but for the breach. In other words, the court attempts to restore that state of affairs if the employer did not breach the contract. This type of damage is significant compared to nominal damages. For instance, if the agreement promises a salary of $40,000 and your employer pays you $10,000, you may be able to sue for the extra $30,000.

Punitive Damages

In certain instances, the employer willfully or maliciously breaches a term of the contract. The court may award punitive damages beyond the compensatory damages as punishment to the breaching party and to appease the injured party.

For instance, if your employer terminates your employment contract based on discrimination or resistance to sexual harassment, the court may award punitive damages.

Liquidated Damages

The employment contract may contain a list of damages you may claim in case of a breach. Certain agreements have clauses that estimate a specific amount that a party may claim in case of an infringement. The purpose of liquidated damages is to cater to losses that are hard to quantify.

Apart from damages, the court may award costs against your employer to cover some of your expenses. Again, if the contract stipulates that the employer will take care of legal actions, you can invoke that clause to your advantage.

What Is a Settlement? Is It a Better Alternative to a Lawsuit?

Some contracts set out procedures for resolving disputes outside the courtroom. This is called alternative dispute resolution. The employer may also choose to negotiate with the employee out of court. Sometimes, the parties reach a settlement for a breach of an employment contract, so the court will adopt that agreement as a consent judgment in that case.

The best choice is the option that suits your needs after considering all the necessary factors. Either way, reach out to an employment attorney to assist you through the process.

When Should You Initiate a Lawsuit for Breach of Employment Contract?

According to 42 Pa.C.S.A. §5525(a), you have four years to initiate legal proceedings for breach of the employment contract. However, the agreement may state a shorter duration and many employment statutes contain significantly shorter statutes of limitations. It is prudent to contact an attorney immediately to ensure your claims are not time-barred.

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Employment attorneys are professionals with experience in handling employment matters. Reach out to an attorney to assist you with your challenge. Whether you intend to initiate a lawsuit or settle with your employer, an employment attorney can help you assess your claim for breach of the employment contract.

Weisberg Cummings, P.C. is an employment law firm in Harrisburg, Pennsylvania. We specialize in employment claims, contracts, severance issues, work accidents, discrimination and sexual harassment issues.

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